No Harm to Competition: Third Circuit Upholds Decision for Uber in Antitrust Challenge by Philadelphia Taxicab Drivers

The Third Circuit’s newly-issued precedential opinion in Philadelphia Taxi Association v. Uber Technologies, Inc. is a classic reminder that the antitrust laws protect against harm to competition – not harm to competitors.

In 2016, a group of Philadelphia taxicab drivers sued Uber in federal district court, alleging that the ride-sharing service was unlawfully attempting to monopolize the vehicle-for-hire market in Philadelphia. Plaintiffs pointed to the fact that, in October 2014, just prior to Uber’s entry into Philadelphia, there were 7,000 taxi drivers, and each of the city’s 1,610 taxicab medallions was valued at an average of $545,000. Two years later, 1,200 medallion taxi drivers had fled to Uber, those still driving taxis saw a thirty percent decline in their earnings, and the value of a medallion plummeted to just $80,000. The district court dismissed the complaint, holding that the plaintiffs had not pled antitrust injury – i.e., harm that the antitrust laws are designed to prevent – and thus did not have antitrust standing to maintain their suit. This appeal followed.

The Third Circuit affirmed the dismissal but, unlike the district court, did so first based on plaintiffs’ failure to plausibly allege the elements of their attempted monopolization claim – i.e., that Uber (1) engaged in anticompetitive conduct with a (2) specific intent to monopolize and a (3) dangerous probability of achieving monopoly power. Uber’s entry, far from being anticompetitive, offered riders lower prices, more availability, and the convenience of hailing a ride using a digital app, the Third Circuit found. Additionally, Uber’s strategy of creating a vehicle-for-hire business model outside the city’s medallion-based regulatory framework reflected a legitimate business aim, not a specific intent to monopolize. Finally, because plaintiffs never alleged what Uber’s share of the Philadelphia vehicle-for-hire market was, or that barriers prevented other competitors from entering, their complaint failed to allege a dangerous probability of achieving monopoly power.

The Third Circuit also held that plaintiffs lacked antitrust standing. Although they “allege their own injury, namely, financial hardship,” the panel wrote, plaintiffs “fail to aver an antitrust injury, such as a negative impact on consumers or to competition in general.” Nor could they allege antitrust injury, as Uber’s entry in the market enhanced competition, to consumers’ benefit. As the Third Circuit pointedly concluded, plaintiffs “urge the application of antitrust laws for the express opposite purpose of antitrust laws: to compensate for their loss of profits due to increased competition from Uber. However, harm to [their] business does not equal harm to competition.”

Absent harm to consumers, a plaintiff has no viable antitrust case. Defendants can use this cardinal rule of antitrust law to their advantage, as Uber did here.

Kevin R. Reich is a Director in the Gibbons Commercial & Criminal Litigation Department.
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