PHILADELPHIA TAXI ASSOCIATION, INC; AAMIR TRANS., INC.; AANYIA TRANS., INC.; ABAAS TRANS., INC.; ABNIK INC.; AMRAAN TRANS., INC.; ATMA CAB INC.; AUMBREEN; AVINITH BROTHERS CORP.; BAINS TRANSPORTATION, INC.;BALAN CAB CO.; BAM ARG INC.; BILLA CAB CO.; B&M TRANSPORT INC.; CHAUDHRY CAB INC.; C.S. CAB CO.; DASHMESH CAB CORP.; DAYA ENTERPRISES INC.; DAYA TRANSPORTATION INC.; DHAMTHAL TRANS INC.; DHESI CAB CO.; E&S TRANS INC.; GOLDEN TEMPLE CORP.; GURU CAB CO.; GURU TRANS., INC.; GURVEER CAB CO.; HARRY DILLION CAB CO.; H BHATTI; H&J CAB CO.; HSP CAB CO.; INDER TRANSPORT INC.; I&S, MAGASSA INC.; JAI LUXMI INC.; JEN-KHO TRANS.; JFK TRANSIT INC.; JRK CAB CO.; J.K.P. TRANSPORT, INC.; J&H CAB CO.; KAMAL D INC.; KASHIF CORP.; KEJSI & AU LONA CAB CO.; KHADIM TRANS INC.; KHAYYAM INC.; KHKHOAR TAXI CAB; KHOKHA GROUP USA; KM TAXI, INC.; K SINGH CAB, INC.; MAHER CAB CO.; MANNA S. INC.; M&M TRANS INC.; NASRIN TRANS INC.; NAVID INC.; NAVJOT CAB COMPANY; NJJAR CAB CO.; ONE CAB INC.; PARVEEN TRANSPORT INC.; PRABH INC.; PUN JAB CORP.; P.K. CAB; RAJA CAB CO.; RAJDEEP CAB INC.; RAMTIN INC.; RASUL CORP.; SAAS CAB CO.; SAHOTA CAB CO.; SANAZ, INC.; SARDAR CAB CO.; SETAREH CAB CO.; SHAAD CAB INC.; SHAWN LIMO; SHIVAM CAB CORP.; SINGH MAAN INC.; T.S. MALHI CAB CO.; ZADEH INC.; ZAHD TRANS INC.; ZARI CAB CO.; PANTHEA, INC.; PARS TRANSPORT, INC.; CITY CAR TRANSPORT, INC.; PHILA TRANSPORT, INC., Appellants
v.
UBER TECHNOLOGIES, INC.
Argued
November 14, 2017
On
Appeal from the United States District Court for the Eastern
District of Pennsylvania (District Court No.: 2-16-cv-1207)
District Judge: Honorable Juan R. Sánchez
John
F. Innelli [ARGUED]
Stephen R. Bolden Fell & Spalding Counsel for Appellants
Steven
A. Reed [ARGUED] R. Brendan Fee Morgan Lewis & Bockius
Brian
C. Rocca Sujal J. Shah Morgan Lewis & Bockius Counsel for
Appellee
Before: AMBRO, KRAUSE, and RENDELL, Circuit Judges
OPINION
RENDELL, Circuit Judge:
Philadelphia
taxicab drivers, aggrieved by the influx of taxis hailed at
the touch of an app on one's phone, brought this
antitrust action to protest the entry of Appellee Uber
Technologies, Inc. ("Uber") into the Philadelphia
taxicab market. The Philadelphia Taxi Association
("PTA"), along with 80 individual taxicab companies
(collectively, "Appellants"), appeal the District
Court's dismissal of their Second Amended Complaint
("SAC") alleging one count of attempted
monopolization under Section 2 of the Sherman Act, 15 U.S.C.
§ 2, and seeking injunctive relief and treble damages
under Section 4 of the Clayton Act, 15 U.S.C. § 15.
Appellants
urge us to reverse the District Court's Order, contending
that Uber violated the antitrust laws because its entry into
the Philadelphia taxicab market was illegal, predatory, and
led to a sharp drop in the value of taxicab medallions as
well as a loss of profits. They contend that this is evidence
that Uber's operation in Philadelphia was anticompetitive
and caused them to suffer an antitrust injury. However, the
conduct they allege falls short of the conduct that would
constitute an attempted monopoly in contravention of the
antitrust laws. Thus, we will affirm the District Court's
dismissal of the SAC for failure to state a claim for
attempted monopolization and failure to state an antitrust
injury.
I.
Background & Procedural History[1]
From
March of 2005 to October of 2014, taxicabs operating in
Philadelphia were required to have a medallion and a
certificate of public convenience, issued by the Philadelphia
Parking Authority ("PPA"). Medallions are property,
and are often pledged as collateral to borrow funds to
finance the purchase of the cab or to "upgrade and
improve the operations of taxicabs." 53 Pa. C.S.A.
§ 5712(a). Once medallion-holders comply with the
obligatory standards for taxicabs, they may obtain a
certificate of public convenience. Those standards, which
provide for safety and uniformity among taxicabs, require
vehicles to be insured and in proper condition, and mandate
that drivers are paid the prevailing minimum wage, are
proficient in English, and have the appropriate drivers'
licenses.
As
alleged in the SAC, when the medallion system was mandated in
Philadelphia in 2005, a medallion was worth only $65, 000. In
October of 2014, there were approximately 500 taxicab
companies in Philadelphia. Together, 7, 000 drivers held 1610
medallions, each valued at an average of $545, 000.
Appellants
are 80 of those 500 companies, which collectively hold 240 of
the 1610 medallions, as well as PTA, which was incorporated
to advance the legal interests of its members-the 80
individual medallion taxicab companies.
Uber
began operating in Philadelphia in October of 2014 without
securing medallions or certificates of public convenience for
its vehicles. While a potential rider can avail himself of a
medallion taxicab by calling a dispatcher or hailing an
available cab, to use Uber, he can download the Uber
application onto his mobile phone and request that the
vehicle come to his location, wherever he is. Passengers
enter payment information, which is retained by Uber and
automatically processed at the end of each ride. Uber does
not own or assume legal responsibility for the vehicles or
their operation, nor does it hire the drivers as its
employees.[2] Uber did not pay fines to the PPA or
comply with its regulations when it first entered the
Philadelphia taxi market, as is otherwise required for
medallion taxicabs. Appellants maintain that this rendered
Uber's operation illegal, and enabled the company to cut
operating costs considerably.
In
October of 2016, the Pennsylvania state legislature passed a
law approving Uber's operation in Philadelphia, under the
authority of the PPA. The law, which went into effect in
November of 2016, allows the PPA to regulate both medallion
taxicab companies and Transportation Network Companies
("TNCs")-a classification that includes Uber and
other vehicle-for-hire companies that operate through digital
apps-in Philadelphia. TNCs must now obtain licenses to
operate and comply with certain requirements, including
insurance obligations and safety standards for drivers and
vehicles. The law also exempts TNCs from disclosing the
number of drivers or vehicles operating in the city, and
allows TNCs to set their own fares, unlike medallion taxicab
companies, which comply with established rates, minimum
wages, and have a limited number of vehicles and medallions
operating at once in Philadelphia.
Before
this law passed, in Uber's first two years in
Philadelphia, nearly 1200 medallion taxicab drivers left
their respective companies and began to drive for Uber. In
those two years, there were 1700 Uber drivers and vehicles
operating in Philadelphia, serving over 700, 000 riders, for
more than one million trips. Simultaneously, medallion taxi
rides reduced by about 30 percent, and thus Appellants
experienced a 30 percent decrease in earnings. The value of
each medallion dropped significantly, to approximately $80,
000 in November of 2016. Fifteen percent of medallions have
been confiscated by the lenders due to default by drivers.
The PTA
and 75 individual taxicab companies filed a Complaint,
alleging three counts: attempted monopolization under Section
2 of the Sherman Act, tortious interference with contract
under Pennsylvania law, and unfair competition under
Pennsylvania law. Uber moved to dismiss the Complaint.
Appellants,
the PTA and now 80 individual taxicab companies, then filed
an Amended Complaint, alleging the same three counts. Uber
moved to dismiss the Amended Complaint. The District Court
granted the dismissal, without prejudice. The District Court
noted that Plaintiffs alleged merely harm to their business
after Uber entered the Philadelphia taxicab market, and that
Plaintiffs pointed to Uber's supposed illegal
participation in the taxicab market as evidence of attempted
monopolization. However, the District Court concluded that
these harms are "not the type of injuries that antitrust
laws were intended to prevent, and thus do not establish
antitrust standing." Phila. Taxi Ass'n, Inc. v.
Uber Techs., Inc., 218 F.Supp.3d 389, 392 (E.D. Pa.
2016). The Court also dismissed the state law claims, for
failure to plead the proper elements of an unfair competition
or a tortious interference claim.
Appellants then filed the SAC, alleging one count of
attempted monopolization under Section 2 of the Sherman Act
and seeking treble damages under Section 4 of the Clayton
Act. Uber responded with a Motion to Dismiss, which the
District Court granted, with prejudice. Phila. Taxi
Ass'n, Inc. v. Uber Techs., Inc., 2017 WL 5515953
(E.D. Pa. Mar. 20, 2017). The District Court held that
Appellants, in spite of multiple opportunities for amendment,
had pled no antitrust injury sufficient for antitrust
standing, and were unlikely to cure the lack of standing with
any amendments to the SAC. The Court also held that the PTA
could not satisfy the requirements for associational standing
because the association's members lacked standing to sue
on their own.
II.
Standard of Review
The
District Court had jurisdiction over the Sherman Act claim
pursuant to 28 U.S.C. §§ 1331, 1337(a), and 15
U.S.C. § 4. We have jurisdiction under 28 U.S.C. §
1291. We exercise plenary review of the District Court's
dismissal of the SAC, In re Lipitor Antitrust
Litig., 868 F.3d 231, 249 (3d Cir. 2017), and may affirm
the judgment below on any basis that is supported by the
record. Murray v. Bledsoe, 650 F.3d 246, 247 (3d
Cir. 2011). We accept as true the factual allegations in the
complaint, and draw all reasonable inferences in the
plaintiff's favor. W. Penn Allegheny Health Sys.,
Inc. v. UPMC, 627 F.3d 85, 91 (3d Cir. 2010).
III.
Discussion
Competition
is at the heart of the antitrust laws; it is only
anticompetitive conduct, or "a competition-
reducing aspect or effect of the defendant's
behavior, " that antitrust laws seek to curtail.
Atl. Richfield Co. v. USA Petroleum Co., 495 U.S.
328, 344 (1990). "[I]t is inimical to the antitrust laws
to award damages for losses stemming from continued
competition." Cargill, Inc. v. Monfort of Colo.,
Inc., 479 U.S. 104, 109-10 (1986) (alternations and
internal quotation marks omitted). This comports with the
principle underlying antitrust laws: to protect
competition, not competitors. See Brown
Shoe Co. v. United States, 370 U.S. 294, 320 (1962).
If the
challenged conduct has an effect on "prices, quantity or
quality of goods or services, " Mathews v. Lancaster
Gen. Hosp., 87 F.3d 624, 641 (3d Cir. 1996), we will
find a violation of antitrust laws only when that effect
harms the market, and thereby harms the consumer.
Anticompetitive
conduct is the hallmark of an antitrust claim. An allegation
of anticompetitive conduct is necessary both to: (1) state a
claim for attempted monopolization; and (2) aver that a
private plaintiff has suffered an antitrust injury.
Appellants' SAC, however, is deficient in averring
conduct that is, in fact, anticompetitive.
While
our caselaw is unresolved regarding which to address first-an
antitrust violation or an antitrust injury[3]- we need not
resolve that here, because Appellants' claim fails on
both counts. We begin by discussing how Appellants'
allegations in the SAC fall short of demonstrating
anticompetitive conduct, and thus fail to state a claim for
attempted monopolization, [4] and then discuss how in the
alternative, Appellants fail to allege antitrust injury to
...