Uber car in the Hampden neighborhood of Baltimore on March 24, 2020. Photo: Photo: Diego M. Radzinschi/ALM

A federal judge said Friday that he's tentatively leaning toward allowing an antitrust lawsuit against Uber to move forward over claims the company has the ability to restrict the market for ride-sharing and charge monopoly prices.

U.S. Chief Magistrate Judge Joseph Spero of the Northern District of California announced his tentative ruling at the beginning of a hearing held via Zoom videoconference, but said at the hearing's close that he hadn't come to a final decision.

Spero earlier this year dismissed a prior complaint filed by Uber's defunct competitor, Sidecar, finding that precedent from the U.S. Court of Appeals for the Ninth Circuit didn't allow Sidecar to pin its Sherman Act claims on allegations that an oligopoly of Uber and Lyft had the power to set anticompetitive prices and drive Sidecar out of business. Spero, however, gave Sidecar and its lawyers at McKool Smith leave to amend, finding that they could plausibly allege that "Uber can unilaterally raise market prices by restricting its output."

During Friday's hearing on Uber's latest motion to dismiss the case, Spero said that the latest complaint had made the case that Uber's advantage in the number of drivers and in perceived wait times had given the company the power to set monopoly prices. "My preliminary view is that is going to be sufficient for pleading purposes," Spero said. "I have no idea how this pans out when we get to the real world."

Gibson, Dunn & Crutcher's Daniel Swanson, arguing for Uber, said the company has a viable real-world competitor, Lyft, which has gone from 0% of the ride-hailing market to its current perch around 30% of the total market—and as high as 40% in some local markets.

"Two players with substantial market shares are going to be in this market for the foreseeable future," said Swanson of Uber and Lyft. "If there are monopoly prices then Lyft will be able to undercut those prices and still earn a profit."

But Spero said that in a two-sided market where Uber controls the price it charges passengers and the commissions it pays to drivers, the plaintiffs seemed to allege that Uber could raise prices and restrict output in a way that wouldn't lead riders or drivers to move to a competitor.

"At some level the difference in the number of drivers or the number of passengers would make it so that you would have to lower your prices to a loss in order to complete or you couldn't do it all," said Spero of any prospective competitor.

"Just because someone is a substitute in a theoretical fashion doesn't mean that people switch to it," he said.

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