US Airways v. Sabre Holdings Corporation

Background

US Airways brought claims under Sections 1 and 2 of the Sherman Act against Sabre Holdings Corporation, Sabre Travel International Ltd., and Sabre GLBL Inc. US Airways challenged its 2006 and 2011 contracts with Sabre, including provisions requiring US Airways to provide Sabre the same flight information and prices available through other booking channels, prohibiting efforts to steer customers away from Sabre, and prohibiting surcharges on Sabre bookings.

Sabre operates a global distribution system, a computerized platform connecting airlines with travel agents who purchase airline tickets. US Airways alleged that Sabre used monopoly power in this market through the challenged contracts and other conduct. The opinion identifies evidence concerning Sabre’s market share, pricing, profits, barriers to entry, dealings with travel agents, and alleged conduct affecting potential competitors.

A jury had previously found for US Airways on its Section 1 claim, but the Second Circuit later vacated that award and remanded the case. The Second Circuit also reinstated US Airways’ Section 2 claim.

Motion to Exclude Expert Testimony

Sabre moved to exclude testimony from US Airways’ damages expert, Dr. Rosa Abrantes-Metz, under Federal Rule of Evidence 702. That rule requires expert testimony to be relevant, based on sufficient facts or data, produced through reliable methods, and reliably applied to the case. The court explained that it must act as a gatekeeper by assessing whether expert testimony rests on a reliable foundation and will assist the jury.

The court denied Sabre’s motion. It rejected Sabre’s argument that Dr. Abrantes-Metz’s damages models had to account for a five-year delay before competition would emerge. The court stated that the models should compare the actual market with a hypothetical market in which the alleged unlawful conduct never occurred.

The court also rejected Sabre’s challenges to the expert’s estimates of overcharge damages. It found that Dr. Abrantes-Metz had considered the relative price sensitivity of airlines and travel agents, and that Sabre had not shown that those sensitivities had to be quantified. The court further held that the overcharge model was intended to measure the difference between prices actually paid and prices that would have been paid without the alleged unlawful conduct; it did not have to estimate bookings that never occurred in the actual market.

The court likewise declined to exclude the lost-profits estimates. It found that Sabre’s challenges concerning price sensitivity, demand for air travel, and opportunity costs concerned the weight the jury should give the testimony rather than whether the testimony was admissible. The court therefore denied Sabre’s motion to exclude Dr. Abrantes-Metz’s testimony.

Summary Judgment

Summary judgment may be granted when the evidence shows no genuine dispute about a fact that could affect the outcome and the moving party is entitled to judgment under the law. The court considered Sabre’s arguments concerning the statute of limitations, the alleged lack of a reliable connection between Sabre’s conduct and US Airways’ damages, and the evidence of monopoly power.

Statute of Limitations

US Airways sought damages for the four years before filing suit, including damages from April 21, 2007, through the end of 2012. Sabre sought to exclude damages arising from the 2006 contract, arguing that the contract was entered into more than four years before the action was filed.

The court granted this part of Sabre’s motion. It held that payments made under the 2006 contract were manifestations of the earlier act of entering into that contract, rather than new acts restarting the limitations period. As a result, US Airways could not recover damages arising from Sabre’s alleged conduct to maintain monopoly power when that conduct was merely performance of the 2006 contract.

The court stated, however, that US Airways could seek damages from other alleged monopolizing conduct if it could prove that the conduct and resulting injury occurred within the four years before filing suit. The opinion identifies alleged conduct such as retaliatory costs imposed on airlines, exclusionary contracts with travel agents, and efforts to thwart potential competitors. The court stated that such conduct could support damages if US Airways proved the required elements of its Section 2 claim.

Causation and Damages

The court rejected Sabre’s argument that the connection between its alleged conduct and US Airways’ injury was too speculative for trial. The court found that Sabre had mischaracterized Professor Joseph Stiglitz’s analysis by presenting one purported causal chain, while the expert had described several possible ways that a more competitive market could develop if the alleged anticompetitive conduct ended.

The court also rejected Sabre’s argument that the analysis was impermissibly speculative because it involved actions by third parties. The court reasoned that airlines, travel agents, and other participants were direct participants in the two-sided market, so analyzing how they might respond was relevant to the market analysis. The court concluded that a reasonable jury could use the expert evidence to find that prices would have been more competitive without Sabre’s alleged conduct.

Evidence of Monopoly Power

The court held that the evidence could allow a reasonable jury to find either a Sabre-only product market or monopoly power in the broader market for global distribution system services. A single brand or platform can constitute a relevant market if customers have no reasonable substitute.

For the Sabre-only market theory, US Airways presented evidence that travel agents were locked into Sabre’s platform, that switching costs were high, that switching rarely occurred, and that airlines would not readily switch platforms in response to a modest price increase. The court found that the parties disputed the significance of competition and incentive payments on the travel-agent side of the market, making those issues appropriate for the jury.

For the broader market, US Airways presented evidence including Sabre’s market share of between 49% and 52% of traditional travel-agent bookings through global distribution systems in the United States from 2006 to 2012, high net prices, excessive profits, price differences not explained by cost differences, barriers to entry, alleged retaliatory conduct, and the absence of a successful new competitor during the preceding thirty years. The court held that this evidence, considered as a whole, could support a finding that Sabre had monopoly power.

The court also rejected Sabre’s argument that US Airways’ Section 2 claim failed because other companies also operated global distribution systems or might possess market power. The court stated that Sabre’s alleged conduct need not be the only cause of US Airways’ injury if it was a substantial or materially contributing factor.

Disposition

Judge Lorna G. Schofield denied Sabre’s motion to exclude Dr. Abrantes-Metz’s testimony. She granted in part and denied in part Sabre’s motion for summary judgment. The court granted the request to exclude damages arising from the 2006 contract, while leaving damages arising from other alleged anticompetitive conduct between 2007 and 2011 not precluded. The court otherwise denied summary judgment and denied Sabre’s request for oral argument as moot.