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US Airways’ restraint of trade claim against Sabre

US Airways’ restraint of trade claim against Sabre

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In this week’s article, we examine the case of US Airways, Inc. v. Sabre Holdings Corp., No. 11 Civ. 2725 (LGS)(March 21, 2017) in which US Airways, Inc. [US Airways] brought antitrust claims against Sabre Holdings Corporation [Sabre] under the Sherman Act…which were tried before a jury which “found in US Airways’ favor on one of the two claims tried. That claim alleges that Sabre unreasonably restrained trade by imposing on US Airway anticompetitive and unlawful contractual provisions that harmed co petition and enabled Sabre to charge US Airways higher booking fees than it would have been able to charge in a competitive market. The jury awarded US Airways $5,098,142 or $15,294,426 after trebling. Sabre has filed a motion for judgment as a matter of law…or, in the alternative, for a new trial…the motion is denied”.

Terror Targets Update

Six Most Deadly Attacks Post 9/11

In Most deadly attacks since 9/11, Gulf News Egypt, gulfnews (11/25/2017) the top six most deadly attacks after 9/11 were (1) Iraq in 2007: 400 dead [four suicide truck bombs explode]; (2) Somalia in 2017: 358 dead [a truck bomb explodes]; (3) Iraq in 2016: 323 dead [explosives-packed mini-van blows up]; (4) Egypt in 2017: 305 dead [attack on a mosque]; (5) Egypt in 2015: 224 dead [Russian jet leaving Egypt crashes in Sinai Peninsula]; (6) Indonesia in 2002: 202 dead [attacks on bar in Bali].

Sinai, Egypt

In Walsh & Kirkpatrick, In Egypt, Furious Retaliation but Failing Strategy in Sinai, nytimes (11/26/2017) it was noted that “After militants massacred 305 people at a packed mosque…President Abdel Fattah el-Sisi (vowed) to ‘take revenge’ and strike back with an ‘iron fist’…But that furious retaliation, which follows years of battle in Sinai against a vicious Islamic State affiliate that downed a Russian passenger jet in 2015 and has regularly attacked Egyptian security forces there, revived the most troubling question about Mr. Sisi’s strategy in the desert Peninsula: Why is it failing? One of the most striking aspects of the carnage that unfolded (at the mosque)…was how easy it was for the militants to carry it out”

Lahore, Pakistan

In Pakistani blamed for 2008 attacks in Mumbai released from house arrest, travelwirenews (11/24/2017) it was noted that “Pakistani Hafiz Saeed, seen as the mastermind of a 2008 militant assaults in the Indian financial hub of Mumbai in which 166 people were killed, has been released from house arrest.

Yala, Thailand

In Policeman killed, another wounded by Yala bomb, travelwirenews (11/21/2017) it was noted that “A member of a police team providing protection for teachers was killed and another wounded by a bomb explosion in Bannang Sata district on Tuesday morning. It was planted under a traffic sign and was detonated when the security team arrived at the spot”.

Melbourne, Australia

In Australian police detain jihadist sympathizer plotting New York’s Eve attack in Melbourne, rt (11/29/2017) it was noted that “A 20-year-old Australian citizen has been arrested for plotting a shooting rampage in Melbourne’s central square while it is packed with New Year’s Eve revelers. Police say he was inspired by jihadist terrorists and associated with a local ‘extremist community’”.

Paris, France

In Paris cop goes on shooting rampage after break-up with girlfriend, kills 3 before committing suicide, travelwirenews (11/19/2017) it was noted that “A police officer shot dead three people and injured three others before committing suicide in the northern suburbs of Paris…The shooting began…on Saturday night in the commune of Sarcelles, where an argument broke out between 31-year-old officer Arnaud Martin and is 25-year-old girlfriend as they sat in a car outside her parent’s house”.

Myanmar

In Paddock, Myanmar General’s Purge of Rohingya Lifts His Popular Support, nytimes (11/27/2017) it was noted that “The most powerful person in Myanmar now, Senior Gen. Min Aung Hlaing, was little known outside the country’s military circles until the villages started burning. Within just a few weeks in 2009, his forces droves tens of thousands of people out of two ethnic enclaves in eastern Myanmar…Locals accused his solders of murder, rape and systematic arson…The methods his forces used in 2009 have all been on display this year as the military has driven more than 620,000 Rohingya Muslims out of Myanmar in a campaign the United States has declared to be ethnic cleansing”.

El Salvador

In Ahmed, “They Will Have to Answer to Us”, nytimes (11/30/2017) it was noted that “In March 2016, President Salvador Sanchez Ceren of El Salvador announced a set of ‘extraordinary measures’ that he said would put an end to the gangs that had made his nation the most homicidal place on Earth…’We want to make the government aware that it cannot put an end to the gangs’ the speaker said. ‘We are a part of our country’s community’. An attack on the gangs was an attack on the people and such an attack would have a cost…we have the tools to destroy the country’s political system’…A gang in El Salvador makes in a year what a Mexican cartel might make in a week. MS-13, the nation’s largest gang, with 40,000 members takes in about $30 million annually, collecting extortion payments of a few dollars, sometimes in coins, and distributing it in small handouts to its members who also live off whatever food that can strong-arm from local vendors”. Nytimes

Rio de Janeiro, Brazil

In Lonndono, In Rio de Janeiro, ‘Complete Vulnerability’ as Violence Surges, nytimes (11/18/2017) it was noted that “For teachers in the seaside megacity, Rio de Janeiro’s surge in violence has meant making a life-or-death judgment call with unnerving frequency: deciding whether to cancel classes because of nearby shootouts. For police officers, it has meant burying 119 of their own so far this year and surrendering ever more territory to drug gangs that have resumed open-air sales in teeming communities that had been declared ‘pacified’ just a few years ago. Many ordinary residents of this city of about 6.5 million start the day scanning mobile apps that track live reports of gunfire before planning their commutes…There were 4,974 people killed…during the first nine months of this year, up 11 percent from last year”.

9/11 Airline Payouts

In Airlines agree $95.2m payout over hijacked planes used on 9/11, travelwirenews (11/22/2017) it was noted that “Insurers for American Airlines and United Airlines will foot part of a $95.2 million damage claim brought by the developers of the World Trade Center, after the buildings were destroyed by two hijacked passenger jets on September 11, 2001″.

Going To Jail In Dubai

In Nordland, Holding Hands, Drinking Wine and Other Ways to Go to Jail in Dubai, nytimes (11/11/2017) it was noted that “A Scottish electrician named Jamie Herron, visiting Dubai as a tourist, was sentenced to three months in jail for touching a man in a bar. The British head of a professional soccer team, David Haigh, was ordered jailed for seven months for a tweet that he says could not have been from him-since he was already in jail without a phone. An Australian aid worker living in Dubai, Scott Richards, was locked up for trying to raise money to buy blankets for freezing Afghan children, because was not part of a recognized charity…(Dubai has) a legal system based on a hard-line interpretation of Shariah law often lands foreigners in jail for offenses that few Westerners would dream were even crimes”,

Jail Time For Donkeys

In Gettleman & Schultz, India’s Punishment for Plant-Eating Donkeys: Jail Time, nytimes (11/29/2017) it was noted that “What happens in a northern Indian town when you rip up someone else’s plants and saunter away? You go to jail. Even if you’re a donkey. News this week that eight donkeys had been jailed for four days for eating expensive saplings went viral in India, a mix of ridicule and good-hearted laughs. The Indian government has been on a cleanliness kick, led by Prime Minister Marendra Modi, who has vowed to build tens of millions of toilets and clean up garbage in cities. According to the authorities, the donkeys were making a mess”.

U.S Civil Rights Trail

In Krueger, In the South and North, New (and Vital) Civil Rights Trails, nytimes (11/28/2017) it was noted that “Two years ago representatives from Southern state tourism departments gathered at Georgia State University to start work on what would become the nation’s first civil rights trail. They knew their states were dotted with landmarks that commemorated significant events in the struggle for racial equality…they made a list of 100 sites that seemed most significant…The trail, called the US Civil Rights Trail, will be officially introduced to the public on New Year’s Day (the date is significant: On Jan. 1, 1863, Abraham Lincoln signed the Emancipation Proclamation)”.

Bali Volcano Erupts

In Ramzy, Bali Volcano Eruption Triggers More Evacuations, nytimes (11/27/2017) it was noted that “Officials in Indonesia say 100,000 people on the island of Bali need to be evacuated from a danger zone around the Mount Agung volcano, which has begun erupting and sending dark clouds of ash into the air… Volcanic activity is now at a very high level, and the probability of a bigger eruption is increasing”.

No Bull Goring, Please

In Bull gores Argentine tourist to death in India: police, travelwirenews (11/19/2017) it was noted that “An Argentine man holidaying in India has been gored to death by a bull in the popular tourist city of Jaipur, police said on Sunday. The 29-year-old was walking along a street near Japiur’s main market…when he was attacked and seriously injured by the animal. ‘He was struck by the bull’s horn in the neck and stomach”.

Norwegian Reindeer Goodbye

In Libell, ‘It Was a Blood Bath’: Freight Trains Kills 110 Reindeer in Norway, nytimes (11/28/2017) it was noted that “More than a hundred reindeer were killed in a single four-day period by freight trains rolling through Norway, prompting an outcry for the national railway to do more to protect animals. In all, 110 reindeer were killed when eight freight trains plowed through herds on the tracks last week…In the most serious accident, 65 reindeer were killed Saturday”.

Smog: What Me Worry?

In ‘My eyes are burning’: Delhi half marathon goes ahead despite the smog, travelwirenews (11/19/2017) it was noted that “More than 30,000 people, some sporting pollution masks, braved a hazy morning to run through the Indian capital despite almost two weeks of hazardous smog forced schools to shut for several days. (Runners) choked through smog…ignoring dire health warnings from doctors who fought for the controversial race in the heavily polluted capital to be postponed”.

Comfort Women Statue

In Sisters no more: Japanese city drops San Francisco over ‘comfort women’ statue, travelwirenews (11/24/2017) it was noted that “The city of Osaka in Japan has said it will end its 60-year relationship with San Francisco after the California city approved a statue commemorating the ‘comfort women’. The sex slaves were used in Japanese military brothels during World War II”.

Gold Rush In Salmon Country

In Jones, A Gold Rush in Salmon Country, nytimes (11/27/2017) it was noted that “Eric brought up the issue of Pebble Mine. ‘It makes you want to give up hope, doesn’t it’… He was talking about renewed efforts to build a mine at the headwaters of one of the world’s last wild salmon nurseries, at Bristol Bay in southwestern Alaska. Northern Dynasty Minerals, a Canadian company that wants to construct the mine, estimates that 100 million ounces of gold rest beneath the native spawning grounds…Alaskans had come out overwhelmingly against the measure…On May 1, Scott Pruitt, the new administrator of the E.P.A….order the E.P.A. regulations scrapped, telling the company it would proceed with permitting. And like that, the mine was back in play”.

Tiger On The Loose In Paris

In Escaped tiger briefly puts Paris on lockdown, killed by Circus staff 2km from Eiffel Tower, travelwirenews (11/25/2017) it was noted that “A tiger which escaped from a Paris circus briefly caused pandemonium in the heart of the French capital. The animal was shot dead by circus staff, which triggered outrage among local residents and online”.

China’s Toilet Revolution

In China Pledges another three years of ‘toilet revolution’ to boost tourism, travelwirenews (11/19/2017) it was noted that “China announced on Sunday plans to build and upgrade 64,000 public toilets between 2018 and 2020 as part of its ‘toilet revolution’ aimed at boosting tourism and lifting the sector’s contribution to economic growth”.

Airbnb & Pillow

“In Airbnb, Pillow Residential Partner to Make Home Sharing in Apartments Easier, travelwirenews (11/5/2017) it was noted that “Airbnb and Pillow today announced a new partnership that will support landlords and tenants who share their home on Airbnb. Under the new partnership, Pillow Residential will become the preferred partner for landlords enrolled in Airbnb’s Friendly Buildings Program”.

Mexico’s Green Airport

In Villegas & Malkin, As Mexico Builds Green Airport of the Future, Age-Old Mistakes Loom, nytimes (11/19/2017) it was noted that “On the flat salt basin that was once the Aztecs’ great Lake Texcoco, Mexico is building its ‘door to the world’, an enormous airport the government vows will exist in harmony with the environment…And as construction moves ahead…the much-heralded environment protection effort is still so devoid of detail, critics say, that it raises questions of credibility and actually obscures the risk of flooding. Centuries old mistakes concerning land and water management are likely to be repeated as a result, said Fernando Cordova Tapia, an analyst at the National Autonomous University of Mexico who led a group of scientists that examined the government’s initial environmental impact statement”.

Vietnam’s Eco Warriors

In Vietnam’s eco warriors fight to shield nature reserve from mass tourism, travelwirenews (11/20/2017) it was noted that “Danang, Vietnam. A 10-minute drive from the city, the forested coastal mountains of Son Tra nature reserve are throbbing with wildlife. It is home to more than 1,000 species of plants and nearly 400 animals and its most famous inhabitants are the critically endangered red-shanked douc, also known as the costumed monkey’ because of its striking colors”.

Protecting Our Elephants

In Shipstead, Why Can’t We Protect Elephants?, nytimes (11/18/2017) it was noted that “Lately I’ve been haunted by a photo. In it a mother elephant and her baby are running across a road in West Bengal, India. The mother has her head down and ears forward, heading for safety in the trees. A ball of fire clings to her right foot; her tail appears singed. The baby’s hind legs are engulfed in flames. In the background, a crowd of men is running away, some pausing to gape and jeer over their shoulders. They are the reason for the fire. They have thrown firecrackers and balls of flaming tar at the animals… Over the past two decades, the global populations of both Asian and African elephants have declined precipitously because of poaching, habitat loss caused by human encroachment”.

No Trophies, Please

In Cochrane. For Now, Trump to Keep Ban on Importing Elephant Trophies, nytimes (11/18/2017) it was noted that “President Trump on Friday reversed the government’s decision to start allowing hunters to import trophies of elephants that were killed in two African countries, pending a further review…’Put big game trophy decision on hold until such time as I review all conservation facts’, Mr. Trump tweeted. ‘Under study for years. Will update soon with Secretary Zinke. Thank you!”.

Travel Law Case Of The Week

In the US Airways case, the Court noted that “Defendant Sabre operates a global distribution system and Sabre itself is referred to as a ‘GDS’. Sabre is one of three GDSs in the United States. The GDSs provide computer services that allow participating airlines and other travel providers to distribute, schedule, fare and booking information to travel agents. The GDSs also provide a means for travel agents to search for, book and manage ravel reservations. Plaintiff US Airways is one of the airlines that participates in the Sabre distribution system. US Airways and Sabre entered into successive contracts whereby Sabre distributed US Airways’ flight and fare information to travel agents through the Sabre distribution system, and US Airways paid Sabre a booking fee for its services whenever a US Airways ticket was sold through Sabre. At issue is the parties’ contract that became effective February 23, 2011″.

History Of GDS Business

“The GDSs was computerized reservation systems that evolved out of those developed by the airline for their own use beginning in the 1960s. These systems were first made available to travel agents in the mid-1970s. The airlines’ systems offered not only their own flights and fares, but also those of other carriers to attract users to their platform. As the systems became more established, the airlines began to charge other airlines booking fees for bookings made through their platform. In 1984, the Department of Justice and the Civil Aeronautics Board concluded that the airline had engaged in discriminatory pricing and began to regulate the reservation systems”.

Airlines Divest Reservations Systems

“(In 1992) airlines began divesting themselves of the reservation system business, creating GDSs that were independent of the airlines. GDSs were also consolidating and the internet was beginning to change the way that airline tickets were bought and sold. The DOT found that each of the GDSs had market power over most airlines because travel agents generally ‘single-homed’ and the airlines were dependent upon the GDSs to reach traditional travel agents. However, the DOT expected that new technologies would create sufficient competition in the airline ticket distribution market to erode the GDSs market power over time”.

The GDS Business

“Sabre is one of only three GDSs in the United States, with Amadeus and Travelport. Sabre is the largest and controls over 50% of the market. Since deregulation, the number of GDS competitors has dropped from four to three. No new GDS has entered the market since the 1980s. US Airways estimated that 40% percent of its revenues were booked through Sabre and another 25% through the other GDSs. ‘Brick and mortar’ travel agencies book almost exclusively through the GDSs, These travel agencies are primarily corporate travelers, who are higher value customers for airlines. Travel Agencies frequently ‘single-home’ with one GDS. In 2011, 94% of travel agency locations…used a single GDS. Because of single-homing, US Airways must participate in each of the GDSs to reach the corporate travelers whose travel agencies book through the GDS. GDSs earn revenues through booking fees paid by the airlines and other travel providers. The GDSs do not charge travel agents for GDS services, Instead, travel agencies receive incentive payments from GDSs as well as commission payments from the airlines. From 2006 through 2012, Sabre paid more than $1.2 billion in incentive fees to travel agents. US Airways’ expert…opined that these ‘incentive payments’ serve to keep the travel agents loyal to its chosen GDS but do not benefit the airlines”.

Challenged Contractual Provisions

“The challenged restraints, collectively referred to as the ‘full content’ provisions…as they appear in the parties’ 2011 Contract are (1) A ‘No Discounts’ provision, also referred to as a ‘parity’ provision, prohibiting US Airways from providing lower fares through other, non-Sabre, channels…(2) A ‘No Surcharge’ provision, preventing US Airways from charging or collecting from travel agents a fee or higher prices for booking through Sabre… The contract stated that US Airways ‘shall not charge to or collect from any Sabre Subscriber a service fee or any similar charge’. (3) A ’No Better Benefits’ provision, requiring US Airways to provide Sabre subscribers access to ‘the same types, amounts and levels of products, services…benefits and rights’ that US Airways offered to users of any other booking channel. (4) A ‘No Direct Connects’ provision, preventing US Airways from inducing travel agents, of their customers, from directly connecting their reservation system with the airlines’…[US Airways] will not…encourage, promote or induce…Sabre Subscribers (or their customers) to circumvent the Sabre GDS’”.

Trying To Avoid These Provisions

“After US Airways merged with America West Airline in 2005, the airline tried unsuccessfully to avoid the challenged restraints. Ultimately, US Airways had no choice but to accept them…for fear of being removed from the Sabre GDS or being retaliated against, for example, through ‘display biasing’ which means reordering search results as they appear in the system to disadvantage a particular airline”.

The Relevant Market

“US Airways presented sufficient evidence…that the relevant product market is the market for GDS services linking airlines with traditional travel agents to serve the vast majority of business travelers, but that the relevant market does not include other means of distributing airline tickets, such as websites and online travel agencies (e.g., Expedia, Travelocity)…because consumers do not view them as reasonable substitutes for GDS services.”

One-Sided Market

“At trial, the evidence was sufficient…to conclude…that the relevant market for purposes of Count I was one-sided, even though Sabre and the other CDSs are two-sided platforms…This issue was the basis for US Airways’ argument that Sabre’s supracompetitive prices, which are the measure of US Airways’ harm, should be measured without subtracting Sabre’s incentive payments to travel agents. The concept of two-sidedness in economics is relatively new and complex…Simply put, ‘[a] two-sided platform provides goods and services to two distinct groups of customers who need each other in some way and who rely on the platform to intermediate transactions between them’ (citing U.S. v. Amex, 838 F. 3d 179 (2d Cir. 2016))…The relevant holding of Amex for purposes of this case is that, where the two sides of a platform are interdependent, excluding one side from the relevant market would be improper”.

Unreasonable Restraint Of Trade (Rule Of Reason)

“The evidence at trial was sufficient to…(find) that ‘Sabre unreasonably restrained trade by means of the challenged contract provisions’…US Airways adduced direct evidence at trial…that the challenged restraints had an adverse effect on the market as a whole for GDS services-through supracompetitive pricing or lower quality…In the alternative, US Airways presented evidence sufficient (to show) that the contract restraints had an anticompetitive effect in the market for GDS services used by airlines…US Airways presented evidence that Sabre had market power…(and) that the contractual restraints raised barriers to entry and reduced consumer choice…In summary, US Airways presented evidence of harm to competition”.

Less Restrictive Alternatives

“US Airways introduced evidence of several potentially less restrictive alternatives for travel agents to compare and book airline tickets efficiently without the full content provisions (which) included: allowing airlines to impose a surcharge on tickets booked through Sabre to reflect the higher cost of the booking channel…or Sabre charging separately for searching and booking…A surcharge would permit the airline to recoup some of the higher cost of booking through Sabre and lower prices to travelers who book through lower cost channels…These alternatives would allow greater competition by allowing airlines to pass on savings from lower booking fees to their customers and permitting competitors to differentiate their products by cost. This in turn could spur greater technological innovation and quality”.

Conclusion

“The evidence was sufficient (to find) that US Airways ‘was injured as a result of Sabre’s unreasonable restraint of trade’ (and sustained damages of $5,098,142 or $15,294,426 after trebling”.

tom dickerson

The author, Thomas A. Dickerson, is a retired Associate Justice of the Appellate Division, Second Department of the New York State Supreme Court and has been writing about Travel Law for 41 years including his annually updated law books, Travel Law, Law Journal Press (2016), Litigating International Torts in U.S. Courts, Thomson Reuters WestLaw (2016), Class Actions: The Law of 50 States, Law Journal Press (2016) and over 400 legal articles many of which are available at nycourts.gov/courts/9jd/taxcertatd.shtml. For additional travel law news and developments, especially, in the member states of the EU see IFTTA.org

This article may not be reproduced without the permission of Thomas A. Dickerson.

Read many of Justice Dickerson’s articles here.

For additional travel law news and developments, especially, in the member states of the EU see IFTTA.org

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