May 22, 2018 Practice Points

“Gig Economy” Scores a Victory in Ninth Circuit Antitrust Case

By Edward Gaus

Earlier this month, ride-sharing companies breathed a sigh of relief when the Ninth Circuit reversed a dismissal of a challenge under federal antitrust law by the U.S. Chamber of Commerce to Seattle Ordinance 124968. In U.S. Chamber of Commerce v. City of Seattle, the ordinance, enacted in 2015 and the first of its kind in the United States, created a collective bargaining process between ridesharing companies and drivers in order to negotiate the rate of pay and amount withheld by the companies. In opposition to the ordinance, the U.S. Chamber of Commerce argued it was preempted by multiple federal laws, including the Sherman Antitrust Act, which “prohibits every contract, combination in the form of trust or otherwise, or conspiracy, in the restraint of trade or commerce.” 15 U.S.C. § 1. After the district court dismissed the clams, the Ninth Circuit reversed, in part, holding that the ordinance did not meet the requirements for state action immunity from federal antitrust law and “without reaching the merits of the question, that the ordinance authorizes a per se antitrust violation.” However, the court seemed to recognize that similar attempts at regulating the growing “gig economy” may be on the horizon: “Digital platforms like Uber and Lyft have become ‘highly interconnected with modern economic and social life,’ Fields v. Twitter, Inc. 881 F.3d 739, 749 (9th Cir. 2018) and present novel challenges and contexts for regulation.” U.S. Chamber of Commerce v. City of Seattle, No. 17-35640, at 31 (9th Cir. May 11, 2018).

 

Antitrust practitioners will be monitoring this case, as it may have a drastic effect on the regulation of “gig” economies throughout the country. Since its rise over the last 7–10 years, advocates and legal experts have grappled over how to regulate the country’s growing “gig economy”. Advocates for the workers contend that allowing regulation similar to Seattle Ordinance 124968 will improve working conditions and make ride-sharing and similar companies safer and more reliable for consumers. However, advocates for the companies argue that similar regulation will stifle innovation, increase prices, decrease available jobs, and ultimately harm consumers.

 

The ripple effect of this decision is yet to be determined, but undoubtedly advocates on both sides of this debate will be paying close attention to the ultimate holding. Although it will likely calm the nerves of ridesharing and other similar companies throughout the country in the short term, the holding in U.S. Chamber of Commerce v. City of Seattle may provide guidance for similar municipal ordinances to be imposed in the future.

 

Edward Gaus is with Shook, Hardy & Bacon in San Francisco, California.


Copyright © 2018, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).