“[Rlequiring market definition . . . in all cases would undermine the presumption of anticompetitive effect in the context of per se antitrust violations.”
How later courts described this case
- “[Rlequiring market definition . . . in all cases would undermine the presumption of anticompetitive effect in the context of per se antitrust violations.”
Written by the judges who cited it.
The opinion
UNITED STATES DISTRICT COURT USDC SDNY
SOUTHERN DISTRICT OF NEW YORK DOCUMENT
sess eee erates ELECTRONICALLY F
MARIAM DAVITASHVILL et al, . . ILED
DOCH:
Plaintiffs, DATE FILED:_2 | 70 □ 20 22
Vv.
20-cv-3000 (LAK}
GRUBHUB INC,, ef al, and consolidated case
Defendants.
ee rm □□ eee ee ee eee HH HK
MEMORANDUM OPINION
Appearances:
Gregory A. Frank
Marvin L. Frank
Asher Hawkins
FRANK LLP
Kyle W. Roche
Edward Normand
Stephen Lagos
ROCHE CYRULNIK FREEDMAN LLP
Attorneys for Plaintiffs
Steven C, Sunshine
Karen M. Lent
Evan Kreiner
SKADDEN, ARPS, SLATE, MEAGHER, & FLOM LLP
Attorneys for Defendant Postmates Inc,
Derek Ludwin
Stacey K. Grigsby
Andrew A. Ruffino
COVINGTON & BURLING LLP
Attorneys for Defendant Uber Technologies, Inc.
David J. Lender
Eric S. Hochstadt
WEIL, GOTSHAL & MANGES LLP
Attorneys for Defendant Grubhub Inc.
LEWis A. KAPLAN, District Judge.
This putative class action involves the contractual relationships between restaurants
and online platforms for restaurant meals. The amended complaint alleges that three defendants —
Grubhub, Inc. (“Grubhub”), Uber Technologies, Inc. “Uber” or “Uber Eats”), and Postmates Inc.
(“Postmates’) (together, “Defendants”) — each unlawfully has fixed prices for restaurant meals by
entering into restrictive agreements with restaurants that preclude those restaurants from charging
lower prices off-platform, i.e., in the “direct” markets for restaurant meals and/or on other restaurant
platforms. Plaintiffs claim that Defendants thus have caused them to pay artificially high prices for
restaurant meals.’ They seek damages and injunctive relief under Section 1 of the Sherman Act and
its state analogues on behalf of themselves and three nationwide classes of others similarly situated.
Before the Court is Defendants’ joint motion to dismiss the amended complaint.
Defendants contend that the contracts at issue do not fix prices in a manner sufficient to state an
antitrust claim. For the following reasons, the motion is denied.
Facts
The relevant facts alleged in the amended complaint are deemed true for purposes
of this motion. They are summarized as follows:
Am. Compl. (Dkt. 28) ff 1, 188-216. All docket citations are to No. 20-cv-3000 (LAK).
Background
Defendants operate electronic, internet based meal ordering platforms, which allow
customers to order restaurant food online.? They are “two-sided platforms, acting as...
intermediar[ies] to connect restaurants and consumers.’ Along with the rise of the internet, such
platforms have become increasingly popular means of buying and selling restaurant food, especially
since the early 2010s.‘ They aggregate the menus of participating restaurants within pick up or
delivery range of the user and permit the user fo view and compare offerings before placing an order
from a single restaurant.’ In exchange for their services, restaurant platforms collect commissions
and fees on each transaction from both their restaurant and consumer customers. At issue in this
lawsuit is Defendants’ practice of imposing contractual “no price competition clauses” (“NPCCs”)
on listed restaurants. All three Defendants’ NPCCs prevent their restaurant customers from charging
lower list prices to consumers who dine in person or who order food takeout or delivery directly
from the restaurant. Grubhub and Uber have more expansive NPCCs, which prevent their restaurant
customers from charging lower prices to consumers who purchase their meals on rival restaurant
platforms.
The amended complaint pleads four counts of vertical price fixing stemming from
these arrangements. Counts I and UI charge Defendants with unlawfully setting minimum prices
Td. 25-28.
Td. 436.
Id. 492, 25.
Id. §§ 25-28.
in the local direct markets for restaurant meals (/.e., for dine-in meals and for meals for takeout and
delivery coordinated through the restaurant). Counts II and IV claim that defendants Grubhub and
Uber similarly have set unlawful minimum prices throughout the restaurant platform market, both
on the national and local levels. Because restaurant platform commissions force restaurants to raise
their list prices to make money — or even break even — on each transaction, Plaintiffs allege that
Defendants’ NPCCs have caused anticompetitive effects in the relevant markets and harmed
Plaintiffs directly by causing them to pay supracompetitive prices for restaurant meals.
The Parties
A. Plaintiffs
There are eight named plaintiffs in this case. Each is a natural person who resides
in and is a citizen of the State of New York.® Over the relevant period, plaintiffs Mariam
Davitashvili, Adam Bensimon, and Mia Sapienza have ordered meals for “takeout, delivery, and
dine-in directly from restaurants that sell their goods through Defendants’ platforms.” Plaintiffs
Phil Eliades and Jonathan Swaby have done the same, but also have ordered “indirectly from such
restaurants through Doordash.” Plaintiff John Boisi “has placed orders for takeout and dine-in
directly from restaurants that sell their goods through Grubhub and Postmates, and indirectly from
Id. F§ 10-17.
Id. ff 10-12.
Id. 99 13-14.
such restaurants through Caviar and Doordash.”” Plaintiff Nate Obey “has placed orders for takeout
and dine-in directly from restaurants that sell their goods through Grubhub, and indirectly from such
restaurants through Caviar.”!” Meanwhile, plaintiff Malik Drewey “has placed orders for takeout
and dine-in directly from restaurants that sell their goods through each Defendant’s platform, but
he has not used any of those platforms.”
Plaintiffs purport to represent three classes of similarly-situated consumers. First,
the Direct Takeout and Delivery Class, which “comprises all persons or entities in the United States
who have purchased goods, for takeout or delivery by the restaurant, directly from a restaurant
subject to any Defendant’s NPCC.””? Second, the Dine-In Class which “comprises all persons or
entities in the United States who have purchased goods, for dining in the restaurant, from a
restaurant subject to any Defendant’s NPCC.”? Third, the Restaurant Platform Class which
“comprises all persons or entities in the United States who have purchased goods, through a non-
Defendant Restaurant Platform, from a restaurant subject to Grubhub’s or Uber’s NPCCs.”""4
Td G15.
10
Id. 4 16.
El
Jd. 417.
Id. 4173.
13
Id. 4174.
14
ld. 4175.
B. Defendants
Defendants Grubhub, Uber, and Postmates are horizontal competitors that operate
platforms for restaurant takeout and delivery orders. Each operates throughout the United States.
The Relevant Markets
Plaintiffs have pleaded three separate product markets. First, they allege a Restaurant
Platform Market in which Defendants compete for restaurant meal transactions.'* Jn this market,
consumers can “search for participating restaurants in a locality and order food for takeout and
delivery, through the same platform from those restaurants.”'° Second, Plaintiffs allege a Direct
Takeout and Delivery Market, in which “a consumer may order directly from a restaurant for takeout
or delivery by, for example, calling the restaurant’s phone number or by visiting the restaurant’s
website.”!’ Third, they allege a Dine-In Market, in which a consumer may order and eat a meal at
a restaurant.'*
In addition, Plaintiffs plead both national and local geographic markets. Plaintiffs’
alleged Restaurant Platform Market encompasses platform business throughout the United States.
The Direct Takeout and Delivery Market and the Dine-In Market are inherently local because
consumers realistically will order food from or visit only a restaurant that is relatively close by.
15
Id. 9929, 46.
16
Pl. Mem. (Dkt. 40) at 3.
Am, Compl. § 30.
18
ld.
Plaintiffs allege also that Defendants compete locally in the Restaurant Platform Market, both for
“listings from restaurants” and “delivery and takeout orders from consumers.”!” The local markets
include New York City, Los Angeles, Chicago, Dallas-Fort Worth, Houston, Miami, Philadelphia,
Atlanta, Boston, Phoenix, and the San Francisco Bay Area.””
Market Shares
Four restaurant platforms —Doordash and Defendants Grubhub, Uber, and Postmates
— account for 98 percent of the market for meals purchased through restaurant platforms in the
United States.” As of November 2019, Doordash was the national leader with a market share of 37
percent, while Defendants Grubhub, Uber, and Postmates held respective national market shares of
31 percent, 20 percent, and 10 percent.” Defendants’ local market shares vary by region, but
Plaintiffs allege that each Defendant is dominant in at least one metropolitan area. For example,
Grubhub holds 67 percent of the restaurant platform market in New York City, Uber holds 55
percent of the market in Miami, and Postmates holds 37 percent of the market in Los Angeles.’ In
July 2020, it was announced that Uber would acquire Postmates.”*
19
Id. 98,
20
Id. 499.
21
Id. 931-32.
22
Id. 433.
23
Id. 434.
24
Id. 99121, 39.
Plaintiffs offer several explanations for this concentration. Indirect network effects
are at work in the restaurant platform markets because “the value that [the restaurant platforms] offer
to one side of the platform is a function of the extent of the use of the other side of the platform.”
In other words, a restaurant platform is more attractive to a given user if it lists many restaurants and
more valuable to a given restaurant if it is used by many prospective customers. Indirect network
effects thus reinforce the dominant positions of the few platforms that can offer access to the largest
networks of restaurants and consumers. This might explain also why the platforms “split their
dominance regionally,” with one restaurant platform usually dominant in cach metropolitan area.”
Restaurant platforms are also “sticky,” meaning consumers — for a variety of reasons, including
familiarity and convenience ~ are unlikely to switch platforms.”’ In addition, as explained below,
Plaintiffs allege that Defendants’ anticompetitive conduct contributes to their market dominance by
preventing restaurants and other restaurant platforms from competing with them on price.
Commissions and Fees
In exchange for connecting restaurants to consumers, restaurant platforms charge
commissions and fees on both sides of each transaction.” First, the platforms charge a restaurant
commission, which is typically calculated as a certain rate multiplied by the total price of the
25
Td. § 66.
26
See id. {34 (listing Defendants’ respective market shares in each local market).
27
Id. $87, 106-107.
28
Id. 99 40-45.
9 □
customer’s order plus any delivery fee charged by the restaurant.”” According to the amended
complaint, Defendants typically charge a 30 percent commission rate to restaurants that do not
provide their own delivery and a lower rate to restaurants that do provide their own delivery.
Second, restaurant platforms charge service fees to the consumer. Like the restaurant
commission, the service fee is generally equal to a rate multiplied by the total list price of the
customer’s order. Plaintiffs allege that the service fee is typically between 5 percent and 10 percent,
but they concede that in certain cases — including for pick up orders and cases in which the
restaurant does its own delivery — no service fee is charged.”°
Third, the platforms generally charge a 5 percent delivery fee to customers in cases
where the restaurant uses the platform’s delivery services.*!
Plaintiffs contend that these rates are supracompetitive. Defendants’ current
commission rates — at least, when the platform is providing delivery — are “triple what they were in
2004 and almost double what they were in 2015.” Other platforms provide the same services at
lower rates.* Plaintiffs point to Defendants’ alleged market power and indirect network effects as
29
Id. 941-42.
30
id $43.
31
Id. § 44,
32
PL. Mem. at 4; Am. Compl. {ff 109, 112-13, 115, 118.
33
Am. Compl. 110.
10
the primary economic reasons why Defendants are able to impose rates which, according to one
survey, 90 percent of restaurants have deemed subjectively “unreasonable.””
The Alleged Restraints
At the heart of this dispute is Plaintiffs’ allegation that each of these defendants
requires each restaurant listed on its platform to enter into a restrictive agreement — an NPCC —
which prevents the restaurant from offering the same menu items directly to consumers or, in some
cases, on other restaurant platforms at a lower price than the restaurant charges on the defendant’s
platform.** A “narrow” NPCC prohibits the product’s sale at a lower price only when the restaurant
sells to consumers directly.° A “wide” NPCC prohibits restaurants from selling products anywhere
at a price lower than that charged on the restaurant platform in question. This includes prices for
direct sales and on other restaurant platforms.*”
Postmates imposes a narrow NPCC that requires restaurants that use its platform to
maintain “price parity between in-store and online menus.”** This means that
“any restaurant that sells goods through Postmates is contractually prohibited from
selling those goods at a lower price to consumers who purchase directly from that
restaurant, regardless of whether the meal is for takeout, delivery, or dine-in, and
regardless of whether that meal was ordered online, by phone, or in person. The
34
Td. F145.
35
Id. 49] §5-56.
36
Id. 456.
37
td.
38
Td 57.
restaurant may, however, charge a lower price when it sells its goods through a
competing platform, such as Doordash.”””
Grubhub and Uber, however, both impose wide NPCCs that prohibit restaurants from selling meals
at lower prices “through any competing restaurant platform” or through direct orders placed by
consumers.” Grubhub’s NPCC states that
“(tlhe item pricing must be at least as favorable to the consumer as that which is
available for Restaurant’s standard menu or offered to any 3rd party service,’
and Uber’s NPCC provides that a
“Merchant may not make any Item available to Customers through the [Uber] Eats
App at a price that is higher than the price that Merchant charges in-store for similar
Items .. . [nor] at a price higher than the amount Merchant is charging for similar
Items through any comparable platform for food delivery services.”
Plaintiffs note that DoorDash, the market leader, does not impose an NPCC on restaurants that sell
on its platform. Instead, it allows restaurants to “increase prices on that platform to offset the
delivery app’s commission fees, without increasing the in-house restaurant list price.”
Plaintiffs allege that Defendants’ NPCCs are designed to inhibit competition and in
fact have significant anticompetitive effects. Restaurants make very low profit margins, usually
39
Id. 458.
40
Id. 959.
At
Id. $60.
42
1d 61.
43
Id. 4 62.
12
below 15 percent. This means that a restaurant typically must make a high volume of sales to stay
afloat. It means also that restaurants cannot realistically forgo listing their menus on Defendants’
platforms, even though restaurant commission rates — which can reach up to 30 percent — are likely
to swallow most restaurants’ profits.
The platforms’ reach is hard to overstate. Restaurant platforms now capture 80
percent of online orders for meal delivery.” Millions of customers order food through one or more
platforms.** And because restaurant platforms are “sticky” and many consumers use only one
platform, most restaurants contract with multiple platforms in order to reach as many potential
customers as possible.*” Defendants are the second, third, and fourth largest restaurant platforms
nationally and each dominates at least one of the local markets. Accordingly, it is exceedingly
difficult for restaurants to avoid being bound by Defendants’ NPCCs. And once they are so bound,
restaurants cannot lower their list prices — either for direct purchases or on platforms that charge
lower commissions or fees — in order to offset the costs they incur on Defendants’ platforms. Given
these pressures, it makes sense that restaurants have been forced to raise prices to counteract
Defendants’ high commission rates.
44
1d. 975.
45
Id. F113.
46
Id. 478-79, 104,
47
Td. 9 85-88, 126,
13
Discussion
Legal Standard
A, Motion to Dismiss
To survive a motion to dismiss for failure to state a claim under Federal Rule of Civil
Procedure 12(b)(6), a complaint must allege sufficient facts to “state a claim to relief that is
plausible on its face.’"* “A claim has facial plausibility when the plaintiffpleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.’ The Court accepts as true all factual allegations made in the complaint, but does not
credit “mere conclusory statements” nor “threadbare recitals of the elements of a cause of action.”””
The Court considers also any documents attached to the complaint or incorporated therein by
reference.”
B. Relevant Antitrust Principles
Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form
of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States.””’
48
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. vy. Twombly, 550 U.S.
544, 570 (2007).
49
Id, .
50
Id.
53
DiFotco v. MSNBC Cable L.L.C., 662 F.3d 104, 111 @d Cir. 2010).
52
15 U.S.C. § 1.
14
“A violation of Section 1 generally requires a combination or other form of concerted action
between two legally distinct entities resulting in an unreasonable restraint on trade.”?
Combinations, conspiracies and agreements “formed for the purpose and with the
effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity” commonly
are referred to as price-fixing arrangements.’ Agreements between or among competitors are
characterized as “horizontal” while those between or among entities at different levels of distribution
— e.g, manufacturer and wholesaler or wholesaler and retailer — are referred to as “vertical.”
Horizontal restraints on competition — notably but not exclusively price fixing — are unlawful per
se. Vertical restraints, including resale price restraints, are evaluated according to the rule of
reason.’ As plaintiffs contend that Defendants’ NPCCs are vertical price-fixing arrangements, they
come under the rule of reason. So we come to the question of what is required in order to state a
legally sufficient claim.
Asa general matter, a private plaintiff bringing a claim under the Sherman Act must
“(1) define the relevant market, (2) allege an antitrust injury, and (3) allege conduct in violation of
the antitrust laws.® So here Plaintiffs must allege facts which, assuming their truth and drawing
53
E & L Consulting, Ltd. v. Doman Indus. Lid., A7T2 F.3d 23, 29 (2d Cir. 2006).
54
Dennis v. JPMorgan Chase & Co., 343 F. Supp. 3d 122, 171 n.212 (S.D.N.Y. 2018)
(quoting United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223 (1940)).
55
Leegin Creative Leather Prods., Inc, y. PSKS, Inc., $51 U.S. 877, 881 (2007).
56
Concord Assocs., L.P. v, Ent. Props. Tr., 817 F.3d 46, 52 (2d Cir. 2016) (internal citation
omitted),
The qualification relates to the fact that definition of a relevant market typically is
unnecessary in a case alleging a per se antitrust violation such as horizontal price fixing.
15
from them all reasonable and favorable inferences, would suffice to permit a fnding of relevant
matket or markets and an antitrust injury. In order to satisfy the requirement of pleading conduct
in violation of the antitrust laws, they must allege also the concerted action essential to stating a
Sherman Act Section 1 claim, which they obviously have done by alleging Defendants’ agreements
with restaurants, and that Defendants’ conduct otherwise violates the antitrust laws.
□□ Market Definition
A plaintiff bringing a claim under the rule of reason must plead facts that plausibly
support its proposed definition of the relevant market.°’ A relevant market has two components: a
relevant product and a relevant geographic scope.°* The boundaries of the alleged product market
must be rationally related to an “analysis of the interchangeability of use or the cross-elasticity of
demand.”*” A geographic market is normally the geographic “area of effective competition,” which
courts measure “by determining the areas in which the seller operates and where consumers can turn,
as a practical matter, for supply of the relevant product.” Market definition is a “deeply fact-
E.g., In re Mercedes-Benz Anti-Tr. Litig., 157 F. Supp. 2d 355, 364 (D.N.J. 2001)
(“[Rlequiring market definition . . . in all cases would undermine the presumption of
anticompetitive effect in the context of per se antitrust violations.”) (citing Pace Elecs., Inc.
y. Canon Comput. Sys., Inc., 213 F.3d 118, 123 Gd Cir. 2000)).
57
See Ohio vy, Am. Express Co., 138 8, Ct. 2274, 2285 & n.7 (2018).
58
Concord Assocs., 817 F.3d at 52 (citing Bayer Schering Pharma AG v, Sandoz, Inc., 813
F. Supp. 2d 569, 574 (S.D.N.Y. 2011).
39
Todd v. Exxon Corp., 275 F.3d 191, 200 (2d Cir. 2001) (internal citation omitted).
60
Concord Assocs., 817 F.3d at 53 (internal citations omitted).
16
intensive inquiry, [and] courts hesitate to grant motions to dismiss for failure to plead a relevant
product market.’*! This Court nonetheless should dismiss Plaintiffs’ claims their proposed market
definition is not plausible.”
2. Anticompetitive Effects
In rule of reason cases, the legality of a challenged restraint ultimately — i.e, on
summary judgment or at trial — is evaluated in accordance with a three-step burden-shifting
framework.
“First, a plaintiff bears the initial burden of demonstrating that a defendant’s
challenged behavior ‘had an actual adverse effect on competition as a whole in the
relevant market.’ Capital Imaging, 996 F.2d at 543. Examples of actual
anticompetitive effects include reduced output, decreased quality, and
supracompetitive pricing. See Tops Mkts., 142 F.3d at 96; Capital Imaging, 996 F.2d
at 546-47.
“Tf the plaintiff cannot establish anticompetitive effects directly by showing
an actual adverse effect on competition as a whole within the relevant market, he or
she nevertheless may establish anticompetitive effects indirectly by showing that the
defendant has ‘sufficient market power to cause an adverse effect on competition.’
Tops Mkts., 142 F.3d at 96; see also K.M.B. Warehouse Distribs., Inc. v. Walker Mfg.
Co., 61 F.3d 123, 129 (2d Cir. 1995) (”[W]here the plaintiff is unable to
demonstrate [an actual adverse effect on competition,] .. . it must at least establish
that defendants possess the requisite market power’ and thus the capacity to inhibit
competition market-wide.’ (quoting Capital Imaging, 996 F.2d at 546)). Because
‘[m|arket power is but a “surrogate for detrimental effects,”’ Tops Mkts., 142 F.3d
at 96 (quoting FTC v. Ind. ked’n of Dentists, 476 U.S. 447, 461, 106 S.Ct. 2009, 90
L.Ed.2d 445 (1986)), ‘[a] plaintiff seeking to use market power as a proxy for
adverse effect must show market power, plus some other ground for believing that
the challenged behavior could harm competition in the market, such as the inherent
anticompetitive nature of the defendant’s behavior or the structure of the interbrand
market,’ id, at 97,
él
Todd, 275 F.3d at 199 (internal citation omitted).
62
See id. at 200-201.
17
“Once the plaintiff satisfies its initial burden to prove anticompetitive effects,
the burden shifts to the defendant to offer evidence of any procompetitive effects of
the restraint at issue. See Geneva Pharms.|Tech. Corp. v. Barr Lab’ys. Inc.,386 F.3d
485, 507 (2d Cir. 2004)]. Ifthe defendant can provide such proof, then ‘the burden
shifts back to the plaintiff] ] to prove that any legitimate competitive benefits offered
by defendant{[ ] could have been achieved through less restrictive means.’ fd. (citing
Capital Imaging, 996 F.2d at 543).
But at the pleading stage, only the first step of this framework is material, as consideration of alleged
procompetitive effects of defendants’ actions and the ultimate judgment of whether any
procompetitive effects “outweigh” any anticompetitive effects is inappropriate on a motion
addressed to the sufficiency of the complaint.“ As Judge Rakoff aptly has put it when a defendant
opposed a motion to dismiss a rule of reason antitrust claim on the basis that its actions had
procompetitive benefits:
“Defendant counters that [it] provides many pro-competitive benefits
[citation omitted] and also disputes the conclusions that plaintiff purports to draw
from the . . . studies [plaintiff cited]. [Citation omitted] Defendant’s counter-
assertions, while certainly worth a fact-finder’s consideration, do not persuade the
Court to grant a motion to dismiss. The Court hence determines that plaintiff has
plausibly pleaded adverse effects in the relevant market. Consequently, the Court
finds that plaintiff has presented a plausible claim of a vertical conspiracy under
Section 1 of the Sherman Act.”®
United States v. Am. Express Co., 838 F.3d 179, 194 (2d Cir, 2016), aff'd sub nom, Ohio v.
Am. Express Co., 138 S. Ct. 2274 (2018).
64
See Inre Keurig Green Mountain Single-Serve Coffee Antitrust Litig., 383 F. Supp. 3d 187,
239 (S.D.N.Y. 2019) (quoting Maxon Hyundai Mazda vy. Carfax, Inc., No. 13-cv-2680
(AJN), 2014 WL 4988268, at *9 (S.D.NY, Sept. 29, 2014).
45
Meyer v. Kalanick, 174 F. Supp.2d 817, 828 (S.D.N.Y. 2016).
18
3. Antitrust Standing
Section 4 of the Clayton Act creates a private cause of action for damages under the
antitrust laws, including Section 1 of the Sherman Act.®* Section provides also for injunctive relief
“against threatened loss or damage by a violation of the antitrust laws.””’ A private plaintiff who
brings a case under these provisions, in addition to pleading adeqautely the other elements of his or
her claim, must plead constitutional standing under Article II and antitrust standing.”
Defendants have not challenged Plaintiffs’ Article HI standing on this motion to
dismiss. Nor do they argue explicitly that Plaintiffs lack antitrust standing to bring suit.
Nonetheless, because the principles of antitrust standing underlie Defendants’ arguments regarding
Plaintiffs’ purported failure to plead antitrust injury in the relevant markets, the Court will briefly
explain the law that governs its analysis.
Courts evaluating antitrust standing must determine that a plaintiff plausibly has
alleged (a) injury in fact, (b) antitrust injury, and (c) that he or she is an acceptable plaintiff to pursue
the violation, or, in other words, that he or she would be an efficient enforcer of the antitrust laws.”
66
See 15 U.S.C. §§ 15(a), 26.
67
See 15 U.S.C. § 26.
Unlike Section 4, which in general requires a private plaintiff to prove actual loss in order
to recover damages, a plaintiff seeking injunctive relief under Section 16 “need only
demonstrate a significant threat of injury from an impending violation of the antitrust laws
or from a contemporary violation likely to continue or recur.” Zenith Radio Corp. v.
Hazeltine Rsch., 395 U.S. 100, £30 (1969).
68
See Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters (“AGC”),
459 U.S. 519, 535 1.31 (1983).
69
Id.
19
In deciding whether the plaintiff has pleaded antitrust injury, the Second Circuit
requires that we
“employ a three-step process for determining whether a plaintiff has sufficiently
alleged antitrust injury. First, the party asserting that it has been injured by an illegal
anticompetitive practice must ‘identify[] the practice complained of and the reasons
such a practice is or might be anticompetitive.’ Port Dock [& Stone Corp. v.
Oldcastle Ne., Inc., 507 F.3d 117, 122 (2d Cir. 2007)]. Next, we identify the ‘actual
injury the plaintiff alleges.’ Id. This requires us to look to the ways in which the
plaintiff claims it is in a ‘worse position’ as a consequence of the defendant’s
conduct. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 486 (1977).
Finally, we ‘compar[e]’ the ‘anticompetitive effect of the specific practice at issue’
to ‘the actual injury the plaintiff alleges.’ Port Dock, 507 F.3d at 122. It is not
enough for the actual injury to be ‘causally linked’ to the asserted violation.
Brunswick, 429 U.S. at 489 .... Rather, in order to establish antitrust injury, the
plaintiff must demonstrate that its injury is ‘of the type the antitrust laws were
intended to prevent and that flows from that which makes [or might make]
defendants’ acts unlawful.’ Daniel [v. Am. Bd. of Emergency Med., 428 F.3d 408,
438 (2d Cir. 2005)] (internal quotation marks omitted).””
In addition, the plaintiff must allege plausibly that he or she would be an efficient enforcer of the
antitrust laws. On this point we consider
“(1) the directness or indirectness of the asserted injury; (2) the existence of an
identifiable class of persons whose self-interest would normally motivate them to
vindicate the public interest in antitrust enforcement; (3) the speculativeness of the
alleged injury; and (4) the difficulty of identifying damages and apportioning them
among direct and indirect victims so as to avoid duplicative recoveries.”
□□ weight to be given these various factors will necessarily vary with the circumstances of
particular cases.””
70
Gatt Comime’ns, Inc. v. PMC Assocs., L.L.C., 711 F.3d 68, 76 (2d Cir. 2013).
71
Id. (quoting Paycom Billing Servs., Inc. v. Mastercard Int'l, Inc., 467 F.3d 283, 290-91 (2d
Cir. 2006) (internal citation omitted)).
72
Paycom, 467 F 3d at 291 (quoting Daniel, 428 F.3d at 443).
20
Finally, in addressing both antitrust injury and whether a plaintiff is an efficient
enforcer of the antitrust laws, “a court must analyze whether a plaintiffs alleged injury constitutes
injury to the competitive process ....”” The general rule is that “only those that are participants
in the defendants’ market can be said to have suffered antitrust injury.””? This makes intuitive sense.
Competitors and consumers have the clearest connection to a given defendant’s anticompetitive
conduct because they unlawfully may be forced to pay higher prices for the defendant’s goods or
services, deprived of their own business opportunities, or excluded from the market. But, as
explained in more detail below, others who are injured as a result of anticompetitive conduct may
also have standing to sue.”
Sufficiency of Relevant Market Allegations
Defendants areue that Plaintiffs have failed plausibly to allege the relevant markets.
They challenge the distinctions among Plaintiffs’ alleged product markets, arguing that they “fail
to plausibly suggest that ordering from a restaurant (or a restaurant receiving an order) is not a
substitute for ordering the same meal from a restaurant (or a restaurant receiving an order) via
Defendants’ platforms.” This argument is without merit for purposes of this motion.
73
In re Zinc Antitrust Litig., 155 F. Supp. 3d 337, 359 (S.D.N-Y. 2016).
74
in re Aluminum Warehousing Antitrust Litig., 833 F.3d 151, 158 (2d Cir. 2016) Gnternal
citation omitted).
id,
76
Def, Mem, (Dkt. 38) at 24.
Defendants do not challenge Plaintiffs’ proposed distinction between the Takeout and
21
The Supreme Court recently held that “[o |nly other two-sided platforms can compete
with a two-sided platform for transactions.””’ Even if this did not settle the matter, Plaintiffs have
pleaded facts adequately supporting the separate product markets.
Defendants contend that the cross-elasticity “between and among orders placed on
platforms and direct delivery” dooms Plaintiffs’ proposed market definition.” Plaintiffs correctly
point out that Defendants’ argument on this point fails to account for the so-called Cellophane
fallacy.” But perhaps more importantly, the pertinent question is not whether there are any cross-
elasticities at all between the separate markets, but whether the cross-elasticity of demand is
sufficient to require viewing the purportedly separate markets as a single, unified market.” Given
the fact-intensive nature of this inquiry, courts, perhaps especially at the pleading stage, look also
to “practical indicia” of the relevant market, including “industry or public recognition .. . , the
product’s peculiar characteristics and uses, unique production facilities, distinct customers, distinct
prices, sensitivity to price changes, and specialized vendors.””’
Delivery Market and the Dine-In Market. Even if they had, the Court is inclined to agree
with Plaintiffs that a meal at a restaurant is not an interchangeable substitute for a takeout
or delivery meal that a consumer will eat elsewhere. See Am. Compl. { 30.
VF
See Am. Express, 1388. Ct. at 2287.
78
Def. Mem, at 25.
79
Pi. Mem, at £3.
8G
See Todd, 275 F.3d at 201.
81
See Geneva Pharms., 386 F.3d at 496 (quoting Brown Shoe Co. y. United States, 370 U.S.
294, 325 (1962)).
22
These practical indicia support separate treatment for the proposed Restaurant
Platform Market for substantially the reasons that Plaintiffs suggest. The amended complaint
alleges plausibly that restaurant platforms “provide a service distinct from a restaurant’s website or
app (e.g., a Domino’s pizza app)” first and foremost because they aggregate the offerings of many
restaurants in one place.” They also provide functionalities that restaurants do not, including search,
the ability to write and read reviews, and automated recommendations based on the user’s
“preferences and other consumer reviews.” Restaurant platforms are “especially popular” with
urban young professionals, “a distinct group of consumers with distinct preferences,”** And
industry analysts have characterized the Restaurant Platform Market as a separate market, indeed,
characterizing it as “an oligopoly and calling for antitrust scrutiny,”
Moreover, Defendants’ cited cases to the contrary are inapposite. While it indeed
may be true that courts “have not hesitated to define separate markets based on how the same
product reached the consumer,” it does not follow that this Court therefore should decline to find
well-pleaded Plaintiffs’ alleged separate product markets for restaurant platform services and meals
purchased directly from a restaurant. For example, the holding that “print books are an obvious
substitute for e-books” in Bookhouse of Stuyvesant Plaza, Ine. v. Amazon.com, Inc. * would be
82
Am. Compl. § 28.
83
Pl. Mein. at 4; Am. Compl. Ff] 48-50.
84
Pi. Mem. at 4; Am. Compl. 52.
85
Am. Compl. #53.
86
985 F. Supp. 2d 612 (S.D.N_Y. 2013).
23
persuasive if, instead of comparing print books to e-books, the Court had found print books an
obvious substitute for online book platforms.
Plaintiffs’ allegations of national and local Restaurant Platform Markets also are
sufficient. Defendants contend that the national market is implausible because they do not “compete
for transactions” on a national basis.*’ But the facts alleged suggest that Defendants do compete
nationally, and courts have recognized the existence of national markets even when market
participants in some sense operate locally.** Defendants allegedly “compete to build a national
network of consumers to offer restaurants, and a national network to offer consumers.” They also
advertise, operate, charge the same commissions to restaurants and consumers, provide the same
services on their websites and mobile apps, and impose the same NPCCs throughout the country.”
They compete also for partnerships with national restaurant chains.”
New York v. Deutsche Telekom AG” is instructive. There the parties agreed on a
national market for retail mobile wireless communications services, but disagreed over the existence
of separate local markets. The court determined that both geographic markets were present.
Although a consumer in one city is unlikely to seek wireless services provided out of another city,
87
Def. Mem, at 27.
38
See United States v. Grinnell Corp., 384 U.S, 563, 575-76 (1966).
89
Am. Compl. 7 94.
90
Id. 495.
91
497.
92
439 F. Supp. 3d 179 (S.D.N.Y. 2020).
24
that carriers make decisions and set prices on a national basis is persuasive evidence of a national
market that coexists with local markets.”
Having concluded that Plaintiffs have alleged sufficiently the relevant product
markets, the Court proceeds to consider Plaintiffs’ antitrust claims.
Counts I and HI
Counts I and Ill allege that Defendants’ NPCCs unreasonably restrain trade in the
Direct Takeout and Delivery Market and the Dine-In Market in violation of Section 1 of the
Sherman Act (Count I and its state antitrust law analogues™ (Count IID.
A, Anticompetitive Effects
Plaintiffs have alleged plausibly facts that, if proven, would be direct evidence of
anticompetitive effects in the direct markets resulting from Defendants’ NPCCs. This evidence is
especially strong in regard to supracompetitive prices.”
93
id, at 205.
94
Am. Compl. { 209 (alleging Defendants’ conduct violates Ariz Rev. Stat. §§ 44-1401, ef
seq., with respect to purchases in Arizona; Cal Bus. Code §§ 16700, ef seq., and Cal. Bus.
Code §§ 17200, ef seg., with respect to purchases in California; D.C. Code Ann. §§ 28-
4501, et seq., with respect to purchases in the District of Columbia; Fla. Stat. § 501.201, ef
seg., and Mack vy. Bristol-Myers Squibb, 673 So, 2d 100, 104 (Fla. Dist. Ct. App. 1996),
with respect to purchases in Florida; 740 Ill. Comp. Stat. 10/1] ef seg., with respect to
purchases in Illinois; Mass Gen. Laws Ch. 93, § 1, ef seg., with respect to purchases in
Massachusetts; and N.Y. Gen. Bus. L. §§ 340, ef seg., with respect to purchases in New
York).
98
Am. Express, 838 F.3d at 194.
25
Plaintiffs analogize Defendants’ conduct to that at issue in Leegin Creative Leather
Products, Inc. v. PSKS, Inc.,°° in which Leegin, a leather goods manufacturer, imposed minimum
resale prices on retailers that sold its products. The Supreme Court held that this type of
arrangement is subject to the rule of reason and offered certain considerations that may render
vertical price restraints anticompetitive. They include whether the restraints are imposed by the
retailer rather than by the manufacturer, whether the retailer’s market power is such that
manufacturers cannot avoid them by “sell[ing] their goods through rival retailers,” whether the
restraint would prevent rival retailers “with better distribution systems and lower cost structures
.. from charging lower prices,” and whether a large proportion of manufacturers is bound by the
restraint or restraints.”
Although Plaintiffs’ comparison of retailers to restaurant platforms and
manufacturers to restaurants is somewhat strained, the facts Plaintiffs allege in support of their
Leegin analysis paint a plausible picture of the anticompetitive effects allegedly caused by
Defendants’ NPCCs. The NPCCs were propounded by Defendants,”* who are not retailers but
nonetheless consolidate and offer to their customers products from wide arrays of restaurants.
Defendants therefore allegedly hold power over restaurants comparable to that which a retailer
might wield over a manufacturer in the sense that both Defendants and a theoretical retailer serve
as conduits through which the restaurant or manufacturer can offer its goods to consumers. The
amended complaint also alleges plausibly that restaurants cannot feasibly avoid doing business with
06
551 U.S. 877 (2007).
97
Id. at 892-94, 897-99, □
98
Am. Compl. ff 55-61.
26
Defendants because restaurants need access to the platforms’ customers — many of whom use only
one platform due to platform “stickiness” — in order to generate sufficient sales to make up for their
low margins.” The NPCCs explicitly prevent restaurants from selling their goods at lower prices
through “distribution systems with lower cost structures,” i.e., in the direct markets, where costs are
lower because no commission rates are added to the list prices of restaurant meals.'’ And Plaintiffs
have pleaded facts supporting the proposition that “one or more Defendants’ NPCCs restrain[s]
more than half of the Direct Markets.”"°!
All of this, together with Plaintiffs’ well-pleaded allegation that Defendants’
commission rates match or exceed most restaurants’ profit margins, supports the reasonable
inference that restaurants — being foreclosed from lowering prices in the direct markets to attract
sales — have had no choice but to raise prices in both the platform and direct markets. Plaintiffs’
anecdotal and survey evidence permits an inference or conclusion that restaurant owners have done
just that.’
99
Id, 75-80, 85-86.
100
Id. 98 140-41.
10!
PL Mem, at 23; see Am. Compl. {f 82-83.
102
See, e.g, Am. Compl. ff 142 (“As one Colorado restaurant owner explained, the
‘[cJommissions are too high to maintain a profit,’ so restaurants are forced to either raise
prices to maintain a profit or lose money on delivery orders.”); 144 (“[Ijn 2019 the New
York City Hospitality AlHance found that 64.1 [percent] of restaurants either raised menu
prices or considered raising menu prices to offset fees from Grubhub.”}; 145 (In
Milwaukee, ‘Alexa Afaro of the Filipino restaurant and food truck Meat on the Street said
they’ve had to raise prices to help off set some of the additional costs of delivery
comimissions.’”’).
27
B. Antitrust Standing
In order to bring their claims under Counts I and III, Plaintiffs must plead facts that
allege plausibly that the direct classes have sustained antitrust injury and that they are acceptable
plaintiffs to pursue the violation.’ Defendants contend that Plaintiffs have not adequately pleaded
antitrust injury on behalf of the direct classes because any injury they suffered by purchasing meals
at supracompetitive prices in the direct markets cannot be traced to Defendants’ conduct in the
Restaurant Platform Market. According to Defendants, this is fatal because “a challenged restraint
must harm competition in a market in which defendants compete.” But in Blue Shield of Virginia
v. McCready,'® the Supreme Court held that the antitrust laws protect “parties whose injuries are
‘inextricably intertwined’ with the injuries of market participants.”!”°
The McCready case arose from an alleged conspiracy entered into by Blue Shield and
an association of psychiatrists to make psychologists ineligible for compensation for the provision
of psychotherapy under Blue Shield’s health insurance plans. Plaintiff, an individual who was
covered by Blue Shield health insurance, sued after her requests that Blue Shield reimburse her for
a psychologists services were denied. The district court granted defendants’ motion to dismiss
because, in its view, McCready’s injury “was tof[o] indirect and remote to be considered “antitrust
103
AGC, 459 U.S. at 535 n.31,
104
Def. Mem. at 10 (citing United States v. Visa U.S.A, Inc., 344 F.3d 229, 238 (2d Cir.
2003)).
165
457 U.S. 465 (1982).
106
Aluminum, 833 F.3d at 158 (quoting Am, Ad Mgimt., Inc. v. Gen. Tel. Co. of Cal., 190 F.3d
1051, 1057 n.5 (9th Cir. 1999)).
28
injury.’”!°’ The Court of Appeals reversed and the Supreme Court affirmed, holding that the
plaintiff had antitrust standing because, despite being neither a competitor nor a direct customer of
Blue Shield or its coconspirators (her employer purchased the insurance coverage on the group
market, and she did not participate in the market for psychiatric services), she sustained antitrust
injury when she was forced to pay for psychotherapy that would have been reimbursable absent
defendants’ anticompetitive conduct."
The Court emphasized that the plain language and policy underlying Section 4 of the
Clayton Act made clear that the statute “provides a remedy to ‘[a]ny person’ injured “by reason of
anything prohibited by the antitrust laws.”'? Section 4 nonetheless may not apply in cases that
present the danger of “duplicative recovery” or when the injury is “too remote” to be proximately
caused by the violation at issue. But the Court found no potential for duplicative recovery in
McCready’s case because she already had paid the psychologist, and her injury was not too remote
because it was “clearly foreseeable” to the alleged conspirators and, in fact, was “a necessary step
in effecting the ends of the alleged illegal conspiracy.”"!° McCready’s alleged injury therefore was
“inextricably intertwined with the injury the conspirators sought to inflict on psychologists and the
psychotherapy market,” and cognizable under the antitrust laws.'"'
107
McCready, 457 U.S. at 470-71 (internal citation omitted).
198
dd. at 483-84.
109
id, at 484-85.
L1G
fd. at 479.
Hl
Td. at 484.
29
The Second Circuit has applied and reaffirmed the McCready rule in various cases,
In Crimpers Promotions Inc. v. Home Box Office, Inc.,'"* the Second Circuit held that an organizer
who claimed the defendant coordinated a boycott of its trade shows in order to prevent the
defendant’s suppliers and competitors from meeting and transacting business suffered antitrust
injury. The Court noted that, like Blue Shield and the organization of psychiatrists harmed
McCready in order to harm the psychologists, HBO destroyed plaintiff's trade show as a “means to
eliminate [its] competition.”!? And in Jn re Aluminum Antitrust Litigation,'" the Second Circuit
agreed that “the thrust of McCready is that the plaintiff was a participant in ‘the very market directly
distorted by the antitrust violation.’”'’? The “upshot” is that “sometimes the defendant will corrupt
a separate market in order to achieve its illegal ends, in which case the injury suffered can be said
to be ‘inextricably intertwined’ with the injury of the ultimate target.’””’”
The amended complaint alleges plausibly that the direct classes’ injuries in the direct
markets similarly are “inextricably intertwined” with Defendants’ allegedly unlawful
anticompetitive conduct in the Restaurant Platform Market. Plaintiffs plead that Defendants’
NPCCs were designed to restrict competition that could result from restaurants offering lower prices
1:2
724 F.2d 290 (2d Cir. 1983).
1:3
Id. at 292,
114
833 F.3d 151 (2d Cir. 2016).
115
Id. at 160 (quoting SAS of P.R., Inc. v. PR. Tel. Co., 48 F.3d 39, 46 (Ist Cir. 1995)).
116
Id, at 161.
30
in the direct markets. Defendants allegedly force consumers to pay supracompetitive prices in the
direct markets as a “means to eliminate competition” that would threaten their business. '"”
Thus, the Court holds that the direct classes have adequately alleged facts thatsupport
their claims against Defendants. They plausibly have alleged antitrust injury under the Second
Circuit’s three-step analysis.’ They identify Defendants’ imposition of NPCCs as vertical
restraints of trade in violation of the Sherman Act, and they allege actual injury in the form of
suptacompetitive prices. This injury is “of the type the antitrust laws were intended to prevent and
flows from that which makes defendants’ acts unlawful.”!!? The Court holds also that the direct
classes would be efficient enforcers of the antitrust laws. The injury they sustained by paying
supracompetitive prices was direct. Their interest in obtaining damages and/or injunctive relief
against Defendants’ anticompetitive practices likely would motivate them to pursue enforcement.
Their alleged injury is not impermissibly speculative, and there is no danger of duplicative
recoveries to direct and indirect victims, as Plaintiffs are the direct victims of the alleged restraint
and have already paid for their meals.
Crimpers, 724 F.2d at 292.
118
Gatt, 711 F.3d at 76.
119
Id. (quoting Daniel, 428 F.3d at 438).
31
Counts I and IV
On behalf of the Restaurant Platform Class, Plaintiffs allege that defendants Grubub
and Uber’s NPCCs unreasonably restrain trade in the Restaurant Platform Market in violation of
Section 1 of the Sherman Act (Count II) and its state antitrust law analogues’”’ (Count IV).
120
Am. Compl. { 214 (alleging Defendants’ conduct violates Ala. Code § 6-5-60[,] e¢ seq.,
which [sic] respect to purchases in Alabama; Alaska Stat. §§ 45.50.562, 45.50.576(a), (b),
with respect to purchases in Alaska; Ariz Rev. Stat §§ 44-1401, ef seg., with respect to
purchases in Arizona; Ark Code Ann. § 4-75-212(b), ef seq., with respect to purchases in
Arkansas; Cal Bus. Code §§ 16700, et seg., and Cal. Bus. Code §§ 17200, ef seg., with
respect to purchases in California; D.C. Code Ann, §§ 28-4501, ef seg., with respect to
purchases in the District of Columbia; Fla. Stat. § 501.201, ef seg., and Mack v. Bristol-
Myers Squibb, 673 So. 2d 100, 104 (Fla. Dist. Ct. App. 1996), with respect to purchases in
Florida; Hawaii Code § 480, ef seg., with respect to purchases in Hawaii; 740 Il, Comp.
Stat, 10/1[,] ef seg., with respect to purchases in Illinois; Iowa Code §§ 553],] ef seq., with
respect to purchases made in Jowa; Kansas Stat. Ann. § 50-101, ef seg., with respect to
purchases in Kansas; Mass Gen. Laws Ch. 93, § 1, ef seg., with respect to purchases in
Massachusetts; Me. Rev. Stat. Ann. 10, §§ 1101, ef seg., with respect to purchases in Maine,
Mich. Comp. Laws Ann. §§ 445.772, ef seq., with respect to purchases in Michigan; Minn.
Stat. §§ 325D.49, ef seq., with respect to purchases in Minnesota; Miss. Code Ann. § 75-21-
1, ef seq., with respect to purchases in Missouri; Neb. Code Ann. §§ 59-801, ef seg., with
respect to purchases in Nebraska; Nev. Rev. Stat. Ann, §§ 598A, et seg., with respect to
purchases in Nevada; N.H. Rev. Stat. Ann. §§ 356:1, ef seg., with respect to purchases in
New Hampshire; N.M. Stat. Ann. §§ 57-A-A, et seq., with respect to purchases in New
Mexico; N.Y. Gen. Bus. L. §§ 340, ef seq., with respect to purchases in New York; N.C.
Gen Stat. §§ 75-1, ef seq., with respect to purchases in North Carolina; N.D. Cent. Code
§§51-08.1, ef seg., with respect to purchases in North Dakota; Or. Rev. Stat. §§ 646.705,
et seq., with respect to purchases in Oregon; P.R. Laws Ann, Tit. 10, § 257, ef seq., with
respect to purchases in Puerto Rico; R.1. Gen. Laws § 6-36-1, ef seg., with respect to
purchases in Rhode Island; $.D, Codified Laws Ann. §§ 37-1-3, ef seq., with respect to
purchases in South Dakota; Tenn. Code Ann. §§ 47-25-101, ef seq., with respect to
purchases in Tennessee; Utah Code § 76-10-3101, ef seq., with respect to purchases in Utah;
Vt. Stat. Ann. tit. 9, § 2453, ef seq., with respect to purchases in Vermont; W. Va. Code §§
47-18-1, ef seg., with respect to purchases in West Virginia; and Wis. Stat. §§ 133.01, □□
seg., with respect to purchases in Wisconsin).
32
A. Anticompetitive Effects
We begin by examining Plaintiffs’ allegations of anticompetitive effects in the
Restaurant Platform Market stemming from Grubhub and Uber’s “wide” NPCCs, which set
minimum prices anywhere restaurants sell meals, including on other restaurant platforms. The Court
is persuaded by Plaintiffs’ contention that the amended complaint sufficiently pleads direct evidence
of anticompetitive effects in the platform market. Because this is a two-sided transaction market,
Plaintiffs must allege anticompetitive effects resulting from the challenged restraint both for the
Defendants’ consumer and restaurant customers.'”!
The amended complaint alleges plausibly that Grubhub and Uber’s NPCCs create
supracompetitive prices for consumers. The distinction here is between restaurant list prices and
platform commissions. Wide NPCCs prevent restaurants from offering lower list prices on other
platforms. Because these list prices allegedly are “a key (and, in some cases, the only) component
of the end-price paid by customers for goods ordered through Restaurant Platforms,”'”’ it is plausible
that Grubhub and Uber’s conduct prevents restaurants from charging lower prices through less
expensive channels of distribution.” It is reasonable to infer that the list prices consumers pay for
platform orders are supracompetitive.'*
121
See Am. Express, 1388, Ct. at 2287.
£22
Am. Compl. ff 59-61.
£23
See Leegin, 551 U.S. at 893.
124
See id. § 130.
33
Defendants’ papers understandably highlight competition by other restaurant
platforms. But despite challenges by new entrants and Doordash’s position as the largest platform
in the national market, Grubhub and Uber are alleged to have continued to raise their commission
rates over time. According to its SEC filings, Grubhub’s commission rate increased 156 percent
between 2014 and 2019.'% Plaintiffs allege that both Grubhub and Uber make profit margins of
between 40 percent and 80 percent, depending on whether or not the restaurant provides its own
delivery.'"® The Court does not decide whether Defendants have raised their rates and become more
profitable because of improved services to customers or because of their alleged anticompetitive
conduct. At the pleading stage, courts “may not pick and choose among plausible explanations” for
these effects.’?”
In addition to supracompetitive prices, Plaintiffs allege plausibly that consumer
choice has decreased due to Grubhub and Uber’s NPCCs. High restaurant commission rates — which
“flow” from the NPCCs— allegedly make it impossible for restaurants to “offer lower-margin items
through Defendants’ platforms.” Plaintiffs plead also that these restraints shield Grubhub and
125
Td (118,
126
Id, $9 120-21.
i27
Commodity Exch., Inc., 213 F. Supp. 3d 631, 669-72 (S.D.N.Y. 2016).
128
Am. Compl. 139.
34
Uber from competitive pressures to improve their technology’ and offer quality customer
service,”
Plaintiffs plead facts that support their claim that these anticompetitive effects are
felt throughout the relevant markets. Because the NPCCs allegedly bind all restaurants that list their
menus on Grubhub and Uber regardless of what volume of transactions they do on each platform,
the relevant metric through which to assess the agreements’ impact is how many restaurants in each
market are listed on the platforms. Plaintiffs plead ample facts suggesting that very large numbers
of restaurants are listed on Grubhub and Uber, at both the national and local levels.
“(Alpproximately 77 [percent] of all restaurants in the United States that offer delivery do so
through Grubhub, and more than a quarter... do so through Uber and Postmates.”'*' “[MlJore than
half of the restaurants in each Local Market... are on Grubhub.”'*? And for the local markets for
which Uber data is available, the lowest percentage of total restaurants on Uber is 19 percent in Los
Angeles, and in San Francisco it reaches 93 percent.'” Plaintiffs contend that these percentages
129
Td 9135.
130
Id. 137-38. Plaintiffs allege also that Grubhub and Uber provide poor service to
restaurants. fd. J 136.
131
id (81.
132
Id. © 82.
133
I.
35
would be even higher in a sample of restaurants that included only restaurants that list their products
on restaurant platforms.’
Plaintiffs also plead direct evidence of harm to restaurants in the form of
supracompetitive prices. For much the same reasons as described above, it is plausible that Grubhub
and Uber’s NPCCs both discourage rival restaurant platforms from offering lower commissions and
allow Grubhub and Uber cover to raise their own rates. And because of indirect network effects,
platform “stickiness,” and the restaurants’ need to access as many potential customers as possible
in order to stay in business, it is reasonable to infer that restaurants have no choice but to accept
Grubhub and Uber’s NPCCs.
B. Antitrust Standing
Defendants have not challenged Plaintiffs’ antitrust standing to bring suit on behalf
of the Restaurant Platform Class against Grubhub and Uber on Counts If and IV. But the Court
addresses the issue for the sake of completeness. Plaintiffs who have purchased meals from
restaurant platforms in the relevant markets are alleged to have suffered injury in fact and antitrust
injury because they paid supracompetitive prices — an injury “of the type the antitrust laws were
intended to prevent and that flows from” defendants’ unlawful acts'*’ — due to Grubhub and Uber’s
unlawful restraints. The amended complaint alleges plausibly also that Plaintiffs are likely to be
efficient enforcers of the antitrust laws because they suffered direct pecuniary injury that will
134
id.
135
Gatt, 711 F.3d at 76 (quoting Daniel, 428 F.3d at 438).
36
motivate them “to vindicate the public interest in antitrust enforcement,”! their injury is concrete
rather than speculative, and Plaintiffs’ status as direct victims of the unlawful restraint who have
already paid for the products at issue would likely mitigate any potential for duplicative recoveries.
The Court, having concluded that Plaintiffs plausibly have alleged claims under
Counts IT and IV, considers Defendants’ arguments in favor of dismissing Plaintiffs’ state law
claims under Counts I and IV.
State Law Antitrust Claims
In Counts IT] and IV, Plaintiffs allege state law antitrust violations under the laws of
32 states and U.S. territories.'*” Defendants contend that these claims should be dismissed because
Plaintiffs have failed to state a claim under the Sherman Act, their “pleading is completely devoid
of any allegations concerning 26 of the jurisdictions under whose laws they purport to sue,” and
Plaintiffs “have not sufficiently alleged that they can bring a claim in their individual capacities for
violation of any of the state laws listed in Counts ID] and IV.”"8
Defendants’ first argument fails because the Court holds that Plaintiffs have plausibly
alleged their federal claims, And Defendants’ additional arguments misapprehend the law. The
amended complaint alleges unlawful activity in every relevant jurisdiction, and indeed throughout
136
Id.
137 .
Am. Compl. 9§ 209, 214.
138
Def. Mem. at 27-29,
37
the country.'” “[WJhether a plaintiff can bring a class action under the state laws of multiple states
is a [class certification] question . . . not a question of standing... .”""° It therefore does not affect
the outcome of this motion that Plaintiffs have alleged only the purchase of restaurant meals in New
York.'*' The Court concludes that Plaintiffs’ state law claims survive the motion to dismiss.
Conclusion
For the foregoing reasons, Defendants’ motion to dismiss (Dkt. 37) is denied in
its entirety,
SO ORDERED.
Dated: March 30, 2022
Lewis A. Kapl
United States District Judge
139
Am. Compl. ff 31-34.
140
Langan y, Johnson & Johnson Consumer Cos., 897 F.3d 88, 96 Qd Cir. 2018).
14:
The Court accepts Plaintiffs’ contention that it can be reasonably inferred from the amended
complaint that Plaintiffs purchased meals “in at least New York,” given they all reside in
that state. See Pl. Mem. at 34.