The adverse and antagonistic relationship between the Federal Trade Commission, Department of Justice vs the Independent Small Businesses who operates a motor vehicle to move riders for compensation in a taxi, rideshare, uber, limo, lyft, personal or private car

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No. 17-35640

IN THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

–––––––––––––––––––––––––––––––––––––––––––––

CHAMBER OF COMMERCE OF THE UNITED

STATES OF AMERICA and RASIER, LLC,

Plaintiffs-Appellants,

v.

CITY OF SEATTLE; SEATTLE DEPARTMENT OF

FINANCE AND ADMINISTRATIVE SERVICES; and

FRED PODESTA, in his official capacity,

Defendants-Appellees.

–––––––––––––––––––––––––––––––––––––––––––––

On Appeal from the United States District Court

for the Western District of Washington

No. 2:17-cv-00370 (Hon. Robert S. Lasnik)

–––––––––––––––––––––––––––––––––––––––––––––

BRIEF FOR THE UNITED STATES AND THE FEDERAL

TRADE COMMISSION AS AMICI CURIAE IN SUPPORT

OF APPELLANT AND IN FAVOR OF REVERSAL

The FTC did a study on state and local municipality sanctioned antitrust anticompetitive behavior in the taxi industry via regulations in the 1980s and concluded the behavior was hurting drivers economically, cost the consumers unnecessary millions of dollars, and created a barrier for consumers to access taxi service. The FTC concluded states granting municipalities power to circumvent antitrust laws via permit caps, geofencing , and barriers to new market entry should be addressed with a deregulation of the market. The FTC and DOJ never felt compelled to address these major antitrust issues that were the catalyst for the destruction of the taxi industry and the rise of the Uber and Lyft monopolies. Instead of the FTC and DOJ abolishing state sanctioned anticompetitive behavior in the taxi industry when Uber and Lyft launched — the FTC allowed Uber and Lyft (while preaching free market deregulation) to get regulatory accommodations instead of industry wide local deregulation. This was by design on behalf of Uber (and Lyft). Drivers who operate taxis were left trapped under onerous archaic anticompetitive local regulations. It was imperative for Uber and Lyft to block new drivers who partnered with them from obtaining independent operator taxi and limo permits from local regulators. There was no way for rideshare drivers to build their personal client base. Rideshare drivers were thus relegated to operate as indentured servants to the Uber and Lyft platforms. The anticompetitive permit caps in most markets guaranteed that. The existential threat to Uber (and Lyft) was the rise of the pre Daimler version of the HAILO TAXI APP. The FTC’s and DOJ’s malfeasance in failing to abolish local anticompetitive control of the for hire transportation industry additionally made it impossible for a nationwide taxi app to launch and impossible for rideshare drivers (blocked from independent operator permits) to partner with taxi apps. The list continues. The FTC and DOJ ignored the collusion between Uber, Lyft, and the non commercial Auto Insurance Industry to perpetuate the viral personal insurance fraud which was imperative for Uber and Lyft’s anticompetitive price fixing and price dumping in their attempt to eradicate the taxi industry. In exchange for their cooperation the Insurance Industry collected billions in zero risk 100% profit Uber and Lyft drivers premiums until Uber’s legal team (with a little help from PCIAA and R Street Institute) could produce acceptable language in the form of model legislation that made it legal for Insurers to continue to collect those billions while now officially being responsible for nothing in the majority of states “model legislation” language that was signed into law. Then inexplicably, after Seattle City Commissioners had the balls to stand up to Uber and Lyft and wrote an ordinance that allowed drivers to form unions to address the slave wage conditions they were working under, the Department of Justice and The Federal Trade Commission snapped out of their coma and intervened on the court case on behalf of Raiser (Uber) and the so called United States Chamber of Commerce to overturn an ethical judge’s decision to allow the ordinance to stay on the books. The FTC and DOJ claimed their interest was to prevent dangerous antitrust and anticompetitive market conditions. I apologize if I find that claim reality resistant after the DOJ and FTC sat back and watched the ground transportation industry being antitrust destroyed not once, but twice. The first time was in the Taxi cartels favor. The second time was in Uber and Lyft’s favor. Neither chapter was in the drivers favor. The following is the brief the DOJ and FTC filed to kill the pro driver Seattle ordinance. In their argument to overturn the ruling, besides stripping a drivers actual connection to the for hire transportation industry, (per the FTC, we drivers apparently are, at best, “tangentially” connected to the industry that wouldn’t exist without us. We are a seperate “input” market) the DOJ and FTC strip the drivers basic humanity by explaining in the “driver service” market the “driver” is akin to a “lightbulb”. Or a “tire”. Or a “car repair part”. Commentary by jennifer@ridehailalliance.org in italics… editing still in progress.

–––––––––––––––––––––––––––––––––––––––––––––

MAKAN DELRAHIM

Assistant Attorney General

ANDREW C. FINCH

Principal Deputy Assistant Attorney General

DAVID C. SHONKA

Acting General Counsel

JOEL MARCUS

Deputy General Counsel

ROBERT B. NICHOLSON

STEVEN J. MINTZ

Attorneys

U.S. DEPARTMENT OF JUSTICE

Antitrust Division

950 Pennsylvania Ave., NW

Washington, DC 20530-0001

MICHELE ARINGTON

Assistant General Counsel

FEDERAL TRADE COMMISSION

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

(202) 326-3157

marington@ftc.gov

I. THE STATE OF WASHINGTON DID NOT CLEARLY ARTICULATE AN

INTENT TO DISPLACE COMPETITION…

(That the FTC and DOJ allowed states to do with the Taxi cartels, Uber, and Lyft)

….WITH RESPECT TO

NEGOTIATION OF DRIVER CONTRACTS.............................

A. The State Laws Authorizing Regulation of Transportation

Services Do Not Show a State Policy to Displace

Competition for Negotiating Driver Contracts...........................................9

This is where the FTC and DOJ decided to use Ubercrackhead logic to explain uber, taxi, limo, and lyft drivers are not part of “TRANSPORTATION SERVICES”. IMO that means drivers don’t have to comply with “transportation services” state and local regulations…

B. The Authority to Ensure “Safe and Reliable” Transportation

Service Cannot Be Read to Clearly Articulate and

Affirmatively Express a State Intent to Displace

Competition in Driver Services or Other Input Markets..........................12

This is where the DOJ and FTC use #Ubercrackhead logic to circumvent the FTC and DOJ sanctioned anticompetitive antitrust state taxi and Uber regulations by defining the newly minted fact that drivers are not a party to “Transportation Services” but instead are a “Driver Services” -- or worse -- an “Other Input” market

C. General State Grants of Antitrust Exemption Do Not Satisfy the Clear Articulation Requirment. ........................................................14

Here the DOJ and FTC explain that when the States played the “General State Grants of Antitrust Exemption” card to originally allow the taxi cartels to engage in antitrust anticompetitive behavior it was only the State’s CLEAR ARTICULATION to allow the taxi cartels to screw their drivers and the public. And then when Uber and Lyft launched it was only the State’s CLEAR ARTICULATION to allow Uber and Lyft to engage in antitrust anticompetitive behavior to screw the taxi cartels and uber, lyft, taxi, and limo drivers. The FTC and DOJ strongly feel in both scenarios it was NEVER the State’s CLEAR ARTICULATION to allow the antitrust anticompetitive EXEMPTIONS to actually work in the favor of America’s economy or in the favor of the, again, newly minted “Driver Services” or “Other Input” markets.

II. THE DISTRICT COURT’S ERRONEOUS STATE ACTION ANALYSIS

HAS POTENTIALLY SERIOUS CONSEQUENCES. ....................

17

Here the FTC and DOJ were about to say “for Uber and Lyft” but who knows… maybe Uber’s legal team had it redacted before the brief was filed. And BTW the District Court was aces. Their STATE ACTION analysis was solid. That’s why Uber and the US Chamber had to call in their chips to sick the DOJ and FTC on the judge to overturn the ruling because it was in favor of the drivers.

STATEMENT OF INTEREST

The United States and the Federal Trade Commission both enforce the

federal antitrust laws and have a strong interest in proper application of the “state

action” doctrine of Parker v. Brown, 317 U.S. 341 (1943), that is central to this

case. Under the state action doctrine, a state must clearly articulate its intention to

displace competition in a particular field with a regulatory structure. The Supreme

Court has carefully cabined that antitrust exemption because it sacrifices the

important benefits that antitrust laws provide consumers and undermines the

national policy favoring robust competition.

It’s funny how the DOJ and especially the FTC who did a study in the 1980s explaining how badly that states intention to

displace competition in the taxi limo industry destroyed the industry and cost consumers and taxi limo drivers untold millions of dollars didn’t intervene but somehow arrived on the scene to help Uber and The United States Chamber of Commerce fight the Seattle ordinance to allow uber lyft and taxi drivers to form a union…

We file this brief under Federal Rule of Appellate Procedure 29(a) and urge

the Court to reject application of the state action doctrine to this case. A

municipality may displace competition under the state’s antitrust exemption only if

that anticompetitive restraint is the inherent, logical, or ordinary result of the

exercise of authority delegated by the state. That standard is not satisfied in this

case.

The State of Washington’s delegation of authority to regulate the for-hire

transportation market does not imply authority to displace competition among

drivers for their services provided to transport companies.

The FTC and DOJ just set legal PRECIDENT that the “for hire transportation market” and “drivers” “ for their services provided to transport companies” are two seperate industries…

The district court’s

expansive interpretation of the Washington code provisions plainly violates the

strict bounds of the state action defense. We express no view on any other issue in

this case beyond the proper application of the state action doctrine. In particular,

2

we take no position on whether or not the drivers covered by the challenged statutes are employees or independent contractors or how federal labor law may apply to this matter.

I’m thinking that means an Independent Contractor is able to offer their service INDEPENDENT of entities they may choose to contract with…🤔

QUESTION PRESENTED

Antitrust law forbids independent contractors from collectively negotiating

the terms of their engagement. For example, jointly setting fees is price fixing, which is at the very core of the harms the antitrust laws seek to address.

Except of course when Uber or Lyft is doing the price fixing.

Or local municipalities empowered under the state action doctrine, (where a state must clearly articulate its intention to displace competition in a particular field with a regulatory structure) (Where “The Supreme Court has carefully cabined that antitrust exemption because it sacrifices the important benefits that antitrust laws provide consumers and undermines the national policy favoring robust competition”) which allows a municipality to price fix taxi meter and limo rates?

An ordinance of the City of Seattle nevertheless allows independent drivers for taxi

companies and car services like Uber and Lyft to bargain collectively.

The City claims exemption from Sherman Act liability under the state action doctrine.

The question presented is whether the State of Washington clearly and affirmatively expressed a legislative decision to allow Seattle to displace

competition, and authorize what otherwise would be per se violations of the

Sherman Act, in the for-hire driver service market.

Wait. What? FTC and DOJ when you say “The question presented is whether the State of Washington clearly and affirmatively expressed a legislative decision to allow Seattle to displace competition, and authorize what otherwise would be per se violations of the

Sherman Act, in the for-hire driver service market.” are you again restating your legal PRECIDENT that the “for hire driver service market” is not the same industry as the “for-hire transportation market” that states are allowed to delegate authority to local municipalities to circumvent federal antitrust laws?

STATEMENT

1. The State Action Doctrine and Subordinate State Entities

In Parker v. Brown, 317 U.S. 341 (1943), the Supreme Court held that the Sherman Act, 15 U.S.C. § 1, which bars “restraints of trade,” should not be read to bar states from imposing market restraints “as an act of government.” Id. at 350, 352.

The Court explained that “nothing in the language of the Sherman Act or in its history” suggested that Congress intended to restrict the sovereign states from regulating their economies. Id. at 350.

Thus, states may, within certain limits, adopt and implement policies that would otherwise violate the Sherman Act.

“within certain limits” DOJ and FTC? Which limits did you apply when states wrote legislation empowering municipal government to restrain the trade of the taxi and limo ground transportation industry? That you failed to intervene on for over 30 years and failed to intervene again when Uber and Lyft launched?

Application of the state action defense, however, is “disfavored,” and the doctrine must be applied narrowly. FTC v. Ticor Title Ins. Co., 504 U.S. 621, 636 (1992).

Unless “application of the State action defense” creates Taxi cartels, drives up medallion prices, places drivers in indentured servitude conditions, gives consumers horrible access to service, and destroys the industry?

That is because “[t]he preservation of the free market and of a system of free

enterprise” is a “national policy of * * * a pervasive and fundamental character

* * *.” Id. at 632; accord FTC v. Phoebe Putney Health Sys., Inc., 568 U.S. 216, 225 (2013); North Carolina State Bd. of Dental Exam’rs v. FTC, 135 S. Ct. 1101, 1110 (2015); Shames v. California Travel & Tourism Comm’n, 626 F.3d 1079, 1084 (9th Cir. 2010).

Unlike states, subordinate state entities such as cities or municipalities “are not beyond the reach of the antitrust laws by virtue of their status because they are not themselves sovereign.” Town of Hallie v. City of Eau Claire, 471 U.S. 34, 38

(1985).

Instead, the acts of substate entities come within the state’s own sovereignty only when they “demonstrate that their anticompetitive activities were

authorized by the state ‘pursuant to state policy to displace competition with

regulation or monopoly public service.’” Id. at 38-39 (quoting City of Lafayette v.

Louisiana Power & Light Co., 435 U.S. 389, 413 (1978)).

To ensure that the state truly intends to displace the national policy of free-market competition, the state’s intent to displace competition must be “clearly (4) articulated and affirmatively expressed.” California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980); see Phoebe Putney, 568 U.S. at

225.

1 A state legislature need not “explicitly authorize specific anticompetitive effects” of a municipality’s or city’s actions, but such effects must be “the inherent, logical, or ordinary result of the exercise of authority delegated by the state legislature.” Phoebe Putney, 568 U.S. at 229.

“[T]he State must have foreseen and implicitly endorsed the anticompetitive effects as consistent with its policy goals.”

Id.

To ensure further that the state action doctrine does not unduly interfere with federal antitrust policy, the doctrine applies only to conduct “in [the] particular

field” where the state has articulated its intent to displace competition. Southern

Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 64 (1985).

Again, the FTC and DOJ establish a legal PRECIDENT that “drivers” are not the same field as “transportation”

In Phoebe Putney, for example, the Court held that Georgia’s regulation of entry into

the hospital services market through a certificate-of-need requirement did not

clearly articulate a policy favoring the consolidation of hospitals already in the

market.

As the Court explained,

1 Additionally, private actors claiming a state action defense must show that the policy is “actively supervised by the State itself.” Midcal, 445 U.S. at 105 (internal

quotation marks omitted).

The “active supervision” requirement does not apply to

the conduct of municipalities. Hallie, 471 U.S. at 46-47.

Because we conclude that

the Seattle Ordinance fails to meet the clear articulation requirement, we express

no view on whether the supervision of private conduct contemplated by the

Ordinance satisfies the active supervision prong of the state action test.

5

regulation of an industry, and even the authorization of discrete forms

of anticompetitive conduct pursuant to a regulatory structure, does not

establish that the State has affirmatively contemplated other forms of anticompetitive conduct that are only tangentially related.

Phoebe Putney, 568 U.S. at 235.

FTC and DOJ again reference that for hire transportation companies and drivers are 2 seperate entities that are only “tangentially related”

Anticompetitive consolidation of the hospital market remained subject to the antitrust laws because it was not the “inherent, logical, or ordinary result” of regulating the entry of new hospitals into the market.

Id. at 229. See also Goldfarb v. Virginia State Bar, 421 U.S. 773, 788-92 (1975)

(state action defense did not apply to price-fixing by lawyers despite the State’s extensive regulation of the practice of law, where the State did not intend to displace price competition for legal services).

2. The Seattle Ordinance

Chapter 46.72 of the Revised Code of Washington (entitled “Transportation of Passengers in For Hire Vehicles”) authorizes municipalities to “license, control, and regulate all for hire vehicles operating within their respective jurisdictions.”

Wash. Rev. Code § 46.72.160.

Specifically, this authority includes (1) “[r]egulating entry”; (2) “[r]equiring a license”; (3) “[c]ontrolling the rates charged” for the transportation service; (4) “[r]egulating the routes”; (5)

“[e]stablishing safety and equipment requirements”; and (6) “[a]ny other requirements adopted to ensure safe and reliable for hire vehicle transportation

service.” Id.

A related provision states the Washington’s legislature’s “intent * * * to permit political subdivisions of the State to regulate for hire transportation services without liability under federal antitrust laws.” Id. § 46.72.001.

Chapter 81.72 (“Taxicab Companies”) contains nearly identical language concerning

taxicab transportation services. See id. §§ 81.72.200; 81.72.210.

Relying on this authority, the City of Seattle enacted the Ordinance now before the Court.

It permits for-hire drivers to negotiate collectively their

contractual relationships with “driver coordinators”—taxicab associations and

transportations network companies such as Uber and Lyft that hire or contract with

drivers.

Under the Ordinance, drivers may act in concert to bargain over the terms of their contracts, including “the nature and amount of payments to be made by, or withheld from, the driver coordinator to or by the drivers.” Ordinance 124968

§ 3(H)(1).

The Ordinance applies only to drivers who are independent contractors. Id. § 3(D).

In enacting the Ordinance, the City made findings that allowing drivers to negotiate collectively their contracts—ordinarily plainly unlawful conduct—

“will enable more stable working conditions and better ensure that drivers can perform their services in a safe, reliable, stable, cost-effective, and economically viable manner * * *.” Id. § 1(I).

3. This Case

The Chamber of Commerce sued the City, alleging, among other things, that collective bargaining by independent competing drivers would be price fixing, and the Ordinance thus violates and is preempted by Section 1 of the Sherman Act, 15

U.S.C. § 1. Am. Compl. ¶¶ 58-72 (ER 68-71).

2

In the order on review, the district court dismissed the Sherman Act claim on

the ground that the City’s authorization of collective bargaining among for-hire

drivers is exempt from the federal antitrust laws under the state action doctrine.

The court held that the City “satisfie[d] the ‘clearly articulated and affirmatively

expressed’ requirement for state immunity,” because the State had “clearly delegate[d] authority for regulating the “for-hire transportation industry” to local government units,” and “‘affirmatively contemplated’ that municipalities would

displace competition in the “for-hire transportation market.” Op. 8 (quoting Phoebe

Putney, 568 U.S. at 226) (ER 8).

3 The court found that the municipal regulation

fell within Section 46.72.160’s authorization of “[a]ny other requirements adopted

to ensure safe and reliable for hire transportation service.” Op. 10 (ER 10).

Although the court recognized that the City’s use of this provision to implement

collective bargaining by drivers was “novel,” it found the State’s general“authorization of anticompetitive regulations” sufficient to meet the state actiontest. Op. 9 (ER 9).

2 “ER” refers to Appellants’ Excerpts of Record.

3 The district court found that companies like Uber and Lyft are “privately operated for hire transportation services” within the scope of Chapter 46.72.

Op. 11-12 (ER 11-12). We express no view on that issue but assume, for purposes

of argument, that the district was correct on that point.

ARGUMENT

I. THE STATE OF WASHINGTON DID NOT CLEARLY ARTICULATE AN

INTENT TO DISPLACE COMPETITION WITH RESPECT TO NEGOTIATION OF DRIVER CONTRACTS.

Unless the state action exemption applies to the Seattle Ordinance, the joint

negotiation permitted by the Ordinance would be a per se violation of the Sherman

Act. Independent contractors, as horizontal competitors, may not collude to set the price for their services. See FTC v. Superior Trial Court Lawyers Ass’n, 493 U.S.

411, 422-23 (1990).

The critical question here is whether the challenged ordinance was “undertaken pursuant to a regulatory scheme that is the State’s own.” Phoebe

Putney, 568 U.S. at 225 (internal quotation marks omitted).

Absent clear evidence

that Seattle’s sanctioning of anticompetitive restraint of the “driver service market”

reflects the State’s deliberate and intended policy choice, the City’s action does not constitute state action exempt from the Sherman Act.

Again, DOJ and FTC create legal PRECIDENT that the “driver service market” is a separate industry not covered under “for hire transportation” industry rules. l

In accepting the City’s state action defense, the district court: (1) failed to require that the City’s restraint on competition be a foreseeable consequence—“the

inherent, logical, or ordinary result”—of the State’s general grant of authority to

regulate “for hire vehicles” and “for hire vehicle [and taxicab] transportation

services,” Wash. Rev. Code §§ 46.72.001; 46.72.160; 81.72.200; 81.72.210;

(2) interpreted the state legislative language “to ensure safe and reliable for hire

vehicle transportation service” so loosely as to nullify limits on the state action (9 ) defense; and (3) contrary to established precedent, read a general antitrust exemption clause to negate the requirement that a state must clearly articulate and affirmatively express state policy to displace competition in a particular field. In

sum, the immunizing provisions of Sections 46.72.001 and 81.72.200 do not show

a deliberate State policy to displace competition among “providers of driver services

to taxi companies and car services” Reading them that way also would have

significant adverse consequences by placing clearly anticompetitive conduct out of

reach of the antitrust laws, potentially undercutting state policy as well as federal

law.

Again, FTC and DOJ establish legal PRECIDENT “providers of driver services to taxi companies and car services” are a “particular field”

A. The State Laws Authorizing Regulation of Transportation

Services Do Not Show a State Policy to Displace Competition

for Negotiating Driver Contracts.

The State of Washington’s “for-hire transportation laws” do not clearly show that the State intended to “displace competition in the driver services market.” State

law permits municipalities to regulate transportation services provided to

consumers. Wash. Rev. Code §§ 46.72.160 & 81.72.210.

Again, FTC AND DOJ establish legal PRECIDENT that State

law permits municipalities to regulate transportation services provided to

consumers and competition in the “driver services market” is a separate industry.

The Seattle Ordinance at

issue here, however, is directed not at competition in the “market for provision of transportation service to consumers”, but at the “market for hiring drivers”.

Again FTC AND DOJ establish legal PRECIDENT “market for provision of transportation service to consumers” and “market for hiring drivers” are 2 seperate industries.

The State statutes cannot be read to imply a policy to exempt from the Sherman Act

contractual negotiations between drivers and companies.

Again FTC AND DOJ establish legal PRECIDENT that drivers and for hire transportation companies are 2 seperate industries

10

A careful review of the statutory language makes clear that the legislation addresses the provision of “service by transportation entities to consumers”

Specifically, the Washington legislature made statutory findings that

“transportation service” is an important state interest and that the government should regulate the “safety, reliability, and stability” of such services. Wash. Rev.

Code §§ 46.72.001 & 81.72.200.

Again, DOJ and FTC establish legal PRECIDENT that “service by transportation entities to consumers” is a separate industry from drivers.

Those statutes focus on the consumer market for

transportation services, as consumers are the only users of that service.

The separately enumerated list of conferred regulatory powers further

bolsters the conclusion that the State legislature focused on the provision of service

to customers, not drivers’ relationships with companies. The statute states that the

conferred “power to regulate includes” market entry, licensing, rates, routes,

safety, and a catch-all provision for other requirements concerning safety and

reliability. Id. §§ 46.72.160(1)-(6); 81.72.210(1)-(6). Every item on the list—level

of supply, price, safety, reliability—pertains to the terms of provision of service to

customers; nothing addresses the conduct of drivers negotiating pay. The only

reference to pricing relates to controlling the rates charged to consumers and the

manner in which the rates are calculated and collected, matters that relate solely to

provision of service to customers. Id. § 46.72.160(3).

It is implausible to read the Washington statute as intended to “displace competition in the market for driver services.” “Regulating the negotiation of wages (11)or other contractual terms between drivers and transportation companies is not an “inherent, logical, or ordinary result” of the bundle of regulatory powers the State

has conferred on municipalities.” Phoebe Putney, 568 U.S. at 229. Put differently,

the statutes do not “clearly articulate[] and affirmatively express[]” the State’s

intent that local governments allow anticompetitive conduct in the market for

hiring or contracting with drivers. Midcal, 445 U.S. at 105.

Although it authorized

displacement of competition in the provision of transportation service, the State has not acted “in [the] particular field” at issue here. Southern Motor Carriers, 471

U.S. at 64.

The State did not “affirmatively contemplate * * * anticompetitive conduct” in the “market for driver services”, “which is distinct from the consumer

service market”. Phoebe Putney, 568 U.S. at 235.

Again, FTC and DOJ establish legal PRECIDENT that the “market for driver services” is not the same industry as the “consumer

service market” (aka the transportation industry)

In that respect, this case is similar to Cantor v. Detroit Edison Co., 428 U.S.

579 (1976), where the Supreme Court held that a state utility commission that had

authority to regulate electricity rates did not also have the authority to confer antitrust exemption for a utility’s restraint of trade in the light-bulb market. The commission’s authorizing statute “contain[ed] no direct reference to light bulbs,”

& state legislature had not spoken to desirability of utility’s conduct.

Id. at 584. The Court thus concluded that the utility commission’s approval of

anticompetitive conduct did not “implement any statewide policy relating to light bulbs”; at most, “the State’s policy [was] neutral on the question whether a utility (12)

should, or should not, have such a program.” Id. at 585.

So too here, the State

statutes say nothing about bargaining over wages paid to drivers; it is impossible to

divine a legislative intent to displace competition in that market even though the

State legislature clearly did displace competition in a different market.

What FTC & DOJ is admitting to here is they let states circumvent antitrust laws allowing local regulators to create taxi cartels that destroyed the industry yet they stood back and did nothing.

The district court mistakenly relied on Southern Motor Carriers in support

of its decision. Op. 9-10 (ER 9-10). There, the Supreme Court considered whether

a Mississippi agency authorized by state law to set common-carrier trucking rates

could lawfully allow private truckers to engage in collective ratemaking as the

method for establishing those rates. 471 U.S. at 63-66. The Court concluded that,

although the statute did not expressly authorize collective ratemaking, the grant of

authority to set rates “articulated clearly [the State’s] intent to displace price

competition among common carriers with a regulatory structure.” Id. at 65.

Southern Motor Carriers has no relevance here because, while the Washington

State statutes grant municipalities authority to regulate rates and conditions for services provided to consumers, nothing in the statutes addresses the setting of prices by drivers for their services provided to companies.

Again FTC AND DOJ state drivers and companies are 2 different industries “services provided to consumers, nothing in the statutes addresses the setting of prices by drivers for their services provided to companies.”

B. The Authority to Ensure “Safe and Reliable” Transportation

Service Cannot Be Read to Clearly Articulate and

Affirmatively Express a State Intent to Displace Competition

in Driver Services or Other Input Markets.

Again DOJ and FTC state Driver Services are not the transportation market; “Driver Services” are thus a seperate industry input market

In finding clear articulation, the district court focused on the statute’s language authorizing municipal regulation “to ensure safe and reliable for hire vehicle transportation service.” Op. 10 (citing Wash. Rev. Code § 46.72.160(6))

(ER 10).

It held that the Ordinance fell within the scope of that delegated authority,

citing the City’s finding that allowing drivers to negotiate contracts collectively

would promote safety and reliability. Id.

From that finding of delegated authority, the court then made the leap to find that the delegation of authority automatically satisfied the clear articulation requirement. It concluded that “[o]nce the Court concludes that the challenged conduct falls within the clearly articulated and

affirmatively expressed state policy to displace competition in a particular field, no more is needed to satisfy the first prong of the Midcal test.” Op. 11 (ER 11).

The district court thus conflated the question of whether the City “possess[ed] the delegated authority to act,” Op. 10 (ER 10), with the clear

articulation inquiry. As the Supreme Court has explained, however, “state-law

authority to act is insufficient to establish state-action immunity; the substate governmental entity must also show that it has been delegated authority to act or

regulate anticompetitively.” Phoebe Putney, 568 U.S. at 228 (emphasis added).

The delegation of authority to regulate for “safety and reliability” does not

demonstrate that the Washington legislature anticipated and authorized the

achievement of those goals through such indirect means as suppressing competition among drivers in their contract negotiations. The district court’s

expansive interpretation of the “safe and reliable” authorizing language cannot be squared with the strict limits the Supreme Court has placed on the state action

defense. See supra 2-5.

Here the FTC and DOJ are somehow oblivious to the safety connection between drivers getting paid a decent wage as opposed to sleeping in their cars, working 18 hour shifts, or racing across town to get that .68 cent a mile fare…

Taken to its logical conclusion, moreover, the district court’s reading of the statute’s “safe and reliable” authorizing language could cover nearly any type of

anticompetitive restriction. For example, the City of Seattle could allow tire manufacturers (who, like drivers, also provide an input to taxi service) to collude to set prices charged to taxi operators on the ground that ensuring good tire quality is important to the safety of passengers. Or it could allow auto mechanics to collude

on the prices they charge for their services on the ground that ensuring high-quality

mechanical service promotes passenger safety. The State surely did not intend to

allow such absurd results, yet they would flow from the district court’s reasoning.

Here the FTC and DOJ compare uber lyft taxi and limo drivers desire not be paid like indentured uber servants to… wait for it…an inanimate shelf life built in obsolescence commodity… like tires. To boot, the FTC and DOJ suggest drivers wanting to bargain to get paid a decent wage is “absurd”

C. General State Grants of Antitrust Exemption Do Not Satisfy the Clear Articulation Requirement.

The district court found that a statutory provision stating the legislature’s

intent “to permit political subdivisions of the state to regulate for hire

transportation services without liability under federal antitrust laws,” Op. 7-8

(citing Wash. Rev. Code § 46.72.001) (ER 7-8), provided blanket antitrust

protection. That conclusion is at odds with the established state-action principle

that “the State may not validate a municipality’s anticompetitive conduct simply by

declaring it to be lawful.” Hallie, 471 U.S. at 39 (citing Parker, 317 U.S. at 351);

see Ticor, 504 U.S. at 633 (“[A] State may not confer antitrust immunity on private

15

persons by fiat.”). In the court’s view, that provision showed that “anti-competitive

results were not merely foreseeable, they were expressly authorized.” Op. 9 n.5

(ER 9). But as shown above, the State did not expressly authorize anticompetitive

results in the market for drivers’ compensation; it clearly articulated and

affirmatively expressed an intent to allow for the municipal regulation only of

distinct aspects of the provision of transportation services to consumers.

The district court took the State legislature’s narrow grant of antitrust

exemption for regulation of the provision of service to customers as a broad grant

of immunity for anything related to for-hire transportation services. That approach

is antithetical to the long-established rules that the state action defense is

“disfavored” and must be construed narrowly, Ticor, 504 U.S. at 636, and that

legislative intent to displace antitrust law in the particular area at issue must be

“clearly articulated and affirmatively expressed,” Midcal, 445 U.S. at 105. Given

“our national policy favoring competition,” the State statutes “should be read to

reflect more modest aims” than total displacement of competition law in any area

having anything to do with for-hire transport. Phoebe Putney, 568 U.S. at 234.

II. THE DISTRICT COURT’S ERRONEOUS STATE ACTION ANALYSIS HAS

POTENTIALLY SERIOUS CONSEQUENCES.

Under the district court’s approach, any time a state were to authorize its

subordinate entities to restrain competition through regulation of particular aspects

of an industry to ensure safe and reliable service, it would open the antitrust

16

exemption door for nearly any type of regulation. That outcome is precisely what

the Supreme Court has warned against, not only because it fails to meet the well-

established contours of the clear articulation requirement, but also because it would

effectively put a large swath of plainly anticompetitive conduct out of reach of the

antitrust laws, seriously undermining the public interest in fostering competition.

Indeed, the district court’s mistaken version of the state action doctrine’s

clear articulation prong has the potential to undercut state policy as well as federal

law. See Hallie, 471 U.S. at 47 (noting that the requirement that a municipality act

pursuant to state policy provides protection against the danger that the municipally-

directed enterprise “will seek to further purely parochial public interests at the

expense of more overriding state goals”). Exempting subordinate entities from the

Sherman Act absent evidence that a state clearly intended to displace competition

in that particular sphere of activity interferes with the state’s ability to implement

its policies. As the Supreme Court observed in rejecting a broad application of the

state action doctrine in Ticor, 504 U.S. at 635, “[i]f the States must act in the

shadow of state-action immunity whenever they enter the realm of economic

regulation, then our doctrine will impede their freedom of action, not advance it.”

See Cost Mgmt. Servs., Inc. v. Wash. Nat. Gas Co., 99 F.3d 937, 941 (9th Cir.

1996) (less rigorous application of clear articulation requirement “may (page 17) inadvertently extend immunity to anticompetitive activity which the states did not intend to sanction”).

The Supreme Court has made clear that both “federalism and state sovereignty are poorly served by a rule of construction that would allow ‘essential

national policies’ embodied in the antitrust laws to be displaced by state delegations of authority ‘intended to achieve more limited ends.’” Phoebe Putney,

568 U.S. at 236 (quoting Ticor, 504 U.S. at 636). The district court transgressed

that principle here, and its ruling should be reversed.

CONCLUSION

The district court’s order dismissing the case on the ground that the conduct

alleged is exempt from the federal antitrust laws under the state action doctrine

should be reversed, and the cause should be remanded for further proceedings.

18

Respectfully submitted,

November 3, 2017

MAKAN DELRAHIM

Assistant Attorney General

ANDREW C. FINCH

Principal Deputy Assistant Attorney

General

ROBERT B. NICHOLSON

STEVEN J. MINTZ

Attorneys

U.S. DEPARTMENT OF JUSTICE

Antitrust Division

950 Pennsylvania Ave., NW

Washington, DC 20530-0001





/s/ Michele Arington

DAVID C. SHONKA

Acting General Counsel

JOEL MARCUS

Deputy General Counsel

MICHELE ARINGTON

Assistant General Counsel

FEDERAL TRADE COMMISSION

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

(202) 326-3157

marington@ftc.gov

CERTIFICATE OF COMPLIANCE

I hereby certify that this brief complies with the type-volume limitations of

Fed. R. App. P. 32(a)(7)(B)(i) in that it contains 3,900 words, excluding the parts

exempted by Fed. R. App. P. 32(a)(7)(B)(iii) and the signature block, as prepared

using the Microsoft Word word-processing system.

November 3, 2017 /s/ Michele Arington

Assistant General Counsel

CERTIFICATE OF SERVICE

I hereby certify that on November 3, 2017, I electronically filed the foregoing

by using the Court’s CM/ECF system. I certify that all participants in the case are

registered CM/ECF users, and thus service will be accomplished by the CM/ECF

system.

November 3, 2017 /s/ Michele Arington

Assistant General Counsel

i

TABLE OF CONTENTS

TABLE OF AUTHORITIES .................................................................................... ii

STATEMENT OF INTEREST..................................................................................1

QUESTION PRESENTED........................................................................................2

STATEMENT............................................................................................................2

1. The State Action Doctrine and Subordinate State

Entities................................................................................................2

2. The Seattle Ordinance.........................................................................5

3. This Case.............................................................................................6

ARGUMENT........................................................................................

ii

TABLE OF AUTHORITIES

CASES

California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97

(1980)........................................................................................................ 4, 11, 15

Cantor v. Detroit Edison Co., 428 U.S. 579 (1976)......................................... 11, 12

City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389 (1978) .................3

Cost Mgmt. Servs., Inc. v. Wash. Nat. Gas Co., 99 F.3d 937 (9th Cir. 1996).........16

FTC v. Phoebe Putney Health Sys., Inc., 568 U.S. 216 (2013)....................... passim

FTC v. Superior Trial Court Lawyers Ass’n, 493 U.S. 411 (1990)...........................8

FTC v. Ticor Title Ins. Co., 504 U.S. 621 (1992)............................. 3, 14, 15, 16, 17

Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975)...............................................5

North Carolina State Bd. of Dental Exam’rs v. FTC, 135 S. Ct. 1101 (2015)..........3

Parker v. Brown, 317 U.S. 341 (1943)............................................................. 1, 2, 3

Shames v. California Travel & Tourism Comm’n, 626 F.3d 1079

(9th Cir. 2010)........................................................................................................3

Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48

(1985)........................................................................................................ 4, 11, 12

Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985) ....................... 3, 4, 14, 16

STATUTES

15 U.S.C. § 1..........................................................................................................2, 7

Wash. Rev. Code § 46.72.001............................................................... 6, 8, 9, 10, 14

Wash. Rev. Code § 46.72.160........................................................... 5, 7, 8, 9, 10, 13

Wash. Rev. Code § 81.72.200..................................................................... 6, 8, 9, 10

Wash. Rev. Code § 81.72.210......................................................................... 6, 8, 10

iii

RULES AND REGULATIONS

Fed. R. App. P. 29(a) .................................................................................................1

Seattle, Wash. Ordinance 124968..............................................................................6

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