Thomas A. Dickerson ()
I have been writing about Travel Law since 1977 and the last three years have been particularly exciting in terms of the developments in this expanding field of law. Recent antitrust class actions involving the travel industry have been brought by or against airlines, in-flight Internet providers, hotels, tour bus companies, ride-sharing companies and online travel sellers and have involved various types of alleged marketing misconduct such as resale price maintenance, parallel business behavior, misleading and unfair price guarantees, elimination of competitors and unfairly raising prices, substantial market foreclosures and price fixing.
Hop-On, Hop-Off Bus Tours
A popular means of exploring large cities is participating in a “hop-on, hop-off” double decker bus tour. Here, the focus is on concepts such as relevant market, competitive effects and barriers to entry as they apply to New York City’s hop-on, hop-off bus tour market. Specifically, the court in United States of America and State of New York v. Twin America, Civil Action No. 12-cv-8989 (ALG)(GWG) (S.D.N.Y. March 18, 2015), approved a final judgment (and competitive impact statement) settling an antitrust lawsuit. The lawsuit arose from the joint venture of two hop-on, hop-off tour bus companies whereby they “allegedly controlled all of the most competitively meaningful bus stops on hop-on, hop-off bus tours and increased prices for riders by 10 percent since coming together in 2009. ‘By eliminating the competition between them, the largest operators of New York City’s iconic double-decker tour buses were able to raise prices and deprive city visitors of the benefits of a free and fair market’.” “US and NY Settle Antitrust Cases Against Bus Companies,” N.Y.L.J (March 18, 2015). The settlement provided for a payment of $7.5 million and giving up 50 bus stops in high-profile locations including Times Square and the Empire State Building.
Hotel Room Price Maintenance
In Online Travel Company Hotel Booking Antitrust Litigation, 997 F. Supp. 2d 526 (N.D. Tex. 2014), plaintiff consumers set forth “three antitrust claims which charge [hotel chains and online travel sellers (OTSs)] with [allegedly] engaging in an industry-wide conspiracy to uniformly adopt resale price maintenance agreements containing most favored nation clauses, in an effort to eliminate price competition among hotel room booking websites.” In addition the complaint alleged that defendants deceptively published “best price” or “lowest price” guarantees on their websites while knowing that “best price” was the same fixed rate offered across all hotel booking websites. In dismissing the antitrust claims the court held that “the real ‘nub’ of the complaint … Is Defendants’ parallel business behavior which is not suspicious … Generally hotels across the industry may find that controlling minimum resale prices is the ‘only feasible’ way of effectuating a profitable price discrimination strategy—that is, a strategy to ‘sell the same product [i.e., hotel room], costing the same to make and sell, at different prices to different consumers’.”
Price Guarantees Deceptive
However, as for defendants’ alleged price guarantees (e.g., “OTA Defendant Expedia’s best price guarantee: ‘Find a cheaper trip within 24 hours of booking and we’ll refund the difference-and give you a travel coupon worth $50′”), the court held that they may have been both misleading and unfair
It seems plausible that an ordinary consumer would reasonably infer from this advertisement that Expedia is trolling the online market, looking for the lowest price for a particular room in the 24 hour-period and publishing that rate for the consumer. Expedia even implies that it is putting in its best effort to find the consumer the best price, promoting that if it slips up, the consumer gets a refund and a $50 travel coupon. In reality, Expedia’s promise is illusory—it has entered into a contract … that ensures the rate offered is the same ‘low’ price offered everywhere else online … These allegations, therefore, plausibly show that a reasonable consumer may be mislead to believe she was receiving the lowest price available in a competitive market.
Stifling Ridesharing Competition
In Wallen v. St. Louis Metropolitan Taxicab Commission (MTC), 2016 WL 5846825 (D. Mo. 2016), Uber alleged “violations of the Sherman Act … by Defendants in (their) attempt to prohibit Uber … from competing in the St. Louis market for for-hire transportation. Plaintiffs claim to bring this antitrust action to put an end to the anticompetitive conduct of defendant MTC and several of its commissioners … many of whom are active market participants in the very market that the MTC regulates’.”
In denying the MTC’s motion to dismiss the court noted:
Although the MTC argues that [its] powers and authority give rise to a clear articulation of a policy to allow anticompetitive conduct, a close analysis of the MTC’s authority establishes just the opposite. The establishment of the MTC demonstrates that the contemplation was that its purpose was to regulate and oversee vehicles for hire to ensure public safety standards and maintain the integrity of the public transportation system. Rather than being exclusionary, i.e., allowing a policy of anticompetition, the statutory framework provides a means for ensuring the vehicle for hire industry is properly licensed, that the rules and fee structures are regulated and the individual drivers properly screened. None of the statutory authority gives any indication that the legislature intended to adopt a policy of anticompetition through the creation of the MTC … The displacement of competition is not the logical result of the statutory framework, rather, the logical result is providing a public transportation system that is safe and efficient. As such, the state has not clearly articulated a policy of allowing anticompetitive conduct.
Uber Price Fixing Conspiracy
In Meyer v. Kalanick, 2016 WL 4073071 (S.D.N.Y. 2016), it was alleged that Mr. Kalanick had orchestrated and facilitated a price fixing conspiracy with Uber drivers to use Uber’s pricing algorithm to set the prices charged to Uber riders, thereby restricting price competition among drivers to the detriment of riders. In denying defendants’ motion to dismiss, the court noted: “Plaintiff alleges that the drivers have a ‘common motive to conspire’ because adhering to Uber’s pricing algorithm can yield supra-competitive prices … and that if the drivers were acting independently instead of in concert, ‘some significant portion’ would not agree to follow the Uber pricing algorithm’.”
Arbitration Clause Enforced
In reversing and remanding, the U.S. Court of Appeals for the Second Circuit noted:
Defendants moved … to compel arbitration … Meyer attests that he was not on actual notice of the hyperlink to the Terms of Service or the arbitration provision … we must consider whether Meyer was on inquiry notice of the arbitration provision by virtue of the hyperlink … a reasonably prudent smartphone user knows that text that is highlighted in blue and underlined is hyperlinked to another webpage where additional information is found … While it may be the case that many users will not bother reading the additional terms, that is the choice the user makes; the user is still on inquiry notice … Although Meyer’s assent to arbitration was not express, we are convinced that it was unambiguous in light of the objectively reasonable notice of the terms.
Airport Landing Slots
In United States of America v. United Continental Holdings and Delta Air Lines, Case No: 2:15-cv-07992-WHW-CLW (D.N.J. 2015)), the U.S. Department of Justice sought to block a proposed transaction between United and Delta in order to preserve competition at Newark Liberty International Airport. The complaint alleged, inter alia, that air passengers flying out of Newark pay among the highest fares in the country. United is the monopoly nonstop provider to 139 of the 206 destinations served nonstop from Newark and already controls 902 (or 73 percent) of the 1,233 slots the FAA has allocated to airlines at the airport—over 10 times more slots than the next largest carrier—and does not even use all of its slots on a given day, thus “depriv[ing] Newark passengers of flight options that would exist if the slots were flown.” But United wanted even more slots and was “attempting to acquire 24 slots” from one of its competitors, Delta. The DOJ noted that “when new entrants have acquired slots at Newark, they have forced United to compete on the merits, resulting in measurable benefits to consumers.” In a Stipulation of Dismissal dated April 4, 2016, United terminated its Slot Lease Agreement dated June 6, 2015, which was the subject of this litigation.
Colluding to Limit Capacity
In Domestic Airline Travel Antitrust Litigation, 317 F.R.D. 675 (N.D. Ga. 2016), the plaintiffs alleged that defendant airlines—American, United, Delta, Southwest—conspired “to, raise, maintain and/or stabilize prices for air transportation services by colluding to limit capacity on their respective airlines [referred to as "capacity discipline"] [causing their airfares to rise] substantially compared to those of other domestic air carriers, despite stagnant or decreasing demand and declines in the cost of fuel.” In denying a motion to dismiss, the court noted: “Plaintiffs pled parallel conduct on the part of defendants coupled with sufficient evidence to raise the suggestion of a preceding agreement [and collusion] to limit capacity in their respective airlines, as a result the airfares rose during that period.”
First Bag Fees
In In Re Delta/Airtran Baggage Fee Antitrust Litigation, 2017 U.S. Dist. LEXIS 47259 (N. Ga. 2017), it was noted by the court:
In December 2008, Defendants AirTran Airways, Inc … and Defendant Delta Air Lines, Inc., began charging a fee to passengers for a first checked bag. Plaintiffs [alleged] that this first-bag fee was the product of a price-fixing conspiracy … According to Plaintiffs, neither airline could unilaterally impose the fee in an open and competitive market without losing customers to the other, so Defendants ‘used their earnings call (and other channels) to communicate and coordinate pricing behavior’ to ensure that both airlines could impose the fee without losing any market share.
Although the court certified the class action (317 F.R.D. 675 (N.D. Ga. 2016)) on behalf of 28 million customers and sanctioned Delta $7.6 million for having lost or destroyed electronic files, it recently granted summary judgment to defendants noting “that evidence in this case simply does not permit a reasonable fact-finder to infer the existence of a conspiracy, as it does not tend to exclude the possibility that the alleged conspirators acted independently.”
Ticket, Fuel and Fare Price Fixing
In Wortman v. All Nippon Airways, 854 F. 3d 606 (9th Cir. 2017), a class of airline passengers alleged that defendant airlines violated the provisions of Section 1 of the Sherman Antitrust Act by colluding to fix the prices of tickets, fuel surcharges and special discount fares. Specifically, the court sought to determine the extent to which the filed rate doctrine applies to airline fares and fees and, if so, whether the Wortman antitrust class action was precluded from being litigated.
We have previously applied the filed rate doctrine to circumstances in which the relevant rates were not literally filed. In so doing, we have found that even though the regulating agency did not oversee rates via a filing system, the agency engaged in sufficient regulation through other means to satisfy the purposes of the doctrine. In the present instance, by contrast, we agree with the district court’s determination that there were genuine issues of material fact as to whether the DOT effectively abdicated its authority over the unfiled air fares …
We hold that the filed rate doctrine does not preclude Plaintiffs’ antitrust claims premised on the unfiled fares. The parties do not dispute that the DOT had the authority to regulate unfiled rates, only whether it actually did so … The record as it currently stands indicates that the DOT has not exercised its authority to regulate unfiled airfares, fuel surcharges or discount fares in a manner sufficient to justify the application of the filed rate doctrine.
In Flight WiFi
In Stewart v. GoGo, 2014 WL 324570 (N.D. Cal. 2014), the court noted that GoGo is a company that provides broadband access to passengers on commercial aircraft and that plaintiffs alleged that it “has violated, inter alia, federal antitrust law because it has an unlawful monopoly in the ‘market for in-flight internet access services on domestic commercial airline flights within the continental United States.” In denying GoGo’s motion to dismiss, the court noted that plaintiffs maintain that there is substantial market foreclosure because GoGo and a majority of the airlines providing commercial, domestic air travel have entered into long-term, exclusive contracts which locked up [most of the airlines' fleets]. Plaintiffs alleged that GoGo possessed 85 percent of the relevant market share. See also Berkson v. GoGo, 97 F. Supp. 3d 359 (E.D.N.Y. 2015) (automatic monthly renewals alleged without adequate notice; motion to compel arbitration denied).