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Farelogix Emails Show Prior Concern Over Sabre’s Dominance (1)

Jan. 28, 2020, 7:52 PMUpdated: Jan. 28, 2020, 10:47 PM

Farelogix’s top executive expressed concern in the past that Sabre Corp.'s growing power over airlines and travel agencies would lead to higher flight costs and fewer options for consumers, according to emails and documents presented at trial by the Justice Department.

Sabre, along with two other dominant travel industry providers—Amadeus IT Group S.A. and Travelport Worldwide Ltd.—are an “oligopoly” that the world’s “largest and most powerful airlines” can’t break, James Davidson, Farelogix’s president and chief executive officer, wrote in a January 2018 presentation to European Union officials.

Airlines aren’t able to use Farelogix as often as they’d like because of “pesky, prohibitive” contracts Sabre, Amadeus, and Travelport enforce on airlines, Davidson also said in a 2011 blog post on the company’s website.

Davidson’s EU presentation, blog posts, and emails were presented by the government as evidence Tuesday in the second day of a trial in the U.S. District Court for the District of Delaware in which the DOJ seeks to block Sabre’s $360 million acquisition of Farelogix.

DOJ officials sued to block the deal in August 2019, saying the merger is an effort by Sabre to stomp out growing competition by eliminating Farelogix as a rival in the airline booking industry.

Davidson said his 2018 presentation accurately reflected his views at the time. But the travel industry has changed so much in the nearly two years since then that such previous dynamics between Sabre, airlines, and other companies aren’t the same, he said.

Companies like Sabre and Amadeus now are providing airlines with better services and user-friendly interfaces, which is what Farelogix primarily was known for in the past, he said. That competition has led Farelogix to lose more and more airline bids, Davidson said.

Market Definition

The DOJ says Sabre and Farelogix compete head to head in offering airlines booking services. Sabre sees an innovative and disruptive competitor in Farelogix, the government says.

Both companies say they don’t compete directly.

The government’s allegations imply that Sabre “doesn’t act with integrity,” Christopher Boyle, Sabre’s vice president of corporate development and M&A, said during the trial.

“I find that offensive,” Boyle, who served as both the government’s and merging companies second witness of the day, said of the DOJ’s allegations.

Farelogix only provides software to airlines that’s used to connect an airline’s internal booking system to travel agents and other third-party travel sites, whereas Sabre is a full-service company that connects airlines, travel agents, hotels, and car rentals with one another, the companies said during trial.

Farelogix’s Davidson characterized the company as “an alternative booking system” in depositions taken by the government, according to the DOJ.

However, “booking services” isn’t a term used in the industry, and instead Farelogix is considered an “IT solution,” Davidson said when asked by attorneys for the merging companies.

Similarly, Sabre views Farelogix’s services as “an element” that compliments Sabre’s overall distribution strategy, Boyle said.

Farelogix’s offerings “are not something to be concerned with,” Boyle said in response to questions from attorneys from the merging parties on if Farelogix is a competitive threat.

None of Farelogix’s software is proprietary or trademarked, and so there are “no obstacles” for other companies, like HP Co., to create similar travel industry systems, he said.

The merger with Sabre will allow Farelogix to scale its services globally, which is something it has wanted to do for years, Davidson said.

The case is United States v. Sabre Corp., D. Del., No. 1:19-cv-01548, trial 1/28/20.

(Updated to include testimony from Sabre executive )

To contact the reporter on this story: Victoria Graham in Wilmington, Del., at vgraham@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com