Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 1 of 36
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`MARIAM DAVITASHVILI, et al.,
`
`Plaintiffs,
`
`Case No. 1:20-cv-03000 (LAK)
`
`v.
`
`GRUBHUB INC., et al.,
`
`ECF Case
`
`Electronically filed
`
`Defendants.
`
`JOINT MEMORANDUM IN SUPPORT OF DEFENDANTS’ JOINT MOTION TO
`DISMISS PLAINTIFFS’ AMENDED CONSOLIDATED CLASS ACTION COMPLAINT
`
`

`

`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 2 of 36
`
`TABLE OF CONTENTS
`
`PRELIMINARY STATEMENT ................................................................................................. 1
`
`COMPLAINT ALLEGATIONS ................................................................................................. 3
`
`A.
`
`B.
`
`C.
`
`Defendants’ Meal-Ordering Platforms, Their Value to Both Consumers
`and Restaurants, and the Vigorous Competition They Face ................................... 3
`
`The Alleged Markets and Market Shares ................................................................ 5
`
`The Challenged Contractual Provisions and Plaintiffs’ Causes of Action ............. 6
`
`LEGAL STANDARD ................................................................................................................... 8
`
`ARGUMENT ................................................................................................................................. 8
`
`I.
`
`PLAINTIFFS FAIL TO PLAUSIBLY ALLEGE COGNIZABLE
`ANTICOMPETITIVE EFFECTS IN THE “DIRECT” MARKETS (COUNT
`I AGAINST ALL DEFENDANTS) ............................................................................... 10
`
`A.
`
`B.
`
`C.
`
`Purported Harm in the “Direct” Markets Cannot Sustain a Claim Against
`Defendants Absent Harm in the Purported Platform Market................................ 10
`
`Plaintiffs Fail to Allege Actual Anticompetitive Effects in the “Direct”
`Markets ................................................................................................................. 12
`
`Plaintiffs Fail to Allege Anticompetitive Effects Indirectly in the “Direct”
`Markets ................................................................................................................. 14
`
`II.
`
`PLAINTIFFS FAIL TO PLAUSIBLY ALLEGE ANTICOMPETITIVE
`EFFECTS IN THE PURPORTED PLATFORM MARKET (COUNT II
`AGAINST GRUBHUB AND UBER EATS)................................................................. 16
`
`A.
`
`Plaintiffs Fail to Allege Actual Anticompetitive Effects in the Purported
`Platform Market .................................................................................................... 16
`
`1.
`
`2.
`
`Plaintiffs Do Not Plausibly Allege That Consumers Pay
`Supracompetitive Prices ........................................................................... 17
`
`Plaintiffs Do Not Plausibly Allege That Restaurant Commissions
`on Grubhub or Uber Eats Are Above a Competitive Level ...................... 18
`
`B.
`
`Plaintiffs Fail to Indirectly Allege Anticompetitive Effects in the
`Purported Platform Market ................................................................................... 19
`
`1.
`
`Plaintiffs Do Not Allege Facts Suggesting That Grubhub or Uber
`Eats Possesses Sufficient Market Share in Any Purported
`Geographic Market ................................................................................... 19
`
`ii
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`

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`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 3 of 36
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`2.
`
`Plaintiffs Do Not Allege Facts Suggesting That Grubhub or Uber
`Eats Can Control Prices or Exclude Competition .................................... 21
`
`III.
`
`PLAINTIFFS FAIL TO ALLEGE A PLAUSIBLE RELEVANT PRODUCT
`OR GEOGRAPHIC MARKET (COUNTS I AND II) ................................................ 23
`
`A.
`
`B.
`
`Plaintiffs Fail to Allege a Plausible Product Market ............................................ 24
`
`Plaintiffs Fail to Allege a Plausible National Platform Market ............................ 26
`
`IV.
`
`PLAINTIFFS’ STATE LAW CLAIMS SHOULD BE DISMISSED
`(COUNTS III AND IV) .................................................................................................. 27
`
`CONCLUSION ........................................................................................................................... 29
`
`iii
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`

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`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 4 of 36
`
`TABLE OF AUTHORITIES
`
`In re Aluminum Warehousing Antitrust Litigation,
`No. 13-md-2481 (KBF), 2014 WL 4743425 (E.D. Pa. Sept. 15, 2014) ............................28
`
`Apotex Corp. v. Hospira Healthcare India Private Ltd.,
`No. 18-cv-4903(JMF), 2020 WL 58247 (S.D.N.Y. Jan. 6, 2020) .....................................20
`
`Ashcroft v. Iqbal,
`556 U.S. 662, 129 S. Ct. 1937 (2009) ..................................................................................8
`
`Bayer Schering Pharma AG v. Sandoz, Inc.,
`813 F. Supp. 2d 569 (S.D.N.Y. 2011)..................................................................................9
`
`Bell Atlantic Corp. v. Twombly,
`550 U.S. 544, 127 S. Ct. 1955 (2007) ............................................................................8, 14
`
`Bookhouse of Stuyvesant Plaza, Inc. v. Amazon.com, Inc.,
`985 F. Supp. 2d 612 (S.D.N.Y. 2013)..........................................................................19, 24
`
`Capital Imaging Associates, P.C. v. Mohawk Valley Medical Associates,
`996 F.2d 537 (2d Cir. 1993)...............................................................................................15
`
`Chapman v. N.Y. State Division for Youth,
`546 F.3d 230 (2d Cir. 2008)...............................................................................................24
`
`Chufen Chen v. Dunkin’ Brands, Inc.,
`No. 17-CV-3808 (CBA) (RER), 2018 WL 9346682 (E.D.N.Y. Sept. 17, 2018) ..............28
`
`Cinema Village Cinemart, Inc. v. Regal Entertainment Group,
`No. 15-cv-05488 (RJS), 2016 WL 5719790 (S.D.N.Y. Sept. 29, 2016) ...........................29
`
`Concord Associates, L.P. v. Entertainment Properties Trust,
`817 F.3d 46 (2d Cir. 2016)......................................................................................... passim
`
`Contant v. Bank of America Corp.,
`No. 17 Civ. 3139 (LGS), 2018 WL 1353290 (S.D.N.Y. Mar. 15, 2018) ..........................29
`
`Data Servers, Inc. v. International Business Machines Corp.,
`262 F. Supp. 2d 50 (S.D.N.Y. 2003)..................................................................................20
`
`Dozier v. Deutsche Bank Tr. Co. Americas,
`No. 09 Civ. 9865 (LMM), 2011 WL 4058100 (S.D.N.Y. Sept. 1, 2011) ..........................23
`
`E & L Consulting, Ltd. v. Doman Industries Ltd.,
`472 F.3d 23 (2d Cir. 2006)...................................................................................................9
`
`Eastern Food Services, Inc. v. Pontifical Catholic University Services Ass’n,
`357 F.3d 1 (1st Cir. 2004) ..................................................................................................10
`iv
`
`

`

`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 5 of 36
`
`FTC v. Qualcomm Inc.,
`969 F.3d 974 (9th Cir. 2020) .......................................................................................11, 15
`
`Heerwagen v. Clear Channel Communications,
`435 F.3d 219 (2d Cir. 2006)...............................................................................................27
`
`IQ Dental Supply, Inc. v. Henry Schein, Inc.,
`924 F.3d 57 (2d Cir. 2019).................................................................................................28
`
`It’s My Party, Inc. v. Live Nation, Inc.,
`811 F.3d 676 (4th Cir. 2016) .............................................................................................27
`
`K.M.B. Warehouse Distrs., Inc. v. Walker Manufacturing Co.,
`61 F.3d 123 (2d Cir. 1995).............................................................................................9, 14
`
`Michael E. Jones M.D., P.C. v. UnitedHealth Group, Inc.,
`No. 19-CV-7972 (VEC), 2020 WL 4895675 (S.D.N.Y. Aug. 19, 2020) ..........................14
`
`Ohio v. American Express Co.,
`138 S. Ct. 2274 (2018) ............................................................................................... passim
`
`Olde Monmouth Stock Transfer Co. v. Depository Trust & Clearing Corp.,
`485 F. Supp. 2d 387 (S.D.N.Y. 2007)................................................................................15
`
`PepsiCo, Inc. v. Coca-Cola Co.,
`315 F.3d 101 (2d Cir. 2002)...............................................................................................24
`
`Spinelli v. National Football League,
`903 F.3d 185 (2d Cir. 2018)...................................................................................10, 11, 12
`
`Stubhub, Inc. v. Golden State Warriors, LLC,
`No. C 15-1436 MMC, 2015 WL 6755594 (N.D. Cal. Nov. 5, 2015) ..........................24, 25
`
`In re SunEdison, Inc. Securities Litigation,
`300 F. Supp. 3d 444 (S.D.N.Y. 2018)................................................................................13
`
`In re Tamoxifen Citrate Antitrust Litigation,
`277 F. Supp. 2d 121 (E.D.N.Y. 2003) ...............................................................................28
`
`Teamsters Local 445 Freight Division Pension Fund v. Bombardier Inc.,
`546 F.3d 196 (2d Cir.2008)................................................................................................27
`
`Tops Markets, Inc. v. Quality Markets, Inc.,
`142 F.3d 90 (2d Cir. 1998).....................................................................................20, 21, 22
`
`United States v. American Express Co.,
`838 F.3d 179 (2d Cir. 2016)...............................................................................................26
`
`v
`
`

`

`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 6 of 36
`
`United States v. Visa U.S.A., Inc.,
`344 F.3d 229 (2d Cir. 2003)...............................................................................................10
`
`US Airways, Inc. v. Sabre Holdings Corp.,
`938 F.3d 43 (2d Cir. 2019).................................................................................................17
`
`Wellnx Life Sciences Inc. v. Iovate Health Sciences Research Inc.,
`516 F. Supp. 2d 270 (S.D.N.Y. 2007)................................................................................13
`
`vi
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`

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`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 7 of 36
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`Defendants Grubhub Inc. (“Grubhub”), Uber Technologies, Inc. (“Uber Eats”), and
`
`Postmates Inc. (“Postmates”) respectfully submit this memorandum of law in support of their
`
`joint motion to dismiss Plaintiffs’ Amended Consolidated Class Action Complaint (“Complaint”
`
`or “Compl.”).1
`
`PRELIMINARY STATEMENT
`
`“Over the past decade, as smart phones have become ubiquitous, the popularity of [meal-
`
`ordering] platforms has skyrocketed.” Compl. ¶ 2. As evidenced by the ever-increasing volume
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`of transactions on meal-ordering platforms, these marketplaces have enhanced the ways
`
`restaurants can serve consumers.
`
`Not long ago, consumers who wanted food delivered were limited to restaurants that
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`provided their own delivery services, and had to search for those restaurants (as well as
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`restaurants offering takeout) individually. Now, through meal-ordering platforms, consumers
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`can access a large network of local restaurant options; search for and compare menus, prices, and
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`reviews; place and pay for an order; and receive delivery via independent couriers. Similarly,
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`restaurants can now sign up with one or multiple meal-ordering platforms to reach new diners;
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`serve existing customers who prefer to order and pay for food using the platforms; and provide
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`delivery without investing in a delivery fleet. Consistent with the growing demand among
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`restaurants and consumers for meal-ordering platforms, Plaintiffs identify several new platforms
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`that have launched in recent years. And in recent months, meal-ordering platforms have served
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`quarantined consumers and offered restaurants an alternative means of reaching consumers.
`
`Notwithstanding this vibrant marketplace competition, Plaintiffs claim that three
`
`1 The Complaint is attached as Exhibit 1 to the accompanying Declaration of Steven C. Sunshine
`dated October 19, 2020 (“Sunshine Decl.”).
`
`1
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`

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`platforms (Grubhub, Uber Eats, and Postmates)—but not the largest platform (DoorDash)—have
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`violated the antitrust laws by preventing restaurants from charging higher menu prices to
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`consumers who use their platforms. Non-discrimination provisions (“NDPs”) in Defendants’
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`standard contracts allegedly prohibit restaurants from charging platform consumers higher menu
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`prices than they charge consumers who order directly from the restaurants for dining in, takeout,
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`or delivery. Grubhub and Uber Eats also allegedly include “inter-platform NDPs” in their
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`standard contracts that prohibit restaurants from charging consumers using Grubhub’s and Uber
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`Eats’ platforms more than they charge consumers who use other meal-ordering platforms.
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`Plaintiffs assert that Defendants’ NDPs somehow cause increased prices even though
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`Plaintiffs acknowledge that restaurants remain free to lower their prices and that restaurants (and
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`consumers) remain free to use the purported industry-leading platform, DoorDash, which is not
`
`alleged to include NDPs in its contracts. Counts I and III assert antitrust claims against all
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`Defendants based on the NDPs in each Defendant’s standard restaurant contracts; Counts II and
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`IV assert antitrust claims against Grubhub and Uber Eats based on their inter-platform NDPs.
`
`After multiple attempts, Plaintiffs’ pleading is still fundamentally defective and cannot be
`
`cured. Plaintiffs have twisted their claims of competitive effects and artificially segmented their
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`proposed markets beyond plausibility.
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`Specifically, Count I should be dismissed because, according to Plaintiffs, Defendants do
`
`not compete in the “dine-in” and “direct takeout and delivery” markets in which the NDPs
`
`allegedly cause competitive harm, and because in any event, Plaintiffs fail to plausibly allege any
`
`anticompetitive effects in those purported markets. Count II fails to state a claim because
`
`Plaintiffs do not plausibly allege that Grubhub’s and Uber Eats’ inter-platform NDPs caused
`
`anticompetitive effects in the purported platform-only market.
`
`2
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`

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`Counts I and II also fail because Plaintiffs’ purportedly separate product markets are
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`implausible, as Plaintiffs concede that meals ordered directly from restaurants compete with the
`
`same meals ordered via platforms. Moreover, the purported national geographic market is not
`
`supported by factual allegations.
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`Finally, Plaintiffs’ state law claims (Counts III and IV) fail for the same reasons as the
`
`federal claims.
`
`COMPLAINT ALLEGATIONS2
`
`A.
`
`Defendants’ Meal-Ordering Platforms, Their Value to Both Consumers and
`Restaurants, and the Vigorous Competition They Face
`
`Defendants operate online meal-ordering platforms that enable consumers to search for
`
`and order delivery or takeout from nearby restaurants. Compl. ¶¶ 26-27, 37-39, 50. They “are
`
`two-sided platforms, acting as an intermediary to connect restaurants and consumers to the
`
`benefit of both.” Id. ¶ 36.3 They display the restaurants from which users can order takeout or
`
`delivery and enable users to compare those restaurants’ menu offerings and order and pay for
`
`meals from the convenience of their own computer or mobile device. Id. ¶ 50. They also
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`coordinate meal delivery and provide restaurants that do not have their own meal delivery
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`personnel with access to Defendants’ networks of delivery drivers. Id. ¶ 27.
`
`Among other things, meal-ordering platforms give restaurants significant marketing
`
`exposure by connecting them—and allowing them to easily advertise their menu offerings—to
`
`the consumers who use the platforms. Id. ¶¶ 2, 85-86, 93. For consumers, meal-ordering
`
`2 Defendants accept the allegations as true only for purposes of this Motion to Dismiss.
`3 While Plaintiffs allege that Defendants operate two-sided platforms, meal-ordering platforms
`actually operate on at least three different sides because in addition to competing for customers
`and restaurants, they also compete for delivery drivers when delivery is requested. See, e.g.,
`Compl. ¶ 39.
`
`3
`
`

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`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 10 of 36
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`platforms provide easy comparison shopping for local takeout and delivery options and the
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`convenience of ordering and paying for delivery or takeout without the need to contact
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`restaurants directly. Id. ¶ 50. And because consumers want to use platforms with a wide
`
`selection of restaurants and restaurants want to make their food available to the largest possible
`
`number of consumers, meal-ordering platforms allegedly “exhibit indirect network effects, in
`
`that the value that they offer to one side of the platform is a function of the extent of the use of
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`the other side.” Id. ¶¶ 66-67.
`
`Plaintiffs acknowledge that Defendants’ platforms face significant competition. Id.
`
`¶¶ 29, 65. In addition to one another, Defendants compete for transactions with numerous other
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`meal-ordering platforms, including DoorDash (which Plaintiffs allege is the largest meal-
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`ordering platform), Foodetective, Slice, and Waitr. Id. ¶¶ 31, 110; see also id. ¶ 137
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`(“SiteJabber, a website that allows consumers to rate businesses,” highlights almost 100 different
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`“Food Delivery sites” for ordering online). They also compete with individual restaurants’ or
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`franchises’ online ordering options (e.g., Domino’s Pizza’s online ordering platform). Id. ¶¶ 25,
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`28-30. And Plaintiffs further allege that meal-ordering platforms compete with restaurants’ in-
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`restaurant dining options and takeout and delivery orders that restaurants receive over the phone.
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`Id. ¶ 89 (platforms “have cannibalized restaurants’ existing business by redirecting orders that
`
`used to flow to restaurants directly”); id. ¶152 (platforms have “cannibalized sales from . . . the
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`Dine-In Market”); see also id. ¶¶ 92-93.
`
`For each transaction that occurs over their respective platforms, Defendants and other
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`meal-ordering platforms charge restaurants a commission. According to Plaintiffs, Defendants’
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`commissions range “between 15% and 30% depending on the service being offered (e.g.,
`
`takeout, delivery orders that the restaurant delivers, or delivery orders that the platform
`
`4
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`

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`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 11 of 36
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`delivers).” Id. ¶ 109. Other meal-ordering platforms that have smaller consumer networks
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`charge restaurants “between 15% and 25%.” Id. ¶ 110. Plaintiffs acknowledge that
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`commissions vary depending on the services (like delivery) that restaurants choose to procure
`
`from Defendants. See id. ¶ 42 (restaurants may choose to pay a lower commission by
`
`“provid[ing] their own delivery”).
`
`Plaintiffs recognize that substantial majorities of both consumers and restaurants use
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`multiple meal-ordering platforms: “approximately” 80% of Postmates customers, 60% of Uber
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`Eats customers, and over 50% of Grubhub customers. Id. ¶ 86. And Plaintiffs allege that
`
`restaurants list their menus on multiple platforms to reach the most potential customers—i.e., “to
`
`access consumers that use different Restaurant Platforms.” Id. ¶ 85.
`
`B.
`
`The Alleged Markets and Market Shares
`
`Plaintiffs allege three purported product markets: (i) a “Restaurant Platform Market” in
`
`which meal-ordering platforms “compete with each other in the product market for takeout and
`
`delivery,” id. ¶ 29; (ii) a “Direct Takeout and Delivery Market” where “restaurants also sell
`
`meals directly to consumers for takeout and delivery” via restaurant websites or over the phone,
`
`id. ¶ 30; and (iii) a “Dine-In Market” where consumers order a meal directly from a restaurant to
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`“eat the meal at that restaurant,” id. Plaintiffs contend that the purported platform market is
`
`distinct from the two purported “direct” product markets, notwithstanding that Plaintiffs
`
`acknowledge “there is some cross-elasticity” between these purported markets. Id. ¶ 148; see
`
`also id. ¶ 54 (“If a hypothetical Restaurant Platform monopolist increased prices, some
`
`consumers would switch to ordering in the [direct markets] . . . .”).
`
`Plaintiffs allege both a nationwide platform market, id. ¶ 95, and at least twelve
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`metropolitan areas that constitute purported local submarkets, id. ¶ 99. Plaintiffs claim that some
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`competition among meal-ordering platforms is “local” because “a consumer in one metropolitan
`5
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`

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`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 12 of 36
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`area is highly unlikely to order food through a Restaurant Platform from a restaurant in a far-
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`away metropolitan area, and because both Restaurant Platforms’ and restaurants’ delivery ranges
`
`are limited.” Id. ¶ 98. Nevertheless, Plaintiffs also assert that there is a nationwide platform
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`market because meal-ordering platforms “compete nationwide to build a national network of
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`consumers to offer restaurants, and a national network of restaurants to offer consumers.” Id.
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`¶ 95. Unlike the purported platform market, Plaintiffs claim that the two purported direct
`
`markets are only “local,” not nationwide. Id. ¶ 99.
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`Plaintiffs also claim that the purported platform market is “dominated by just four firms:
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`DoorDash, Grubhub, Uber [Eats], and Postmates.” Id. ¶ 31. DoorDash—which Plaintiffs
`
`originally sued but dismissed in their latest pleading—is, according to Plaintiffs, the largest
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`meal-ordering platform, with a 37% “national share of the market.” Id. ¶ 33. Plaintiffs allege
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`that Defendants’ shares of the purported nationwide platform market are 31% for Grubhub, 20%
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`for Uber Eats, and 10% for Postmates. Id.
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`In addition to alleging nationwide platform market shares, the Complaint also includes a
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`chart that purports to show, based on one month of data, Defendants’ market shares in the
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`alleged local submarkets. See id. ¶ 34. Plaintiffs assert that Defendants “split their dominance
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`regionally,” but do not specify which Defendants are dominant in which regions. Id. Notably,
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`Plaintiffs now omit a chart that they included in their original complaint, which alleged that
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`DoorDash possesses the largest or second largest share of sales in 10 of the 12 purported local
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`submarkets. See Class Action Complaint, Sunshine Decl. Ex. 2, at ¶ 40.
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`C.
`
`The Challenged Contractual Provisions and Plaintiffs’ Causes of Action
`
`Plaintiffs allege that Defendants each have NDPs in their standard agreements with
`
`restaurants. Specifically, each Defendant’s NDP allegedly requires that a restaurant’s pricing on
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`that Defendant’s platform be no higher than the price the restaurant offers for delivery and
`6
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`

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`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 13 of 36
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`takeout orders made directly to the restaurant or for in-person dining. Compl. ¶¶ 56-61.
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`Grubhub’s and Uber Eats’ standard agreements also allegedly contain inter-platform NDPs,
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`which prohibit restaurants in their networks from offering lower menu prices on other meal-
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`ordering platforms. Id. ¶¶ 59-61. Plaintiffs allege that DoorDash does not include NDPs in its
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`standard agreements with restaurants. Id. ¶ 62.
`
`Named Plaintiffs are eight individuals, all of whom reside in the New York City
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`metropolitan area. Id. ¶¶ 10-17. They each “ordered meals for takeout, delivery, and dine-in
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`directly from restaurants that sell” through at least one of the Defendants’ platforms. Id. ¶¶ 10-
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`17. Plaintiff Drewey admits that he has not used any of Defendants platforms, id. ¶ 17, and four
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`of the other Plaintiffs allege that they also “placed orders for takeout, delivery, and dine-in . . .
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`indirectly from such restaurants” through DoorDash and/or Caviar—two platforms Plaintiffs did
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`not name in this action, id. ¶¶ 14-16.
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`Plaintiffs seek to represent three nationwide classes: (1) a “Direct Takeout and Delivery
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`Class” comprised of “all persons or entities in the United States who have purchased goods, for
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`takeout from or delivery by the restaurant, directly from a restaurant subject to any Defendant’s
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`[NDPs],” id. ¶ 173; (2) a “Dine-In Class” comprised of “all persons or entities in the United
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`States who have purchased goods, for dining in the restaurant, from a restaurant subject to any
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`Defendant’s [NDPs],” id. ¶ 174; and (3) a “Restaurant Platform Class” comprised of “all persons
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`or entities in the United States who have purchased goods, through a non-Defendant Restaurant
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`Platform, from a restaurant subject to Grubhub’s or Uber [Eats’ inter-platform NDPs],” id. ¶ 175.
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`Plaintiffs claim that Defendants’ NDPs constitute “vertical agreements with restaurants in
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`restraint of trade” or commerce, id. ¶¶ 191, 200, 208, that violate Section 1 of the Sherman Act
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`and its “state analogues,” id. ¶ 1. See also id. ¶ 214. Counts I and III assert that Defendants
`
`7
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`

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`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 14 of 36
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`possess market power in the purported nationwide and local platform markets, as well as in the
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`purported local direct markets in which Defendants do not compete, id. ¶¶ 189, 207, and that the
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`NDPs have produced “substantial anticompetitive effects” in the alleged direct markets. Id.
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`¶¶ 192, 208. Counts II and IV assert that Grubhub’s and Uber Eats’ inter-platform NDPs have
`
`harmed competition in all alleged geographic markets of the purported platform market. Id.
`
`¶¶ 201, 213.
`
`LEGAL STANDARD
`
`“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
`
`accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556
`
`U.S. 662, 678, 129 S. Ct. 1937, 1949 (2009) (internal quotation marks and citation omitted). “A
`
`claim is facially plausible ‘when the plaintiff pleads factual content that allows the court to draw
`
`the reasonable inference that the defendant is liable for the misconduct alleged,’ meaning that
`
`there is ‘more than a sheer possibility that a defendant acted unlawfully.’” Concord Assocs., L.P.
`
`v. Ent. Props. Tr., 817 F.3d 46, 52 (2d Cir. 2016) (citation omitted). Mere “labels and
`
`conclusions [or] a formulaic recitation of the elements of a cause of action will not do.” Bell Atl.
`
`Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1965 (2007).
`
`ARGUMENT
`
`As Plaintiffs implicitly concede, their Sherman Act Section 1 claims challenging the
`
`separate, vertical agreements between each Defendant and the restaurants that use their platforms
`
`are subject to the rule of reason. See, e.g., Compl. ¶¶ 192, 201 (alleging the NDPs “constitute
`
`unreasonable restraints of trade” because they purportedly “produce[] substantial anticompetitive
`
`effects”); see also Ohio v. Am. Express Co., 138 S. Ct. 2274, 2284 (2018) [hereinafter Amex]
`
`(“[N]early every . . . vertical restraint . . . should be assessed under the rule of reason.”).
`
`Under the rule of reason, a plaintiff “has the initial burden to prove that the challenged
`
`8
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`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 15 of 36
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`restraint has a substantial anticompetitive effect that harms consumers in the relevant market.”
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`Amex, 138 S. Ct. at 2284. Plaintiffs can make this threshold showing of anticompetitive effects
`
`“directly or indirectly.” Id. Direct evidence of anticompetitive effects must demonstrate “that
`
`the challenged action has had an actual adverse effect on competition as a whole in the relevant
`
`market,” E & L Consulting, Ltd. v. Doman Indus. Ltd., 472 F.3d 23, 31 (2d Cir. 2006) (citation
`
`omitted), including by “reduc[ing] output, increas[ing] prices or decreas[ing] quality.” Amex,
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`138 S. Ct. at 2284. Where a plaintiff is unable to allege actual detrimental effects to competition,
`
`it must allege anticompetitive effects indirectly by “‘at least establish[ing] that defendants
`
`possess the requisite market power’ and thus the capacity to inhibit competition market-wide,”
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`plus some “other grounds to believe that the defendant’s behavior will harm competition market-
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`wide.” K.M.B. Warehouse Distrs., Inc. v. Walker Mfg. Co., 61 F.3d 123, 129 (2d Cir. 1995)
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`(citation omitted).
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`In addition to plausibly alleging that a challenged restraint has caused cognizable
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`anticompetitive effects, the plaintiff must “allege a relevant geographic and product market in
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`which trade was unreasonably restrained.” Bayer Schering Pharma AG v. Sandoz, Inc., 813 F.
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`Supp. 2d 569, 574 (S.D.N.Y. 2011); see also Concord Assocs., 817 F.3d at 53 (“[W]ithout a
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`definition of that market there is no way to measure the defendant’s ability to lessen or destroy
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`competition.” (citation omitted)).
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`Each of Plaintiffs’ claims should be dismissed because they fail to plausibly allege that
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`the challenged NDPs have caused anticompetitive effects in any relevant market. Plaintiffs’
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`claims also should be dismissed because the facts they allege do not support a platform-only
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`product market or a nationwide geographic market.
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`9
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`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 16 of 36
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`I.
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`PLAINTIFFS FAIL TO PLAUSIBLY ALLEGE COGNIZABLE
`ANTICOMPETITIVE EFFECTS IN THE “DIRECT” MARKETS (COUNT I
`AGAINST ALL DEFENDANTS)
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`In Count I, Plaintiffs challenge each Defendant’s alleged requirement that a restaurant’s
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`pricing on its platform be no higher than the restaurant offers directly to consumers in the
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`purported direct markets (i.e., “Dine-In” and “Direct Take-Out and Delivery”). Because
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`Plaintiffs fail to plausibly allege that the NDPs have caused anticompetitive effects in any
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`relevant market, Count I should be dismissed.
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`A.
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`Purported Harm in the “Direct” Markets Cannot Sustain a Claim Against
`Defendants Absent Harm in the Purported Platform Market
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`To cause anticompetitive effects cognizable under the Sherman Act, a challenged
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`restraint must harm competition in a market in which defendants compete. See United States v.
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`Visa U.S.A., Inc., 344 F.3d 229, 238 (2d Cir. 2003) (relevant market is market in which
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`“defendant conspirators have ‘market power’” and plaintiff “must demonstrate that within the
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`relevant market, the defendants’ actions have had substantial adverse effects on competition,
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`such as increases in price, or decreases in output or quality” (emphasis added)). Accordingly,
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`there can be no cognizable anticompetitive effects resulting from a challenged restraint that does
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`not harm competition in a market in which defendants compete. See, e.g., E. Food Servs., Inc. v.
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`Pontifical Cath. Univ. Servs. Ass’n, 357 F.3d 1, 5 (1st Cir. 2004) (“Virtually always, anti-
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`competitive effects under the rule of reason require that the arrangement or action in question
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`create or enhance market power . . . .”) (citing Areeda & Hovenkamp, Antitrust Law ¶ 501 (2d
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`ed. 2002)).
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`In Spinelli v. National Football League, the Second Circuit recently reiterated the need to
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`allege that challenged conduct harmed competition in the relevant market. Spinelli concerned an
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`alleged agreement among all NFL teams to “pool[] and collectively licens[e] their intellectual
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`10
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`Case 1:20-cv-03000-LAK Document 38 Filed 10/19/20 Page 17 of 36
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`property.” 903 F.3d 185, 211 (2d Cir. 2018). This agreement occurred in a purported “market
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`for commercial licensing of [NFL]-related stock photography,” in which NFL teams compete
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`against one another to license their intellectual property for commercial photographs. Id.
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`(alteration in original). Plaintiffs alleged the agreement “substantially reduced the output of
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`stock photography for NFL events,” id. at 212—i.e., a different market than the one in which the
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`teams competed. The court held that this allegation of harm “say[s] nothing about the market for
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`licenses for such photographs” because fewer photographs does not necessarily entail fewer
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`commercial licenses sold by NFL teams. Id. The court affirmed dismissal of the antitrust claim
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`because the alleged competitive harm did not occur “in the relevant market” in which NFL teams
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`competed, and thus could not constitute a cognizable anticompetitive effect. Id.; see also FTC v.
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`Qualcomm Inc., 969 F.3d 974, 999 (9th Cir. 20