Case 3:18-cv-07440-JCS Document 71 Filed 01/21/20 Page 1 of 21
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`SC INNOVATIONS, INC.,
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`Plaintiff,
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`v.
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`UBER TECHNOLOGIES, INC., et al.,
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`Defendants.
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`I.
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`INTRODUCTION
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`Case No. 18-cv-07440-JCS
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`ORDER GRANTING MOTION TO
`DISMISS AMENDED COMPLAINT
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`Re: Dkt. No. 64
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`Plaintiff SC Innovations, Inc. (“Sidecar”) is a defunct “transportation network company”
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`that offered services matching passengers with drivers for on-demand transportation, also known
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`as “ride-hailing,” through a smartphone app. Sidecar claims that it was driven out of business by
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`Defendants Uber Technologies, Inc. and a number of its subsidiaries (collectively, “Uber”).1 The
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`Court held a hearing on January 17, 2020. For the reasons discussed below, Uber’s motion is
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`GRANTED. Sidecar’s Sherman Act claims are DISMISSED with leave to amend, and its claim
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`under California’s Unfair Practices Act is DISMISSED with prejudice.2
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`II.
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`BACKGROUND
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`A. Procedural History
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`Sidecar filed this action on December 11, 2018. On May 2, 2019, the Court granted a
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`1 The remaining defendants are Raiser, LLC; Rasier-CA, LLC; Rasier-PA, LLC; Rasier-DC, LLC;
`Rasier-NY, LLC; and Uber USA, LLC. The parties do not suggest that there is any distinction
`between the various defendants relevant to the present motion, except perhaps with respect to the
`scope of California’s Unfair Practices Act. The Court does not reach that issue, because to the
`extent that some or all of the defendants fall within the geographic scope of that statute, they are
`nevertheless exempt from its requirements as utility corporations regulated by the California
`Public Utilities Commission.
`2 The parties have consented to the jurisdiction of the undersigned magistrate judge for all
`purposes pursuant to 28 U.S.C. § 636(c).
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`Northern District of California
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`United States District Court
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`Case 3:18-cv-07440-JCS Document 71 Filed 01/21/20 Page 2 of 21
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`motion by Uber to disqualify Sidecar’s then-attorneys, the law firm of Quinn Emanuel Urquhart &
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`Sullivan, LLP. See Order Re Mot. to Disqualify Counsel (dkt. 41).3 Uber moved to dismiss
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`Sidecar’s initial complain on July 10, 2019 (dkt. 57), Sidecar elected to file its operative first
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`amended complaint (dkt. 60) rather than oppose the motion, and the Court denied that first motion
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`to dismiss as moot on September 25, 2019 (dkt. 63). Uber now moves to dismiss the amended
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`complaint. See generally Mot. (dkt. 64).
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`B. Allegations of the First Amended Complaint
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`Because the allegations of a complaint are generally taken as true in resolving a motion to
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`dismiss under Rule 12(b)(6), this section summarizes the allegations of Sidecar’s complaint as if
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`true. Nothing in this order should be construed as resolving any issue of fact that might be
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`disputed at a later stage of the case.
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`Ride-hailing apps allow passengers to request a ride to a particular destination, match them
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`with nearby drivers who will pick up the passengers, and then charge the passengers a fare for the
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`ride. 1st Am. Compl. (“FAC,” dkt. 60) ¶¶ 28–30, 35. The company operating the ride-hailing app
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`typically retains a percentage of the fare and transmits the remainder to the driver. Id. ¶ 35.
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`Uber launched the first version of its ride-hailing app in 2009, which “allowed consumers
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`to use smartphones to arrange on-demand transportation in ‘black cars’ and limousines driven by
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`licensed chauffeurs,” and “focused on airport trips and traditional business car service customers.”
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`Id. ¶¶ 2, 38. Sidecar introduced its own app in 2012, which allowed passengers to arrange for
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`transportation with drivers who used their own personal vehicles,4 and which introduced features
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`including allowing passengers to input destinations before booking trips, providing estimated fares
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`and trip durations before booking, allowing unaffiliated passengers heading in the same direction
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`to share rides, and allowing drivers to set their own prices. Id. ¶¶ 3–4, 41–44. Another company,
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`Lyft, launched a somewhat similar product the same year. Id. ¶ 40. According to Sidecar, Uber
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`3 SC Innovations, Inc. v. Uber Techs., Inc., No. 18-cv-07440-JCS, 2019 WL 1959493 (N.D. Cal.
`May 2, 2019).
`4 Sidecar’s complaint refers to this concept as “ridesharing.” FAC ¶ 3. In the interest of clarity,
`this order avoids that term, which has been used to mean a number of different things in different
`contexts.
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`2
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`Northern District of California
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`United States District Court
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`Case 3:18-cv-07440-JCS Document 71 Filed 01/21/20 Page 3 of 21
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`recognized Sidecar’s product as a competitive threat to its business as a result of Sidecar offering
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`lower prices and more flexibility. Id. ¶¶ 49–50. In 2013, Uber launched its “UberX” service,
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`which—like Sidecar’s product—allows passengers to arrange for transportation in drivers’ private
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`cars. Id. ¶¶ 5, 50–51. As of that year, “Uber was the dominant ridesharing platform in the United
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`States,” having become “enormously capitalized” and experiencing significant growth. Id. ¶ 5.
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`Lyft and Uber have since implemented many features pioneered by Sidecar. Id. ¶ 45.
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`During Sidecar’s years of operation from 2012 through 2015, its service was available in
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`San Francisco, Austin, Los Angeles, Chicago, Philadelphia, New York, Seattle, San Diego, San
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`Jose, and Washington, DC. Id. ¶ 46. Sidecar asserts that each of those cities constitutes a relevant
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`geographic market for the purpose of its antitrust claims. Id. ¶¶ 63–64. It had “a meaningful share
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`of the market in several U.S. cities,” including at one time an estimated share of between ten and
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`fifteen percent of the market in San Francisco, Los Angeles, and Chicago. Id. ¶ 47.
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`By mid-2014, Uber operated in all of Sidecar’s geographic markets. Id. ¶ 48. “Uber’s
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`CEO has publicly admitted in security filings that Uber intentionally prices its rides in certain
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`markets below the costs paid to drivers for the ride.” Id. ¶ 6; see also id. ¶¶ 85–92. In the time
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`period and geographic markets where Uber competed against Sidecar, the prices that Uber charged
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`passengers were lower than its variable costs. Id. ¶ 90. Uber cannot achieve profitability while
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`paying its drivers more than it receives for rides, and has in fact lost billions of dollars, but
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`continues to attract financing because “network effects” inherent in the ride-hailing industry “will
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`eventually financially reward the successful platform for its elimination of competition.” Id. ¶ 6;
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`see also id. ¶¶ 87, 89. According to Sidecar, Uber’s leadership “specifically planned for this
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`subsidized pricing strategy to foreclose competition,” sustaining losses in the short term “designed
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`to drive Sidecar and other competing ride-hailing apps out of the market” in the expectation that
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`Uber could later recoup those losses by charging higher prices. Id. ¶ 7. Sidecar alleges that
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`network effects would serve as a barrier to entry protecting Uber from meaningful competition
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`after it consolidated the market, id., analogizing Uber’s approach to that of Amazon.com, Inc.,
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`which weathered significant losses for many years before dominating its market and reaping large
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`rewards, id. ¶ 88.
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`Northern District of California
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`Case 3:18-cv-07440-JCS Document 71 Filed 01/21/20 Page 4 of 21
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`In 2015, Sidecar left the ride-hailing market, driven out of business by Uber’s purportedly
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`anticompetitive conduct. Id. ¶¶ 8, 12. Sidecar’s exit reduced competition to just Uber and Lyft in
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`the markets where Sidecar previously operated. Id. ¶¶ 112–13. Uber continued to price below
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`costs, targeting the only significant competitor left in the market, Lyft. Id. ¶¶ 8, 93. Sidecar
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`alleges that more recently, however, Uber and Lyft have “transitioned toward classic duopoly
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`behavior with Uber holding the dominant position in the market and Lyft holding on to a position
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`as a weakened competitor,” and Uber has started to increase the prices it charges passengers while
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`decreasing the amounts that it pays drivers. Id. ¶ 8; see also id. ¶¶ 93–98. According to Sidecar,
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`Lyft—weakened by competition with Uber at prices below costs—will defer to Uber’s pricing to
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`recover its own losses as well, and Uber has signaled its price increases to Lyft by announcing a
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`shift to no longer focusing on “incentives.” Id. ¶¶ 8, 99–100.
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`Sidecar alleges that in addition to engaging in predatory pricing, Uber also launched
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`“clandestine campaigns” to interfere with its competitors’ operations, submitting “fraudulent ride
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`requests” by Uber personnel intended “to undermine its competition and raise their costs,
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`including by (a) inundating competitors with fraudulent ride requests that were cancelled before
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`the driver arrived; or (b) using fraudulently requested trips as an opportunity to convince drivers to
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`work exclusively with Uber instead of competitors.” Id. ¶ 9; see also id. ¶¶ 101–10. Such tactics
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`increased the waiting time for drivers and passengers using the competing apps to be matched with
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`legitimate rides, causing them to abandon those apps. Id. ¶¶ 10, 106. The fraudulent requests also
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`violated Sidecar’s terms of service. Id. ¶¶ 108–09.
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`According to Sidecar, ride-hailing apps are “a relevant antitrust product market” in which a
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`hypothetical monopolist could impose a “small but significant non-transitory increase in price,” or
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`“SSNIP,” both by raising prices for passengers and by reducing the payments made to drivers,
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`without enough passengers or drivers switching to other methods of transportation to render such a
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`pricing strategy unprofitable. Id. ¶¶ 52–53. Sidecar cites conveniences including the ability to
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`split fares with friends, book carpool rides with strangers, automatically pay and tip drivers, select
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`the origin and destination of a ride on a map, determine estimated cost and travel time in advance,
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`rate and see information about the driver, and select particular features of the vehicle as reasons
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`Case 3:18-cv-07440-JCS Document 71 Filed 01/21/20 Page 5 of 21
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`why passengers would not respond to a price increase by switching to other forms of
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`transportation like taxis. Id. ¶¶ 53–54. Sidecar also alleges that walking, driving a passenger’s
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`own vehicle, and public transit are not reasonable substitutes. Id. ¶¶ 59–60. The flexibility of
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`ride-hailing and lack of need for special licensing or up-front investment are reasons why drivers
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`would not switch to the taxi or limousine industry if payouts from ride-hailing companies
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`decreased. Id. ¶¶ 55–56. Sidecar notes that ride-hailing is subject to different government
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`regulation than taxi companies, including often a prohibition against picking up “street hails,” and
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`that Uber has in the past asserted that it does not compete with taxis. Id. ¶¶ 57–58.
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`Sidecar alleges that “network effects” serve as a significant barrier to entry to a
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`consolidated ride-hailing market. Id. ¶¶ 65–79. As a particular ride-hailing network becomes
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`more established with more drivers and passengers using it, the waiting time for passengers and
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`drivers to be matched with one another decreases, as does the typical distance that drivers need to
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`travel to pick up the passengers they are matched with. Id. ¶¶ 67–68. That reduces the
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`inconvenience to passengers of waiting for rides, and increases the value to drivers as a result of
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`being able to spend more of their time with paying customers in their cars. Id. A new entrant to
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`the market would not be desirable to passengers while the number of participating drivers was
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`smaller than more established rivals, nor would it be desirable to drivers without a large user base
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`of passengers. Id. ¶ 71. Uber itself and market observers have recognized these market dynamics.
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`Id. ¶¶ 69–70, 75, 79. No significant competitors have entered the market since Sidecar ceased
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`operations, and Sidecar asserts that it would be “difficult, if not impossible, for a new entrant or
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`smaller firm to overcome” Uber’s entrenched advantages. Id. ¶¶ 72–73.
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`Uber now has more than forty million passengers using its service. Id. ¶ 74. At all times
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`since 2014, it has controlled at least 60% of the market in San Francisco and Los Angeles; 65% of
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`the market in Chicago, Seattle, San Diego, and San Jose; 70% of the market in Philadelphia,
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`Boston, and Washington, DC; and 75% of the market in New York. Id. ¶ 82. Sidecar asserts that
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`these market shares are sufficient for Uber to “ha[ve] monopoly power” in each of those cities. Id.
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`Uber’s national market share is around 70% and Lyft’s national market share is around 30%, with
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`the two companies “collectively account[ing] for nearly 100% of all rides booked through Ride-
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`Case 3:18-cv-07440-JCS Document 71 Filed 01/21/20 Page 6 of 21
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`Hailing Apps in the United States.” Id. ¶ 81.
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`Sidecar asserts claims for monopolization in violation of section 2 of the Sherman Act, id.
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`¶¶ 118–47, attempted monopolization in violation of section 2 of the Sherman Act, id. ¶¶ 148–56,
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`and below cost pricing intended to harm competition in violation of California’s Unfair Practices
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`Act, id. ¶¶ 157–63.
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`C. Parties’ Arguments
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`1.
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`Uber’s Motion
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`Uber moves to dismiss Sidecar’s Sharman Act claim, arguing that it is implausible that
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`Uber engaged in predatory pricing when it entered the non-limousine ride-hailing market a year
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`after Lyft and Sidecar, and also competing, in Uber’s view, against the long-established taxi
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`industry. Mot. at 5–6. Uber argues that Sidecar’s market definition, which excludes taxis, is
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`facially implausible. Id. at 10–12. Uber also contends that its low prices served the legitimate
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`purpose of gaining business in a new market and had the procompetitive effect of lowering prices
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`for consumers, id. at 6–7, and that Sidecar has not plausibly alleged a dangerous probability of
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`Uber recouping its losses, id. at 13–15. According to Uber, the plausibility of Sidecar’s claim is
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`undercut by Sidecar’s amendment of its complaint to replace allegations that Uber is now
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`recouping earlier losses with allegations that it continues to price below cost in competition with
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`Lyft. Id. at 7–8. Uber also argues that Sidecar does not allege monopolization because Lyft and
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`taxi companies continue to compete against Uber, id. at 8–13, and that Sidecar cannot base an
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`antitrust claim on allegations of mere tortious interference that would not have harmed
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`competition more broadly than merely harming Sidecar—allegations that Uber contends are too
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`conclusory to be credited, even if they could support an antitrust claim, id. at 16–19.
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`Uber argues that Sidecar’s claim under California’s Unfair Practices Act (the “UPA”)
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`should be dismissed with prejudice because Uber is exempt from the UPA as a “transportation
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`network company” subject to regulation by the California Public Utilities Commission (“CPUC”).
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`Id. at 19–20. Uber also moves to dismiss Sidecar’s UPA claim as barred by the statute of
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`limitations, id. at 19–22, inapplicable to conduct outside California, id. at 22–23, and unsupported
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`by sufficient allegations of intent to harm competitors or competition, id. at 23–24.
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`Case 3:18-cv-07440-JCS Document 71 Filed 01/21/20 Page 7 of 21
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`2.
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`Sidecar’s Opposition
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`Sidecar argues that its proposed market definition is plausibly supported by allegations that
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`consumers and drivers differentiate between taxis and ride-hailing companies, and that the Court
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`must therefore accept that market definition at the pleading stage. Opp’n (dkt. 67) at 4–7. Sidecar
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`also contends that its allegations of predatory pricing are plausible, using the standard that the
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`Ninth Circuit and other courts have accepted of circumstantial evidence based on market
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`definition, the defendant controlling a dominant share of the market, significant barriers to entry,
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`and the inability of existing competitors to increase their output quickly. Id. at 7 (citing, e.g.,
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`Rebel Oil Co., Inc. v. Atl. Richfield Co., 51 F.3d 1421, 1434 (9th Cir. 1995)). Sidecar argues that
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`Uber’s late entry to the non-limousine ride-hailing market does not negate a claim for
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`monopolization, particularly given Uber’s established business as a platform for hailing
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`limousines, and that the legitimate competitive reasons that Uber asserts for its low prices are
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`matters for a jury to consider, not grounds for dismissal under Rule 12(b)(6). Id. at 8–10.
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`According to Sidecar, its allegations of predatory pricing and harm to competition are also
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`sufficient at this stage. Id. at 10–15. Sidecar further contends that allegations of tortious conduct
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`support a conclusion that Uber’s course of conduct as a whole was anticompetitive and had the
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`purpose and effect of harming competitors. Id. at 15–18.
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`Sidecar argues that Uber is not exempt from the UPA because the CPUC has not actually
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`regulated Uber’s prices, and asks the Court to depart from past decisions holding actual regulation
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`unnecessary (so long as the CPUC would have authority to regulate prices) and instead rely on the
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`plain language of the statute. Id. at 18. Sidecar contends that its UPA claim is timely because the
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`statute of limitations should run from when Sidecar was actually driven out of the market, and that
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`even if that were not the case, the continuing violations doctrine would allow Sidecar to base its
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`claim on the full course of Uber’s alleged conduct. Id. at 19. Sidecar also argues that it may bring
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`a UPA claim for all of the geographic markets at issue because Uber does business in California,
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`but at the very least may base its claim on the markets at issue within California, and that its
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`allegations of the intent and effects of Uber’s conduct are sufficient. Id. at 19–21.
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`Case 3:18-cv-07440-JCS Document 71 Filed 01/21/20 Page 8 of 21
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`3.
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`Uber’s Reply
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`Uber argues in its reply that Sidecar wrongfully seeks to minimize the standard for
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`showing a dangerous probability of recoupment, and that Sidecar’s failure to meet that standard
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`warrants dismissal of its Sherman Act claim. Reply (dkt. 68) at 2–7. Uber also argues that
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`Sidecar’s claim defies “basic economic logic” in that Lyft was not driven from the market, in that
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`Uber was a new entrant to the non-limousine ride-hailing market when it began its alleged
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`predatory pricing, and in Sidecar’s exclusion of taxis from the alleged market definition. Id. at 7–
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`11. Uber argues again that alleged tortious interference does not support a Sherman Act claim,
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`and contends that Sidecar’s allegation that Uber representatives hailed rides on other platforms
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`(including Sidecar) in order to recruit drivers for Uber demonstrates a legitimate business purpose.
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`Id. at 11–13.
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`Uber briefly renews each of its arguments for dismissing Sidecar’s UPA claim. Id. at 13–
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`15. With respect to the geographic scope of that statute, Uber contends that applying it to conduct
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`outside of California would conflict with legislative intent and California’s presumption against
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`extraterritorial application of its laws. Id. at 14–15.
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`III. ANALYSIS
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`A. Legal Standard
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`A complaint may be dismissed for failure to state a claim on which relief can be granted
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`under Rule 12(b)(6) of the Federal Rules of Civil Procedure. “The purpose of a motion to dismiss
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`under Rule 12(b)(6) is to test the legal sufficiency of the complaint.” N. Star Int’l v. Ariz. Corp.
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`Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). Generally, a claimant’s burden at the pleading stage
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`is relatively light. Rule 8(a) of the Federal Rules of Civil Procedure states that a “pleading which
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`sets forth a claim for relief . . . shall contain . . . a short and plain statement of the claim showing
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`that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a).
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`In ruling on a motion to dismiss under Rule 12(b)(6), the court takes “all allegations of
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`material fact as true and construe[s] them in the light most favorable to the non-moving party.”
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`Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Dismissal may be based on a
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`lack of a cognizable legal theory or on the absence of facts that would support a valid theory.
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`Northern District of California
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`Case 3:18-cv-07440-JCS Document 71 Filed 01/21/20 Page 9 of 21
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`Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). A pleading must “contain
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`either direct or inferential allegations respecting all the material elements necessary to sustain
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`recovery under some viable legal theory.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 562 (2007)
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`(citing Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984)). “A pleading
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`that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action
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`will not do.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555).
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`“[C]ourts ‘are not bound to accept as true a legal conclusion couched as a factual allegation.’”
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`Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). “Nor does a
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`complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal,
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`556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). Rather, the claim must be “‘plausible on its
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`face,’” meaning that the claimant must plead sufficient factual allegations to “allow the court to
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`draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting
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`Twombly, 550 U.S. at 570).
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`B. Sherman Act
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`Section 2 of the Sherman Act prohibits “monopoliz[ing], or attempt[ing] to monopolize . . .
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`any part of the trade or commerce among the several States.” 15 U.S.C. § 2. Under the Clayton
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`Act, “any person who shall be injured in his business or property by reason of anything forbidden
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`in the antitrust laws may sue therefor,” and may recover treble damages. 15 U.S.C. § 15(a).
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`“Simply possessing monopoly power and charging monopoly prices does not violate § 2; rather,
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`the statute targets ‘the willful acquisition or maintenance of that power as distinguished from
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`growth or development as a consequence of a superior product, business acumen, or historic
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`accident.’” Pac. Bell Tel. Co. v. Linkline Commc’ns, Inc., 555 U.S. 438, 447–48 (2009) (quoting
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`United States v. Grinnell Corp., 384 U.S. 563, 570–71 (1966)).
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`In order to state a claim for monopolization under [section 2 of the
`Sherman Act], a plaintiff must prove that: (1) the defendant possesses
`monopoly power in the relevant market; (2) the defendant has
`willfully acquired or maintained that power; and (3) the defendant’s
`conduct has caused antitrust injury. SmileCare Dental Group v. Delta
`Dental Plan of California, Inc., 88 F.3d 780, 783 (9th Cir. 1996)
`(citations omitted).
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`In order to state a claim for attempted monopolization, a plaintiff must
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`Case 3:18-cv-07440-JCS Document 71 Filed 01/21/20 Page 10 of 21
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`prove: (1) specific intent to control prices or destroy competition; (2)
`predatory or
`anticompetitive
`conduct
`to
`accomplish
`the
`monopolization; (3) dangerous probability of success; and (4) causal
`antitrust injury. Id. (citations omitted).
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`Cost Mgmt. Servs., Inc. v. Wash. Nat. Gas Co., 99 F.3d 937, 949–50 (9th Cir. 1996) (footnote
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`omitted; line break added).
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`One means of monopolization recognized by the courts—albeit with skepticism—is
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`predatory pricing, in which an aspiring monopolist sets “below-cost prices that drive rivals out of
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`the market and allow the monopolist to raise its prices later and recoup its losses.” Pac. Bell, 555
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`U.S. at 448; see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 589 (1986)
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`(“[T]here is a consensus among commentators that predatory pricing schemes are rarely tried, and
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`even more rarely successful.”). Such a claim requires the plaintiff to show both pricing below
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`costs and a probability of recoupment:
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`“[C]utting prices in order to increase business often is the very
`essence of competition.” Matsushita Elec. Industrial Co. v. Zenith
`Radio Corp., 475 U.S. 574, 594 (1986). In cases seeking to impose
`antitrust liability for prices that are too low, mistaken inferences are
`“especially costly, because they chill the very conduct the antitrust
`laws are designed to protect.” Ibid.; see also Brooke Group [Ltd. v.
`Brown & Williamson Tobacco Corp., 509 U.S. 209, 226 (1993)];
`Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 121–122, n. 17
`(1986). To avoid chilling aggressive price competition, we have
`carefully limited the circumstances under which plaintiffs can state a
`Sherman Act claim by alleging that prices are too low. Specifically,
`to prevail on a predatory pricing claim, a plaintiff must demonstrate
`that: (1) “the prices complained of are below an appropriate measure
`of its rival's costs”; and (2) there is a “dangerous probability” that the
`defendant will be able to recoup its “investment” in below-cost prices.
`Brooke Group, supra, at 222–224. “Low prices benefit consumers
`regardless of how those prices are set, and so long as they are above
`predatory levels, they do not threaten competition.” Atlantic Richfield
`Co. v. USA Petroleum Co., 495 U.S. 328, 340 (1990).
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`Pac. Bell, 555 U.S. at 451. “That below-cost pricing may impose painful losses on its target is of
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`no moment to the antitrust laws if competition is not injured: It is axiomatic that the antitrust laws
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`were passed for ‘the protection of competition, not competitors.’” Brooke Grp., 509 U.S. at 224
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`(quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)).
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`1.
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`Sidecar Alleges a Plausible Market
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`“In order to state a valid claim under the Sherman Act, a plaintiff must allege that the
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`defendant has market power within a ‘relevant market.’” Newcal Indus., Inc. v. Ikon Office Sol.,
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`Case 3:18-cv-07440-JCS Document 71 Filed 01/21/20 Page 11 of 21
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`513 F.3d 1038, 1044 (9th Cir. 2008). “The outer boundaries of a product market are determined
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`by the reasonable interchangeability of use or the cross-elasticity of demand between the product
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`itself and substitutes for it.” Brown Shoe, 370 U.S. at 325. A common test for such
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`interchangeability “is to find whether a hypothetical monopolist could impose a ‘small but
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`significant nontransitory increase in price’ (‘SSNIP’) in the proposed market” without causing
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`enough consumers to switch to products outside the market definition to render the price increase
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`unprofitable. See St. Alphonsus Med. Ctr.-Nampa Inc. v. St. Luke’s Health Sys., Ltd., 778 F.3d
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`775, 784 (9th Cir. 2015) (considering geographic market definition).
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`Uber argues that Sidecar’s alleged market of app-based ride-hailing services, excluding
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`taxis, defies common sense. It is certainly possible that ride-hailing companies like Uber compete
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`against taxi companies—as a number of taxi companies have argued in lawsuits against Uber.
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`See, e.g., Phila. Taxi Ass’n Inc. v. Uber Techs., Inc., 886 F.3d 332 (3d Cir. 2018); Desoto Cab Co.
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`v. Uber Techs, Inc., No. 16-cv-06385-JSW, 2018 WL 10247483 (N.D. Cal. Sept. 24, 2018);
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`Malden Transp., Inc. v. Uber Techs., Inc., 321 F. Supp. 3d 174 (D. Mass. 2018). At this stage of
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`the case, however, the Court takes Sidecar’s factual allegations as true.
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`Sidecar alleges that consumers distinguish between ride-hailing companies and taxi
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`companies such that a price increase for ride-hailing services meeting the “SSNIP” standard would
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`not cause consumers to switch to taxis. To the extent such an assertion might, alone, be a
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`conclusion not entitled to be taken as true, Sidecar supports it with allegations that consumers base
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`that decision on conveniences that taxis do not share, such as the ability to rate and review drivers,
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`arrange for shared rides with strangers, and receive fare quotes in advance. FAC ¶¶ 53–54.
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`Taking those allegations of consumer preferences as true, it is plausible that ride-hailing services
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`constitute a distinct market. While Uber of course remains free to attack this premise of Sidecar’s
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`case on its factual merits at summary judgment or trial if the case advances beyond the pleading
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`stage, the Court accepts Sidecar’s market definition for the purpose of the present motion.5
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`5 The Court does not reach Sidecar’s alternative argument that its proposed market definition is
`cognizable as a distinct submarket. See Opp’n at 6.
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`2.
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`Sidecar Alleges Below-Cost Pricing
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`Uber suggests in a footnote, and in passing in other parts of its motion, that Sidecar has not
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`sufficiently alleged below-cost pricing. See Mot. at 7 n.7 (faulting Sidecar for relying on financial
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`statements and on allegations that do not identify particular geographic markets); id. at 9 (“Even
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`assuming (wrongly) that [Sidecar] has properly alleged below-cost pricing for UberX . . . .”).
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`Among other relevant allegations, Sidecar alleges that “[b]etween 2013 and 2016, in the markets
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`where Uber was competing with Sidecar, the average prices Uber charged Passengers were lower
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`than Uber’s average variable cost per transaction.” FAC ¶ 20. Uber has presented no reason why
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`the Court should not take that factual allegation as true in resolving the present motion under Rule
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`12(b)(6). The Court concludes that Sidecar has sufficiently alleged below-cost pricing.
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`3.
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`Sidecar Does Not Allege Market Power
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`In order to state a claim for monopolization, Sidecar must plausibly allege monopoly
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`power, which “the Supreme Court has defined . . . as the power to ‘control prices or exclude
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`competition.’” Cost Mgmt. Servs., 99 F.3d at 950 (quoting Grinnell Corp., 384 U.S. at 571).
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`“Whether monopoly power exists depends on a variety of factors,” with market share relevant to
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`that analysis but not the only factor; depending on market conditions, courts have found both
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`market power and a lack of market power when a defendant’s market share is in the sixty to
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`seventy percent ra