hiQ Labs v. LinkedIn Corp., the Web Scraping Saga Continues (Guest Blog Post)
by guest blogger Kieran McCarthy
hiQ Labs v. LinkedIn Corp. is arguably the most important case in the history of web-scraping jurisprudence. In 2019, the Ninth Circuit concluded that “when a computer network generally permits public access to its data, a user’s accessing that publicly available data will not constitute access without authorization under [the Computer Fraud and Abuse Act].” This was a huge victory for advocates of web scraping.
But that wasn’t the end of the case. Procedurally, on that day, the Ninth Circuit merely upheld the district court’s determination that hiQ Labs had established the elements required for a preliminary injunction. The case was then remanded to the Northern District of California for further proceedings.
On September 9, we learned the results of some of those proceedings. hiQ Labs filed an amended complaint in the district court, and LinkedIn filed a motion to dismiss. This opinion from the district court granted in part and denied in part LinkedIn’s motion to dismiss.
Among other things, plaintiffs’ amended complaint sought relief based on three antitrust theories (these bullets are quoted from the court opinion):
- Monopolization, in violation of § 2 of the Sherman Act. According to hiQ, LinkedIn has acquired and maintained monopoly power in the markets for professional social networking platforms and people analytics services through unlawful means, including “leveraging, lock-in, raising rivals’ costs, tying, unilateral refusal to deal, denial of essential facilities, and vertically-arranged boycotts.” FAC ¶ 12.
- Attempted monopolization, also in violation of § 2 of the Sherman Act. According to hiQ, there is a dangerous probability that LinkedIn will monopolize the market for people analytics services because it has engaged in anticompetitive conduct such as “leveraging, lock-in, raising rivals’ costs, tying, unilateral refusal to deal, denial of essential facilities, and vertically-arranged boycotts.” FAC ¶ 150.
- Unreasonable restraint of trade, in violation of § 1 of the Sherman Act. According to hiQ, LinkedIn and its members have entered into contracts or combinations that have the effect of unreasonably restraining trade. SeeFAC ¶ 159. The contracts or combinations include “tying arrangements and vertically-arranged boycotts.” FAC ¶ 162.
A few previous federal cases have raised elements of antitrust law in the context of web scraping. But the only case to have had any success with such claims was ultimately overturned on appeal. Authenticom, Inc. v. CDK Global, 874 F. 3d 1019 (7th Cir. 2017) (vacating preliminary injunction allowing rival to collect data that was previously accessible). As such, hiQ Labs does not have much precedent to rely upon in pursuing these claims against LinkedIn. That said, its prior success in the Ninth Circuit surely gives it hope to break ground here.
Unfortunately for hiQ Labs, in this round of proceedings, most of its antitrust arguments failed. Specifically, the court dismissed with prejudice its arguments that LinkedIn had engaged in illegal leveraging, lock-in, raising rivals’ costs, tying, and vertically arranged boycotts. That means all of those arguments are gone for good.
Still, there remains a sliver of hope for hiQ Labs. The court dismissed without prejudice hiQ Labs’ claims based on LinkedIn’s alleged “unilateral refusal to deal” and “denial of essential facilities.” That means hiQ Labs has a chance to amend and return with new arguments.
Unfortunately, the unilateral refusal to deal claim is very hard to prove, as the Ninth Circuit emphasized here.
As for the merits of the unilateral refusal-to-deal theory, the Court begins with the predicate that, “[a]s a general rule, businesses are free to choose the parties with whom they will deal, as well as the prices, terms, and conditions of that dealing.” Pac. Bell Tel. Co. v. linkLine Communs., Inc., 555 U.S. 438, 448 (2009). This includes dealing or not dealing with a rival. See Aerotec Int’l, Inc. v. Honeywell Int’l, Inc., 836 F.3d 1171, 1184 (9th Cir. 2016) (stating that “there is ‘no duty to deal under the terms and conditions preferred by [a competitor’s] rivals'”). However, there are “limited circumstances in which a firm’s unilateral refusal to deal with its rivals can give rise to antitrust liability,” as indicated in the Supreme Court’s seminal case Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985). See Aerotec, 836 F.3d at 1184. That being said, the Aspen Skiing exception is very narrow, as both the Supreme Court and Ninth Circuit have made clear. See Verizon Communs., Inc. v. Law Offices of Curtis v. Trinko, LLP, 540 U.S. 398, 409 (2004) (characterizing Aspen Skiing as “at or near the boundary of § 2 liability”); FTC v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020), available at No. 19-16122, 2020 U.S. App. LEXIS 25347, at *30 (9th Cir. Aug. 11, 2020) (stating that Aspen Skiing represents a “limited exception to [the] general rule that there is no antitrust duty to deal”); Aerotec, 836 F.3d at 1184 (stating that Aspen Skiing is a “narrow exception”).
In this case, the court held that in its amended complaint, hiQ Labs had failed to establish two essential elements of the unilateral refusal to deal claim. First, there were no specific allegations that hiQ Labs had previously engaged in a “profitable course of dealing” with LinkedIn. And second, there were no specific allegations that LinkedIn had temporarily abandoned this profitable course of dealing to drive out its competition.
hiQ Labs has a few weeks to rethink those arguments. But based on my knowledge of the record, I don’t know what allegations hiQ Labs could present to buttress this claim. Absent something surprising, I suspect this claim, too, will be dismissed with prejudice soon.
Perhaps more promising is the “denial of essential facilities” claim.
To establish a violation of the essential facilities doctrine, [a plaintiff] must show (1) that [the defendant] is a monopolist in control of an essential facility, (2) that [the plaintiff], as [the defendant’s] competitor, is unable reasonably or practically to duplicate the facility, (3) that [the defendant] has refused to provide [the plaintiff] access to the facility, and (4) that it is feasible for [the defendant] to provide such access. Because mandating access, as the essential facilities doctrine implies, shares the same concerns as mandating dealing with a competitor, a facility is essential “only if control of the facility carries with it the power to eliminate competition in the downstream market.”
The “denial of essential facilities” claim is rare and seldom successful in antitrust law. If the “unilateral refusal to deal” theory is, according to the Supreme Court, “at or near the boundary of Section 2” liability, the “denial of essential facilities” claim might be considered in the antitrust hinterlands. The Supreme Court has never approved of the doctrine.
That said, the Ninth Circuit does recognize its basis in Section 2 of the Sherman Act. And so it could be the basis for a viable claim here.
And if ever there were situation where this doctrine would apply, it would seem tailor-made for the modern world of web scraping.
Data collection and ownership in the market is currently 1) controlled and dominated by a handful of purported monopolists (LinkedIn, Facebook, Amazon, Google, Microsoft) 2) whose services cannot be reasonably replicated 3) who, based on their terms of service, refuse to permit web scraping or other forms of access to their data 4) and could, with little or no hardship whatsoever (other than market competition) provide access to their data (by permitting scraping or APIs or other forms of access to that data).
Furthermore, the animus behind LinkedIn’s attempt to deny access seems anti-competitive. The record shows that LinkedIn sent a cease and desist letter to hiQ Labs and blocked hiQ Labs’ access to its data around the same time that it launched a competing product.
The court nonetheless seems reluctant to accept these arguments, at least for now, on the basis that hiQ Labs has failed to properly identify a downstream market. According to the court:
In the instant case, hiQ asserts that LinkedIn’s social networking platform amounts to an essential facility. However, the Court cannot assess the viability of hiQ’s essential facilities argument without there first being a properly defined downstream market (i.e., the people analytics market). The Court therefore dismisses the essential facilities theory based on a failure to adequately allege a people analytics market.
The court explained the deficiency as follows:
The Court acknowledges hiQ’s suggestion that products using employer internal data or publicly available data other than LinkedIn’s are different in quality from hiQ’s products — and thus it is at least a question of fact whether there is some elasticity of demand between them and whether those products are in the same market as hiQ’s products. See generally Brown Shoe Co. v. United States, 370 U.S. 294, 326, 82 S. Ct. 1502, 1524-25 (1962) (“agree[ing] with the District Court that in this case a further division of product lines based on `price/quality’ differences [medium-priced shoes and low-priced shoes] would be `unrealistic'”); see also In re Live Concert Antitrust Litig., 247 F.R.D. 98, 129 (C.D. Cal. 2007) (indicating that consumers may differentiate or distinguish among products based on performance, price, and so forth but that does not necessarily mean that the products are in separate markets). The problem for hiQ is that it has not yet shown that it is plausible that the relevant market should be defined as that which uses only LinkedIn data.
LinkedIn has “well over 75% of all professional social network users in the United States.” FAC ¶ 25. In a data analytics market where data volume is more important than data quality, it’s hard to imagine how a competitor can compete when it does not have access to more than three quarters of the key data in the pertinent market. From the perspective of a web-scraping company, it’s as if there’s only one bridge crossing a river that’s wide and stable enough for cars and trains to cross, it’s owned by a monopolist, and the court is asking the little guy to explain why it’s not possible to do business using a 150-year-old rope bridge upriver.
One can appreciate the district court’s reluctance to apply a seldom-used antitrust theory in this high-profile case, especially since there has been some briefing in this case in the Supreme Court. Also, given the fact that there are some shady companies engaging in web scraping, one can appreciate the court’s reluctance to give all web scrapers unfettered access to monopolists’ data. Still, this question matters for innovators, and this court’s decision will have important ramifications for monopolists and web scrapers alike. The court gave hiQ Labs four weeks from September 9 to amend its complaint. I suspect we’ll have our answer soon.