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Tech

A Federal Judge Compared Uber to Silk Road

In denying a motion to dismiss in an Uber antitrust lawsuit, the judge cited an unusual case.
Image: Uber

It seems like every week Uber is taking yet another beating in the news, but the worst burn it's received (This quarter? This year? Ever?) has been buried deep inside a recent legal opinion in an antitrust case in New York, in which a judge compared Uber to the shuttered online black marketplace Silk Road while reasoning through one of the legal issues in the case.

So what's going on with this case? Well, you know that annoying thing that happens when you're trying to leave a concert in the middle of the night with thousands of other people and an Uber ride out of there costs like $200? Yeah, so, Uber is getting sued for it.

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Price-surging is infuriating for consumers, but the actual theory of the case is… interesting. The class action lawsuit, brought on behalf of Uber customers, alleges that Uber CEO Travis Kalanick and Uber drivers are in an "illegal price-fixing conspiracy in violation of Section 1 of the federal Sherman Antitrust Act."

That might be a little wacky, but Judge Jed Rakoff bought just enough of the argument to let the lawsuit survive a motion to dismiss. For example, Uber sometimes organizes "partner appreciation" meet-ups (maybe more accurately described as a "have some pizza and please don't strike" meet-up). Clearly, this is just an opportunity to "meet and enforce their commitment to the unlawful agreement"—an actual quote from the complaint.

More logic from the plaintiffs: The drivers all signed onto the a "terms of service" agreement—which is clearly an agreement with each other to fix prices. Catch my drift?

"Uh, but wait," you might say. "So basically the argument is that a bunch of drivers use the Uber app and now they're conspiring with Travis Kalanick? How does that even make any sense?" Well, you've hit upon the gist of one of Uber's counter-arguments, which is where the Silk Road comparison comes in. The judge dismissed Uber's arguments by citing a series of other cases—including the criminal case against Ross Ulbricht, who was convicted of running the darknet black market Silk Road.

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In the Silk Road case, "the Government charged the defendant with sitting 'atop an overarching single conspiracy, which included all vendors who sold any type of narcotics on Silk Road at any time.'" Similarly, Judge Rakoff reasoned, "Uber's digitally decentralized nature does not prevent the App from constituting a 'marketplace' through which Mr. Kalanick organized a horizontal conspiracy among drivers."

So, Silk Road wasn't just a platform for selling drugs, it was also a conspiracy to sell drugs. Similarly, Uber isn't just a platform for ride-sharing that happens to involve price-surging, it might also be a conspiracy to price-surge. In other words, Silk Road but for ride-sharing.

This probably isn't what Ross Ulbricht's supporters mean when they say his conviction needs to be overturned in order to get rid of "bad precedent," and to be fair, the judge did cite a lot of other cases that didn't involve any Tor-hidden marketplaces for illegal drugs. But still, it's not a pleasant turn of events for the Dread Pirate Travis Kalanick. The litigation is now rolling forwards, with attorneys ordered to have the "case ready for trial by November 1, 2016."

SDNY Class action suit against Uber