I installed docker-machine 0.1.0 and docker-compose 1.1.0 on Mac OS 10.8.5.
Docker-machine is running normally and able to connect by docker-machine ssh.
$sudo docker-compose up
I did follow the steps as it is in the above answer to add $USER to group docker. i didn't want to add a new group docker because in my docker installation a group named docker automatically created.
Docker CE is installed and running. The docker group is created but no users are added to it. You need to use sudo to run Docker commands. Continue to Linux postinstall to allow non-privileged users to run Docker commands and for other optional configuration steps.
but using docker-compose up didn't work either. It gave the same previous error. So in my case(Ubuntu 18.10) sudo docker-compose up fixed the issue.
ps: @Tiw thanks for the advice.