Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 1 of 31
`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 1 of 31
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`EXHIBIT Q
`EXHIBIT Q
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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 2 of 31
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`THE ARBITRATION TRIBUNALS OF THE
`AMERICAN ARBITRATION ASSOCIATION
`
`In the Matter of the Arbitration between
`
`SPENCER MEYER,
`Claimant,
`
`v.
`
`UBER TECHNOLOGIES, INC.,
`Respondent.
`
`Les Weinstein
`AAA No. 01-18-0002-1956
`
`CLAIMANT SPENCER MEYER’S POST-HEARING BRIEF
`
`HARTER SECREST & EMERY LLP
`Brian Marc Feldman
`Lauren R. Mendolera
`1600 Bausch & Lomb Place
`Rochester, New York 14604
`
`ANDREW SCHMIDT LAW PLLC
`Andrew Arthur Schmidt
`97 India Street
`Portland, Maine 04101
`
`Counsel for Claimant Spencer Meyer
`
`November 15, 2019
`New York, New York
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`

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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 3 of 31
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`TABLE OF CONTENTS
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`Preliminary Statement ......................................................................................................................1
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`Point I—THIS CASE IS NOT GOVERNED BY LEEGIN, BUT BY INTERSTATE CIRCUIT. ...3
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`A.
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`Leegin does not govern this case. ........................................................................................3
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`1.
`
`2.
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`Leegin is limited to vertical theories. .......................................................................3
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`Leegin’s economic rationales are not at issue. .........................................................5
`
`B.
`
`Rather, Interstate Circuit controls this case. ........................................................................7
`
`1.
`
`2.
`
`All Uber drivers adopt surge pricing at Uber’s invitation. ......................................7
`
`Uber drivers adopt surge pricing because all other Uber drivers do so. ..................8
`
`C.
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`Leegin and Interstate Circuit are not in conflict. ...............................................................10
`
`1.
`
`2.
`
`3.
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`Leegin restraints create winners and losers. ...........................................................12
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`Interstate Circuit restraints benefit all affected competitors. .................................12
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`Surge pricing is an Interstate Circuit restraint that benefits all Uber drivers. ........14
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`Point II—THIS TRIBUNAL SHOULD ENJOIN SURGE PRICING. .........................................15
`
`A.
`
`B.
`
`C.
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`Courts regularly enjoin anticompetitive practices in toto. .................................................16
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`An injunction against surge pricing is particularly appropriate here. ................................19
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`This tribunal is empowered to award this relief, as Uber elsewhere admits. .....................21
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`Conclusion .....................................................................................................................................24
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`

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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 4 of 31
`
`TABLE OF AUTHORITIES
`
`CASES
`
`Am. Express v. Italian Colors Restaurant,
`570 U.S. 228 (2013) ................................................................................................................ 17
`
`Am. Safety Equip. Corp v. J.P. Maguire & Co.,
`391 F.2d 821 (2d Cir. 1968).................................................................................................... 16
`
`Bd. of Regents v. NCAA,
`546 F. Supp. 1276 (W.D. Okl. 1982) ................................................................................ 18, 24
`
`Bergjans Farm Dairy Co. v. Sanitary Milk Producers,
`241 F. Supp. 476 (E.D. Mo. 1965).......................................................................................... 20
`
`Bigelow v. RKO Radio Pictures,
`150 F.2d 877 (7th Cir. 1945) .................................................................................................... 8
`
`Blessing v. Sirius XM Radio,
`No. 09-cv-10035, 2011 U.S. Dist. LEXIS 32791 (S.D.N.Y. Mar. 29, 2011) ......................... 20
`
`Bus. Elecs. Corp. v. Sharp Elecs. Corp.,
`485 U.S. 717 (1988) .................................................................................................................. 5
`
`CBS v. Am. Soc’y Composers,
`562 F.2d 130 (2d Cir. 1977).................................................................................................... 17
`
`Continental Airlines, Inc. v. United Air Lines, Inc.,
`136 F. Supp. 2d 542 (E.D. Va. 2001) ................................................................................. 3, 17
`
`Continental TV, Inc. v. GTE Sylvania, Inc.,
`433 U.S. 36 (1977) .................................................................................................................... 5
`
`Eastman Kodak Co. v. Image Tech. Servs.,
`504 U.S. 451 (1992) ............................................................................................................ 3, 18
`
`ES Dev., Inc. v. RWM Enterp., Inc.,
`939 F.2d 547 (8th Cir. 1991) .................................................................................................. 17
`
`Hawaii v. Standard Oil Co.,
`405 U.S. 251 (1972) .......................................................................................................... 17, 20
`
`Image Tech. Servs. v. Eastman Kodak Co.,
`125 F.3d 1195 (9th Cir. 1997) .......................................................................................... 18, 19
`
`Image Tech. Servs. v. Eastman Kodak Co.,
`No. C 87-1686, 1996 U.S. Dist. LEXIS 2386 (N.D. Cal. Feb. 28, 1996)................... 18, 19, 20
`
`ii
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`

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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 5 of 31
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`In re Insurance Brokerage Antitrust Litig.,
`618 F.3d 300 (3d Cir. 2010)...................................................................................................... 7
`
`Int’l Salt Co. v. United States,
`332 U.S. 392 (1947) ................................................................................................................ 20
`
`Interstate Circuit, Inc. v. United States,
`306 U.S. 208 (1939) ......................................................................................................... passim
`
`Kristian v. Comcast Corp.,
`446 F.3d 25 (1st Cir. 2006) ..................................................................................................... 22
`
`Lafeyette v. La. Power & Light Co.,
`435 U.S. 389 (1978) ................................................................................................................ 20
`
`Laumann v. NHL,
`907 F. Supp. 2d 465 (S.D.N.Y. 2012)....................................................................................... 9
`
`Leegin Creative Leather Prods. v. PSKS, Inc.,
`551 U.S. 877 (2007) ......................................................................................................... passim
`
`Meyer v. Kalanick,
`174 F. Supp. 3d 817 (S.D.N.Y. 2016).............................................................................. passim
`
`Meyer v. Kalanick,
`212 F. Supp. 3d 437 (S.D.N.Y. 2016)..................................................................................... 21
`
`Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
`473 U.S. 614 (1985) .......................................................................................................... 16, 22
`
`Monsanto Co. v. Spray-Rite Serv. Corp.,
`465 U.S. 752 (1984) .................................................................................................................. 9
`
`Nat’l Soc’y of Prof’l Eng’rs v. United States,
`435 U.S. 679 (1978) .......................................................................................................... 17, 20
`
`NCAA v. Bd. of Regents of the Univ. of Okla.,
`468 U.S. 85 (1984) .............................................................................................................. 3, 18
`
`NYNEX Corp. v. Discon, Inc.,
`525 U.S. 128 (1998) .................................................................................................................. 4
`
`Premier Elec. Const. Co. v. NECA, Inc.,
`814 F.2d 358 (7th Cir. 1987) .................................................................................................. 10
`
`Schine Chain Theatres v. United States,
`334 U.S. 110 (1948) ................................................................................................................ 18
`
`iii
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`Sheet Metal Works Local No. 20 Welfare & Ben. Fund v. CVS Pharmacy, Inc.,
`305 F. Supp. 3d 337 (D.R.I. 2018).......................................................................................... 10
`
`State Oil Co. v. Khan,
`522 U.S. 3 (1997) ...................................................................................................................... 5
`
`Toys “R” Us v. FTC,
`221 F.3d 928 (7th Cir. 2000) ........................................................................................... passim
`
`United States v. Apple,
`791 F.3d 290 (2d Cir. 2015)............................................................................................. passim
`
`United States v. Arnold, Schwinn & Co.,
`388 U.S. 365 (1967) .................................................................................................................. 6
`
`Volvo Trucks N. Am. v. Reeder-Simco GMC, Inc.,
`546 U.S. 164 (2006) .................................................................................................................. 5
`
`White v. RM Packer Co.,
`635 F.3d 571 (1st Cir. 2011) ..................................................................................................... 9
`
`Wilk v. Am. Med’l Ass’n,
`895 F.2d 352 (7th Cir. 1990) .................................................................................. 3, 17, 19, 20
`
`Zenith Radio Corp. v. Hazeltine Research,
`395 U.S. 100 (1969) .......................................................................................................... 17, 19
`
`RULES
`
`AAA Consumer Arbitration Rule, R-44(a) ................................................................................... 22
`
`REPORTED ARBITRATION DECISIONS
`
`2016 AAA Consumer LEXIS 444 (Dec. 29, 2016) ...................................................................... 23
`
`2018 AAA Consumer LEXIS 8 (Jan. 30, 2018) ........................................................................... 23
`
`2019 AAA Consumer LEXIS 258 (May 9, 2019) ........................................................................ 23
`
`iv
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`

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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 7 of 31
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`Preliminary Statement
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`This case comes down to two questions.
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`First: After Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877 (2007), can
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`competitors agree to raise prices in unison for their collective benefit through a third-party app?
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`The answer is no. Antitrust law does “not tolerate anticompetitive conduct, whether it occurs in
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`smoke-filled rooms or over the Internet using complex pricing algorithms.”1 And nothing in
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`Leegin licenses that moral hazard. Interstate Circuit, Inc. v. United States, 306 U.S. 208 (1939),
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`has always barred vertical actors from tempting competitors with restraints that collectively benefit
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`them while protecting them from competition. Doctrinally, Leegin is expressly limited to vertical
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`theories (not horizontal ones) and does not overrule Interstate Circuit. But more fundamentally,
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`it does not open Pandora’s Box as Uber suggests.
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`Take the proverbial smoke-filled room. Imagine Leegin’s resellers in that smoke-filled
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`room. Those resellers would include high-end boutiques, along with retailers that prefer
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`discounting, like Kay’s Kloset, the Leegin plaintiff. Would they ever agree to the minimum resale
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`pricing policy endorsed by Leegin? No. That restraint, imposed by Leegin, would create winners
`
`and losers. Some of the resellers in the smoke-filled room, like Kay’s Kloset, would become
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`losers. Kay’s Kloset would never commit to that. Those retailer competitors(cid:650)unlike the
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`horizontal competitors in Interstate Circuit(cid:650)thus did not share a common motive. And Leegin
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`did not invite them to organize in any way they would ever have been tempted to conspire in a
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`smoke-filled room.
`
`1 U.S. Justice Department, Press Release, “Former E-Commerce Executive Charged with Price
`Fixing in the Antitrust Division’s First Online Marketplace Prosecution” (Apr. 6, 2015), at
`https://www.justice.gov/opa/pr/former-e-commerce-executive-charged-price-fixing-antitrust-
`divisions-first-online-marketplace.
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`

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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 8 of 31
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`But the Uber smoke-filled room is the opposite, at least when it comes to surge pricing.
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`Uber is a marketplace for competing Uber drivers to sell rides, a commodity. Imagine 100
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`competing Uber black car drivers in a smoke-filled room, drivers of all sorts: part-timers, full-
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`timers, greedy drivers, cheap drivers. If Uber granted them the power to set baseline pricing, it is
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`true that they probably would not agree on a number. Some might be content with Uber’s current
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`pricing; some might think it is too low; others might not understand market conditions well
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`enough. But now imagine if those Uber drivers could instead determine if the surge pricing
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`algorithm should be implemented. That algorithm is designed, as drivers know, to increase fares
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`when demand on the Uber app enables them to command higher prices. Would that roomful of
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`drivers agree to turn it on? Of course, so long as all Uber drivers would be locked into it and
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`unable to undercut them. Uber drivers share a common motive to adopt surge on the app, as long
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`as it is done collectively. The reason why, as Dr. Carlton opined, is that “they make more money;
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`that’s the point of surge.” Trans. 812:24-25. Every Uber driver wins. Only consumers pay more.
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`Leegin did not overrule Interstate Circuit to permit Uber, by common invitation, to do
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`exactly what its drivers would choose to do (only collectively) in a smoke-filled room. Surge
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`tempts competing drivers because it promises, if no one cheats by competing on price, higher
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`prices in unison for their collective benefit. Interstate Circuit prevents Uber from taking advantage
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`of that common motive to conspire, and nothing in Leegin is to the contrary.
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`Second: Can Uber continue surge pricing with impunity, even if it is per se illegal? Again,
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`the answer is no. Uber has succeeded in avoiding class actions by forcing mandatory arbitration.
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`No future Uber rider will rationally pursue arbitration this far, merely to enjoin Uber from surging
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`that individual rider. And it is too much to ask that the government enjoin Uber. For the
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`government to sue, it would need to endorse Uber’s characterization of what it is (i.e., neither an
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`2
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`

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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 9 of 31
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`employer nor a seller), and federal and states government are unlikely to take that leap.2 In any
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`event, the Clayton Act exists to ensure that private litigants will supplement government
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`enforcement. Uber demanded that this matter be arbitrated. This is the right forum to enjoin surge
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`pricing. It may well be the only one.
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`This tribunal asked for precedent where a private claimant enjoined a practice nationwide.
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`Trans. 962:9-25. There is plenty, which we cite, including two cases heard at the Supreme Court,
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`NCAA v. Board of Regents of the University of Oklahoma, 468 U.S. 85 (1984), and Eastman Kodak
`
`Co. v. Image Technology Services, 504 U.S. 451 (1992). Indeed, courts have “repeatedly rejected
`
`the argument advanced by defendants that injunctive relief should be tailored so narrowly as to
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`remedy only the injuries suffered by the plaintiff.” Continental Airlines, Inc. v. United Air Lines,
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`Inc., 136 F. Supp. 2d 542, 550 n.11 (E.D. Va. 2001), rev’d on other grounds, 277 F.3d 499 (4th
`
`Cir. 2002). Individual antitrust injunctions should be designed to “eliminate [the] anticompetitive
`
`effects” of an illegal restraint, “not only to the plaintiff[s]” but to “all consumers.” Wilk v. Am.
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`Med’l Ass’n, 895 F.2d 352, 371 (7th Cir. 1990). This AAA tribunal has the power to enjoin Uber’s
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`practices in toto, as Uber itself has conceded in other rider and driver cases. To be faithful to the
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`Clayton Act, this tribunal should enjoin Uber’s surge pricing.
`
`POINT I
`
`THIS CASE IS NOT GOVERNED BY LEEGIN, BUT BY INTERSTATE CIRCUIT.
`
`A.
`
`Leegin does not govern this case.
`
`Leegin does not govern this case. As a matter of black letter law, Leegin governs vertical
`
`theories only, not the horizontal theory of this case. See infra I.A.1. Moreover, the policies at
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`2 See, e.g., Bloomberg Law, “Uber Hit with $650 Million Employment Tax Bill in New Jersey”
`(Nov. 14, 2019) (“State says drivers are employees, not contractors”).
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`3
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`

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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 10 of 31
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`issue in Leegin(cid:650)encouraging retailer promotional effort and avoiding a free-rider problem(cid:650)do
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`not apply to Uber’s surge pricing. See infra I.A.2.
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`1.
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`Leegin is limited to vertical theories.
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`The Supreme Court’s Leegin decision does not provide the controlling doctrine here
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`because it governs only vertical theories, not horizontal theories concerning vertical agreements.
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`This distinction is dispositive.
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`Leegin considered only a “vertical restraint.” 551 U.S. at 882. The Court expressly refused
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`to consider whether, in imposing that restraint, Leegin also “participated in an unlawful horizontal
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`cartel.” Id. at 907. In Leegin, as in other cases where the Supreme Court has applied the rule of
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`reason to vertical arrangements, the Court “has explicitly distinguished situations in which a
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`vertical player organizes a horizontal cartel.” United States v. Apple, 791 F.3d 290, 323 (2d Cir.
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`2015); accord NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 136 (1998) (explaining per se rule
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`properly applied in cases “involving not simply a ‘vertical’ agreement between supplier and
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`customer, but a case that also involved a ‘horizontal’ agreement among competitors”). The
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`relevant restraint here “is not [the] vertical” agreement between Uber and drivers but “the
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`horizontal agreement that” Uber “organized among [competitors] to raise . . . prices.” Apple, 791
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`F.3d at 323. “How the law might treat [the] vertical agreements in the absence of a finding that
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`[the vertical actor] agreed to create the horizontal restraint”(cid:650)i.e., how the Leegin doctrine would
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`apply in the absence of a horizontal theory(cid:650)“is irrelevant.” Id. at 325.
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`That means both Interstate Circuit and Toys “R” Us v. FTC, 221 F.3d 928 (7th Cir. 2000)
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`remain good law after Leegin.3 See id. at 319-20 (relying on both cases as to Leegin). The Leegin
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`3 Even Leegin, in its successful brief to the Supreme Court, conceded that horizontal rules would
`remain the same. “[T]here is no reason to believe that the existing per se rules against horizontal
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`4
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`

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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 11 of 31
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`court itself observed that vertical price-fixing agreements may, in certain cases, “be useful
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`evidence for a plaintiff attempting to prove the existence of a horizontal cartel,” which “is, and
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`ought to be, per se unlawful.” 551 U.S. at 893. To illustrate this “well established” rule, the
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`Second Circuit cited Interstate Circuit and Toys “R” Us as examples of vertical agreements that
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`evidenced a horizontal cartel. Apple, 791 F.3d at 319-20. The Circuit described both as cases
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`“where multiple competitors sign vertical agreements that would be against their own interests
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`were they acting independently.” Id. Judge Rakoff thus correctly stated that “Leegin did not
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`purport to overrule Interstate Circuit, which . . . permits a finding of a conspiracy among
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`competitors in circumstances such as those of the instant case,” and that Leegin “does not, as
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`defendant would have it, undermine plaintiff’s claim of an illegal horizontal agreement.” Meyer
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`v. Kalanick, 174 F. Supp. 3d 817, 826 n.5 (S.D.N.Y. 2016).
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`In short, Leegin does not govern horizontal theories and did not alter horizontal doctrine.
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`2.
`
`Leegin’s economic rationales are not at issue.
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`Not only is Leegin doctrinally inapplicable, but, moreover, its policies do not apply either.
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`Leegin was premised on reseller promotional efforts that are not present here. Leegin cited
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`the concern that “[a]bsent vertical price restraints, the retail services that enhance interbrand
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`competition might be underprovided.” 551 U.S. at 890. By “interbrand competition,” the Supreme
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`Court meant competition between “different brands of the same type of product” produced by
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`competing manufacturers.4 Id. As to services that could be underprovided, the Supreme Court
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`collusion and the methods of detecting and punishing such collusion are so lacking as to justify
`additional per se rules as a prophylactic measure.” Pet. Br., Leegin, 06-480, at 22 (Jan. 22, 2007).
`4 This is what the Supreme Court has long meant by interbrand competition—competition among
`resellers of branded products. See Volvo Trucks N. Am. v. Reeder-Simco GMC, Inc., 546 U.S. 164
`(2006) (branded manufactured trucks); State Oil Co. v. Khan, 522 U.S. 3 (1997) (branded
`manufactured gasoline); Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717 (1988) (branded
`manufactured calculators); Continental TV, Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977)
`
`5
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`

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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 12 of 31
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`gave examples of “fine showrooms,” “product demonstrations,” and “knowledgeable employees.”
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`Id. Those services require the “investment of capital and labor.” Id. at 891.
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`None of this applies to Uber drivers. As an initial matter, Uber is not a “brand” of the sort
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`described in Leegin or other Supreme Court cases because it does not produce any good or service
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`for resale. See Meyer, 174 F. Supp. 3d at 826 (“Here, unlike in Leegin, Uber is not selling anything
`
`to drivers that is then resold to riders.”). Uber is merely a marketplace. See, e.g. Trans. 310:16-
`
`20 (
`
`(
`
` (“Uber platform” is a “marketplace of riders and drivers”); Trans. 495:1-12, 499:6-11
`
` (similar). Moreover, in contrast to resellers, Uber drivers do not promote their rides on the
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`Uber platform. Uber alone promotes rides on the platform. Drivers simply sign up. Leegin’s
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`promotional efforts rationale does not apply to Uber.
`
`Leegin also tackled a free-rider problem that Uber drivers do not face. In retail, as Leegin
`
`explains, “consumers might decide to buy [a] product because they see it in a retail establishment
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`that has a reputation for selling high-quality merchandise.” Id. Or they might decide to buy the
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`product after learning of it “from a retailer that invests in fine showrooms, offers product
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`demonstrations, or hires and trains knowledgeable employees.” Id. “If the consumer can then buy
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`the product from a retailer that discounts because it has not spent capital providing services or
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`developing a quality reputation, the high-service retailer will lose sales to the discounter, forcing
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`it to cut back its services.” Id. In other words, discounters can free ride off the efforts of high-end
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`retailers. But “[m]inimum resale price maintenance alleviates the problem because it prevents the
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`discounter from undercutting the service provider. With price competition decreased, the
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`manufacturer’s retailers compete among themselves over services.” Id.
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`(branded manufactured televisions); United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967)
`(branded manufactured bicycles).
`
`6
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`Redacted
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`Redacted
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`

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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 13 of 31
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`This free-rider problem does not exist for Uber. Trans. 970:18-18 (Uber summation)
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`(uncontested). The Uber market is not split between drivers promoting Uber rides and those free
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`riding off their efforts. Uber drivers, unlike discounters in Leegin, cannot free ride off other
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`drivers’ promotional efforts. Moreover, Uber drivers, unlike retailers, cannot “compete among
`
`themselves over services.” Leegin, 551 U.S. at 891. Service competition is infeasible because
`
`riders cannot select drivers. Uber’s app matches the drivers instead. See Trans. 503:14-18 (
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`
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`That means, without price competition, Uber drivers simply cannot compete with each other at all.
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`See Trans. 376:6-23 (
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` Nothing in Leegin endorses such an outcome.
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`Leegin’s rationales thus do not help Uber. There are no “concerns about free-riding Uber
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`drivers, or [about] efforts that Uber drivers could make to promote the App that will be under-
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`provided if Uber does not set a pricing algorithm.” Meyer, 174 F. Supp. 3d at 826. As Judge
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`Rakoff properly found, “the justifications . . . offered in Leegin are not directly applicable.” Id.
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`B.
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`Rather, Interstate Circuit controls this case.
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`This case is instead controlled by Interstate Circuit. Surging pricing fits both of the two
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`elements of Interstate Circuit. First, Uber drivers accept surge pricing at the invitation of Uber.
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`See infra I.B.1. Second, Uber drivers charge surge pricing only because they know that all other
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`drivers on Uber will do the same thing, so drivers cannot be undercut on price. See infra I.B.2.
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`1.
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`All Uber drivers adopt surge pricing at Uber’s invitation.
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`The first element of an Interstate Circuit conspiracy is competitors’ acceptance of a vertical
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`actor’s invitation to adopt a restraint. Uber drivers meet this element by adopting surge pricing.
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`What is unique about an Interstate Circuit conspiracy is that it does not require actual
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`agreement among competitors. “Interstate Circuit [stands] for the proposition that an actionable
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`horizontal conspiracy does not require direct communication among the [horizontal] competitors.”
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`In re Insurance Brokerage Antitrust Litig., 618 F.3d 300, 331 (3d Cir. 2010). The Supreme Court
`
`7
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`Redacted
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`Redacted
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`

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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 14 of 31
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`in Interstate Circuit held that “an agreement of [competitors] among themselves” is “not a
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`prerequisite to an unlawful conspiracy.” 306 U.S. at 226-27; see, e.g., Bigelow v. RKO Radio
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`Pictures, 150 F.2d 877, 882 (7th Cir. 1945) (“True, no specific agreement to enter into such
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`conspiracy . . . was proven, but that was not necessary.”). In lieu of an actual agreement,
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`“[a]cceptance by competitors, without previous agreement, of an invitation to participate in [the]
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`plan” can be “sufficient to establish an unlawful conspiracy under the Sherman Act.” Interstate
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`Circuit, 306 U.S. at 227; Bigelow, 150 F.2d at 882 (same).
`
`Here, Uber invited all of its driver partners to accept surge pricing. See Meyer Ex. 25,
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`§ 4.1 (driver agreement); Trans. 548:17-21, 553:10-557:21 (
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` Uber offers surge pricing as
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`part of its pricing algorithm through an identical public contract to all drivers. See id. All drivers
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`accept those same terms. See Meyer Ex. 9, ¶ 19. Uber is the hub, and the drivers are all spokes.
`
`See Meyer, 174 F. Supp. 3d at 824.
`
`2.
`
`Uber drivers adopt surge pricing because all other Uber drivers do so.
`
`An Interstate Circuit conspiracy’s second element is conditionality(cid:650)competitors adopt a
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`restraint that would be against their own interests were they acting independently and they adopt
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`it only because they are confident their competitors are collectively adopting it. This is true of
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`surge pricing. No rational driver would independently lock himself into surged fares without
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`assurance that all other Uber drivers would do the same; otherwise, an Uber driver could be quickly
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`undercut on surged rides. This conditionality element adds a rim between drivers in Uber’s hub-
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`and-spoke conspiracy.
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`This is “that conditionality” Dr. Carlton described in his testimony. Trans. 882:8.
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`Interstate Circuit described it this way: “Each [competitor] was advised that the others were asked
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`to participate; each knew that cooperation was essential to successful operation of the plan.” 306
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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 15 of 31
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`U.S. at 226. And “[e]ach was aware that all were in active competition and that without
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`substantially unanimous action with respect to the restrictions . . . there was risk of a substantial
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`loss of the business . . ., but that with it there was the prospect of increased profits.” Id. at 222.
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`Conditionality under Interstate Circuit means that “where parties to vertical agreements have
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`knowledge that other market participants are bound by identical agreements, and their participation
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`is contingent upon that knowledge, they may be considered participants in a horizontal agreement
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`in restraint of trade.” Laumann v. NHL, 907 F. Supp. 2d 465, 486-87 (S.D.N.Y. 2012). This is
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`another way to prove a “‘conscious commitment to a common scheme.’” Apple, 791 F.3d at 315
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`(quoting Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984)).
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`This conditionality was key to each precedent. In Interstate Circuit itself, “there was the
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`prospect of increased profits” with “substantially unanimous action” by all of the distributors, but
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`each faced the “risk of a substantial loss” of business to its competitors “without substantially
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`unanimous action.” 306 U.S. at 222. “[T]he economic context made it clear that all . . . needed to
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`act uniformly or all would lose business.” White v. RM Packer Co., 635 F.3d 571, 576 (1st Cir.
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`2011). Likewise, in Toys “R” Us, the FTC found “that the only condition on which each toy
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`manufacturer would agree to TRU’s demands was if it could be sure its competitors were doing
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`the same thing.” 221 F.3d at 936; see also Trans. 880:19-881:6 (Dr. Carlton) (“Toys R Us
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`negotiated with the manufacturers and said. . . you agree to this condition, please, because this
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`other person, your competitor is agreeing, and it was that coordination that the FTC used to claim
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`that it was a hub-and-spoke conspiracy.”). And in Apple, “Apple’s Contracts created a set of
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`economic incentives pursuant to which the Contracts were only attractive to the Publisher
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`Defendants to the extent they acted collectively.” 791 F.3d at 320. If a publisher acted alone, it
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`“stood to make less money per sale.” Id. at 316. But “if the publishers acted collectively,” they
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`Case 1:15-cv-09796-JSR Document 182-19 Filed 05/22/20 Page 16 of 31
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`could make more. Id. The conditionality in each case meant that “multiple competitors sign[ed]
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`vertical agreements that would be against their own interests were they acting independently.” Id.
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`at 320.
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`Thus, conditionality creates a rim in a hub-and-spoke conspiracy. This rim is formed if
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`“the spokes would not have gone along with the vertical agreements except on the understanding
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`that the other spokes were agreeing to the same thing.” Id. at 314 (brackets and quotation marks
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`omitted). That is, even without “an explicit agreement” among competitors, if each competitor
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`“acted against its individual interest . . . with the expectation . . . that competitors would do the
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`same,” that conditionality forms “a rim around a spoked hub.” Sheet Metal Works Local No. 20
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`Welfare & Ben. Fund v. CVS Pharmacy, Inc., 305 F. Supp. 3d 337, 349-50 (D.R.I. 2018). A rim
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`exists, as it did in Toys “R” Us, if “the only condition on which each [competitor] would agree to
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`[a restraint] was if it could be sure its competitors were doing the same thing.” 221 F.3d at 936.
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`Here, surge pricing creates a rim between Uber drivers. Surge pricing can deliver higher
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`prices to Uber drivers only because all other drivers on the Uber marketplace agree not charge a
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`lower price.
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` The reason is obvious. Given the choice, riders would prefer to pay less.
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`See, e.g., Trans. 109:5-12 (Meyer) (“Q: [I]n certain circumstances, you would pay $20 to get a ride
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`more quickly? A. Yes. Q. Would you rather pay $19? A. Yes. Q. What about $18? A. Sure.”).
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`“Each seller has an incentive to shave the price a little in order to sell more; to maintain their sales
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`other firms must reduce price too.” Premier Elec. Const. Co. v. NECA, Inc., 814 F.2d 358, 370
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`(7th Cir. 1987); accord Meyer Ex. 111 at 8:12 (Driver) (“So my business is going to go down.
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`When I see one lower, I’m going to go lower. So for me or anyone, it’