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

The U.S. Chamber of Commerce and an Ubersubsidiary have asked aWashington federal judge to invalidate Seattle’s ordinance letting ridehailing app-based drivers unionize. The allege the city’s law violates federalantitrust 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 challengingboth 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 manypeople to earn a better living on their own time and terms.” The companyreiterated that drivers like the flexibility and independence Uber affords themand this new ordinance will allow unionizedindependent contractors to muscle — such as part-time drivers — by preventingthem from contracting with ride-hailing companies outside the terms of acollective bargaining agreement.

“Certain collusive practices — likehorizontal group boycotts and horizontal price fixing — are condemned as per seviolations, which means they are unlawful on their face regardless of marketconditions or any purported economic or policy justifications,” the Chamber andRasier, the Uber subsidiary, said. “Because the group boycotts authorized andfacilitated by the ordinance are illegal per se, the ordinance ispreempted by the Sherman Act.”

This case is back in Washington federalcourt on remand from the Ninth Circuit, which revived the Chamber’s lawsuitlast May. The appeals court partially reversed an August2017 dismissalof the suit, after finding that the state-action immunity doctrine did not savethe 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 afoulof these federal antitrust laws, is that under section 1 of the Sherman AntitrustAct, a “contract, combination in the form of trust or otherwise, or conspiracy,in restraint of trade or commerce among the several States” is unlawful. Thisprovision has been held to prohibit independent economic actors, such asindependent contractors, from colluding on the prices they will accept fortheir services or otherwise engage in concerted action in the marketplace thatwill have an anticompetitive effect.

During the Ninth Circuit argument,business lobbying groups hailed this as a classic example of per se illegalconduct because the law is unlawful on its face. The NFIB argued that, “when it enactedthe NLRA, Congress intentionally chose to deny collective bargaining rights toindependent contractors because they areengaged in their own business ventures.” For this reason, The NLRA preempts stateand local regulation purporting to authorize collective bargaining forindependent contractors.

On the flip side, Seattle argues they are exempt fromantitrust liabilitybecause of the state action doctrine which was articulated in the Supreme Courtcase, Parker v Brown. The two-prongtest for meeting this standard is met when the law is: (1) “clearlyarticulated and affirmatively expressed as state policy”, and (2) the policy is“actively supervised by the state.”

Seattle argues the second prong of thetest is not a major issues since the ordinanceestablishes a regulatory scheme that requires direct review and approval ofprivate action by government officials before any agreement between independentcontractors becomes effective. They also argue that they did foresee that therewould be anti-competitive effects of the law and in fact meant for those tohappen as a matter of policy. The ordinancecontains detailed legislative findings indicating that the City of Seattle hasidentified concerns relating to the safety and reliability of for-hiretransportation services.

The Ninth Circuit stated that the Seattleordinance failed to meet the two-prong test, but the ordinance was notheld to be per se illegal. This gave Seattle another chance to tweak the ordinanceand bring the issue back to court to argue that it does pass the two-prong testand 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