A U.S. appeals court breathed new life into an eight-year-old US Airways federal antitrust complaint against global distribution system provider Sabre.
The U.S. Court of Appeals for the Second Circuit in New York on Wednesday reversed the Southern District of New York’s earlier dismissal of two counts in the lawsuit by US Airways, which merged with American Airlines in 2013. The airline alleged that Sabre conspired with Amadeus and Travelport to monopolize distribution services to travel agencies in violation of the Sherman Antitrust Act, among other accusations.
The appeals court agreed with the lower court that it was correct to limit the damages that US Airways could collect from Sabre to $15.3 million, and the appeals court decided to remand the case back to the district court for further proceedings, including the possibility of a new trial, on the allegation that Sabre’s 2011 contract with the airline harmed competition in that it forced US Airways to pay excessive booking fees to Sabre, and restrained trade.
An American Airlines spokesperson said:
“We have received the Second Circuit’s decision and are evaluating it now. The court has remanded the claims back to the district court for a new trial. We continue to believe in the merits of our claims and expect to retry them in the event that we cannot reach a resolution with Sabre.”
A spokesperson for Sabre said the company didn’t have a comment at this point as it is reviewing the decision.
The antitrust complaint revolves around the contention of many airlines that global distribution systems wield undue market power, can impose excessive fees, and harm competition. US Airways, for example, cited Sabre contract provisions that stipulated that the airline could not provide better airfares or more comprehensive fare features than it gave to Sabre; could not establish direct-connects with travel agencies that bypassed the Sabre global distribution system, and barred the airline from charging travel agencies higher fees if they booked its flights through Sabre than through other platforms such as directly through the airline.
US Airways initially brought its suit in 2011, charging that these so-called “full content” agreements unlawfully restrained trade, and monopolized distribution services in violation of the Sherman Antitrust Act.
Sabre filed a motion to dismiss the complaint, and the district court dismissed two of the counts. The court limited US Airways damages to its 2011 contract with Sabre — and not a 2006 contract, as well — and a jury in 2016 sided with the US Airways complaint only on the count that alleged restraint of trade and excessive booking fees.
US Airways had appealed elements of its original lawsuit that it alleged had been dismissed in error.
The appeals court said a key factor in its thinking was a new legal precedent. In June 2018, the U.S. Supreme Court ruled that American Express was allowed to stop retailers from incentivizing customers to pay with other, cheaper payment cards. Antitrust enforcers had alleged the card company’s contract provisions were anticompetitive. But the regulators lost.
Sabre told the appeals court that the American Express decision applied to its own case. Sabre said its company was similar in this regard to American Express. It offers services that do add incremental costs to consumers on one side of its market, such as via travel agency fees for booking tickets. It also offers services that result in costs to airlines and travel agencies.
Sabre argued that, like American Express, its services provide benefits to all sides of its markets. It said the benefits of its services outweigh the costs, justifying its tight contract provisions.
The appeals court partly agreed with Sabre on Wednesday, arguing that the lower court had looked at some of the issues in the wrong way in light of the recent Supreme Court ruling.
Neither Sabre nor US Airways, via its acquirer American Airlines, are out of the woods yet.
The appeals court noted that its decision “may make previous efforts in the district court seem in retrospect to have been painfully wasteful.” Both sides of this legal battle have reason to feel that way. It’s unclear how much further they want to go now that in many ways they have to retreat to the starting line.
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