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Sabre-Farelogix Ruling Made Moot by Scrapped Deal (Corrected)

July 20, 2020, 5:44 PMUpdated: July 20, 2020, 7:44 PM

A potentially groundbreaking court decision greenlighting the planned merger of travel booking platforms Sabre Corp. and Farelogix Inc. was set aside Monday by the Third Circuit, which held that the ruling became moot when the deal was scrapped after U.K. regulators came out the other way.

Because the appellate order expresses “no opinion on the merits,” it “should not be construed as detracting from the persuasive force of the district court’s decision, should courts and litigants find its reasoning persuasive,” a three-judge panel wrote.

The one-page ruling rewarded the Justice Department’s persistent efforts to undo a Delaware federal judge’s ruling rejecting the government’s bid to block the $360 million tie-up.

Even after the U.K. decision the next day led the parties to terminate the deal, the DOJ pressed on to the U.S. Court of Appeals for the Third Circuit, arguing that Judge Leonard P. Stark’s widely criticized reasoning could upend merger enforcement.

Stark let the transaction move forward in April, saying Sabre and Farelogix don’t count as competitors under the U.S. Supreme Court’s controversial 2018 ruling in Ohio v. American Express Co. because Sabre is a “two-sided” company and Farelogix isn’t.

The 5-4 high court found in AmEx that certain industries, like payment processing, involve two-sided markets, in which the “customers” stand on both sides of the platform, and the “product” is the transaction itself.

Practices that harm only one side of the market can benefit the other side enough to attract more users, creating a feedback loop, or “network effect,” that offsets any anti-competitive impact, the court said. The dissent warned that the ruling could swallow the rest of antitrust law, given that all markets are in some sense two-sided.

Applying AmEx, Stark found Farelogix serves only airlines, while Sabre has customers on both sides of a market that also involves consumers like travelers.

The DOJ originally appealed Stark’s ruling on the merits. After the deal was called off, it asked the Third Circuit to vacate the decision instead, saying it “could have an outsized effect on cases involving competition in the digital economy, where it is not uncommon for multi-sided platforms to face competition from one-sided rivals.”

The government doubled down on its arguments last month, after Farelogix reached a new deal to be acquired by Vista Equity Partners subsidiary Accelya, a Barcelona-based travel tech company.

Sabre and Farelogix opposed the request, saying the DOJ played a role in rendering the ruling moot by coordinating closely with the U.K. regulators who blocked the merger. The government shouldn’t get a “reward” for its “gamesmanship,” the companies said.

The government was represented by the DOJ’s antitrust division. Sabre was represented by Skadden, Arps, Slate, Meagher & Flom LLP. Farelogix was represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP.

The case is United States v. Sabre Corp., 3d Cir., No. 20-1767, 7/20/20.

(Corrects first and fourth paragraphs to correct characterization of UK's merger block.)

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com