Anti-Competitive or A Good Policy for Workers? Uber and Seattle Continue Their Battle Over Whether Uber Drivers Can Unionize.

March 8, 2019

The U.S. Chamber of Commerce and an Uber subsidiary have asked a Washington federal judge to invalidate Seattle’s ordinance letting ride hailing app-based drivers unionize. The allege the city’s law violates federal antitrust law by allowing independent contractors to unionize and fix prices.

In 2015, Seattle became the first city to allow Uber and Lyft drivers the right to unionize. The bill, co-sponsored by Seattle council members Mike O’Brien and Nick Licata, allows drivers for ride-hailing companies, as well as taxis and other for-hire vehicles, to collectively bargain for things like higher pay and better working conditions. Lawmakers felt the bill was necessary after witnessing how poor the working conditions were for drivers.

The dispute is now back in the district court, where the parties are battling over whether the per se rule of illegality or the rule of reason applies to analyzing the Chamber and Rasier’s claims of violations of federal antitrust law.

Uber immediately responded by challenging both the legality of the law as well as the policy reasons for passing the law. Uber stated that its ride sharing platform creates “new opportunities for many people to earn a better living on their own time and terms.” The company reiterated that drivers like the flexibility and independence Uber affords them and this new ordinance will allow unionized independent contractors to muscle — such as part-time drivers — by preventing them from contracting with ride-hailing companies outside the terms of a collective bargaining agreement.

“Certain collusive practices — like horizontal group boycotts and horizontal price fixing — are condemned as per se violations, which means they are unlawful on their face regardless of market conditions or any purported economic or policy justifications,” the Chamber and Rasier, the Uber subsidiary, said. “Because the group boycotts authorized and facilitated by the ordinance are illegal per se, the ordinance is preempted by the Sherman Act.”

This case is back in Washington federal court on remand from the Ninth Circuit, which revived the Chamber’s lawsuit last May. The appeals court partially reversed an August 2017 dismissal of the suit, after finding that the state-action immunity doctrine did not save the ordinance from preemption by the Sherman Act.

The dispute is now back in the district court, where the parties are battling over whether the per se rule of illegality or the rule of reason applies to analyzing the Chamber and Rasier’s claims of violations of federal antitrust law.

The argument that the Ordinance runs afoul of these federal antitrust laws, is that under section 1 of the Sherman Antitrust Act, a “contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States” is unlawful. This provision has been held to prohibit independent economic actors, such as independent contractors, from colluding on the prices they will accept for their services or otherwise engage in concerted action in the marketplace that will have an anticompetitive effect.

During the Ninth Circuit argument, business lobbying groups hailed this as a classic example of per se illegal conduct because the law is unlawful on its face. The NFIB argued that, “when it enacted the NLRA, Congress intentionally chose to deny collective bargaining rights to independent contractors because they are engaged in their own business ventures.” For this reason, The NLRA preempts state and local regulation purporting to authorize collective bargaining for independent contractors.

On the flip side, Seattle argues they are exempt from antitrust liability because of the state action doctrine which was articulated in the Supreme Court case, Parker v Brown. The two-prong test for meeting this standard is met when the law is: (1) “clearly articulated and affirmatively expressed as state policy”, and (2) the policy is “actively supervised by the state.”

Seattle argues the second prong of the test is not a major issues since the ordinance establishes a regulatory scheme that requires direct review and approval of private action by government officials before any agreement between independent contractors becomes effective. They also argue that they did foresee that there would be anti-competitive effects of the law and in fact meant for those to happen as a matter of policy. The ordinance contains detailed legislative findings indicating that the City of Seattle has identified concerns relating to the safety and reliability of for-hire transportation services.

The Ninth Circuit stated that the Seattle ordinance failed to meet the two-prong test, but the ordinance was not held to be per se illegal. This gave Seattle another chance to tweak the ordinance and bring the issue back to court to argue that it does pass the two-prong test and is exempt from anti-trust liability.

Uber has long been allowed to treat workers poorly and pay them meager amounts of money because they are “independent contractors” and not “employees.” More and more Uber drivers drive full time and depend on the job as their primary source of income. Seattle was merely trying to put more power back into the hands of these workers. Uber is claiming that this policy hurts those that only drive part time and like the flexibility of the job, but is protecting a few part time drivers worth hurting those that depend on the job full time? This could be Seattle’s last chance in court to uphold the validity of the law. The case will hinge on which policy is more important- the anticompetitive effects of independent contractors unionizing or a state giving workers, who receive poor wages and few benefits, the ability to fight for their rights.

Kollin Bender, 25 February 2019