Travel technology companies Sabre Corp. and Farelogix Inc. called it quits on their $360 million deal, but their recent legal victory against antitrust charges is likely to help other firms escape scrutiny.
Sabre terminated its planned acquisition of Farelogix Friday, less than a month after the companies defeated a Justice Department antitrust lawsuit that said the deal would limit competition in the airline booking industry and drive up fees.
Now with the deal off the table, the DOJ is stuck with an adverse district court opinion that could hinder its ability to challenge other mergers.
“Companies are likely to exploit this decision going further,” Michael Kades, the director of markets and competition policy at the Washington Center for Equitable Growth, told Bloomberg Law.
U.S. District Court Judge Leonard Stark’s April 8 opinion approving Sabre’s acquisition of Farelogix has been widely criticized as a flawed decision, as many critics say he misread a U.S. Supreme Court antitrust ruling involving American Express Co.
That misreading gives corporations a way to immunize themselves from antitrust scrutiny, Kades, a former Federal Trade Commission antitrust attorney, told Bloomberg Law.
DOJ’s Next Move
While the Sabre-Farelogix deal is over, the ruling in favor of the merger “doesn’t just disappear,” Kades said.
The DOJ had appealed Stark’s decision to the U.S. Court of Appeals for the Third Circuit. The DOJ is now considering asking the appellate court to vacate Stark’s ruling, the department’s antitrust chief Makan Delrahim said Friday in a press release.
“We were disappointed with the District Court’s application of AmEx to this merger case,” Delrahim said.
In his opinion, Stark said the government failed to show how Sabre’s acquisition of Farelogix would harm competition since the two companies don’t compete directly with one another.
Stark said that Sabre is a two-sided platform because it provides airfare distribution services to airlines and also offers flight information and other booking services to travel agents. Farelogix, on the other hand, is a one-sided platform because it only works with airlines as an IT company providing airfare distribution services.
The Supreme Court had ruled in favor of American Express in 2018, after determining that the states who sued the credit card company failed to prove that both sides of the two-sided market American Express serves—merchants and consumers—were hurt the card’s anti-steering provisions.
In his interpretation of the American Express case, Stark concluded that Sabre can’t compete with Farelogix since Sabre is a two-sided platform and Farelogix is a one-sided platform. Only platforms that are both two-sided can compete with one another, and the same logic applies to one-sided platforms, Judge Stark said.
Given Sabre’s ultimate win in this case, companies may point to this merger decision to try to gain protection under the American Express ruling, Randy Stutz, vice president of legal advocacy at the American Antitrust Institute, said.
There would have been benefits to trying the Sabre case on appeal in order to get more clarity around the American Express Supreme Court decision, Stutz added.
“The longer we have to wait, the more sort of wasteful litigation we have to endure and the more confusion there is in the courts,” he said.
Stark’s opinion may influence other district court merger cases, but it’s unlikely to carry precedent since it was a lower level opinion, not an appellate court decision, Stutz added.
But until Stark’s ruling is tested again, companies may attempt to make similar arguments to demonstrate that it doesn’t compete with another firm, Kades said.
The case “shows how a bad decision in American Express can be made even worse through judicial confusion and the fact that it worked in Sabre-Farelogix is a roadmap for defendants to try to extend it further,” Kades added.
The case is United States v. Sabre Corp., D. Del., No. 1:19-cv-01548.