Davitashvili v. Grubhub Inc.

Background

The plaintiffs brought a proposed class action against Grubhub Inc., Uber Technologies, Inc., and Postmates Inc. They alleged that the defendants required restaurants using their online meal-ordering platforms to accept contractual “no price competition clauses,” or NPCCs. These clauses allegedly prevented restaurants from charging consumers lower prices outside the defendant’s platform.

Postmates allegedly used a narrower clause that required price parity between in-store and online menus. Grubhub and Uber allegedly used broader clauses that also prevented restaurants from charging lower prices through competing restaurant platforms. The plaintiffs claimed that these restrictions caused restaurants to raise prices and caused consumers to pay artificially high prices.

The amended complaint asserted four counts under Section 1 of the Sherman Act and comparable state antitrust laws. Counts I and III concerned alleged restraints in direct takeout-and-delivery markets and dine-in markets. Counts II and IV concerned alleged restraints in the restaurant-platform market by Grubhub and Uber. The plaintiffs sought damages and court orders restricting the alleged conduct on behalf of three proposed nationwide classes.

Defendants’ Motion

The defendants jointly moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not adequately state a legal claim. They argued that the contracts did not amount to unlawful price fixing, that the plaintiffs had not adequately defined the relevant markets, and that the plaintiffs had not shown antitrust injury or the right to pursue the claims. They also challenged the state-law claims.

Court’s Analysis

Judge Kaplan held that the plaintiffs plausibly alleged separate product markets for restaurant-platform services, direct takeout and delivery, and dine-in meals. The court also found sufficient allegations supporting both national and local restaurant-platform markets. At the motion-to-dismiss stage, the court was required to accept well-pleaded factual allegations as true and draw reasonable inferences for the plaintiffs.

The court concluded that the plaintiffs plausibly alleged anticompetitive effects. For the direct markets, the plaintiffs alleged that the NPCCs prevented restaurants from lowering prices where they did not have to pay platform commissions, contributing to higher prices. For the restaurant-platform market, the court found plausible allegations that Grubhub’s and Uber’s broader NPCCs prevented lower prices on competing platforms, reduced consumer choice, and weakened pressure on platforms to reduce commissions or improve service.

The court also held that the direct-market classes plausibly alleged antitrust injury even though the alleged restraints operated through the restaurant-platform market. The court reasoned that the alleged higher prices in direct markets were sufficiently connected to the alleged restrictions on competition. It further held that the plaintiffs who bought meals through restaurant platforms plausibly alleged direct financial injury and could be effective plaintiffs to enforce the antitrust laws.

The court rejected the defendants’ arguments against the state antitrust claims. Because the federal claims were adequately pleaded, and because questions about whether a class could proceed under the laws of many jurisdictions generally concerned class certification rather than standing at this stage, the state-law claims also survived.

Disposition

Judge Lewis A. Kaplan denied the defendants’ motion to dismiss in its entirety. The opinion decided only that the amended complaint plausibly stated the claims; it did not decide whether the NPCCs ultimately violated federal or state antitrust law.