Judge Stark of the U.S. District Court for the District of Delaware recently denied the Department of Justice’s (“DOJ”) challenge to the acquisition of Farelogix Inc. (“Farelogix”) by Sabre Corp. (“Sabre”). DOJ argued that significant head-to-head competition in an alleged relevant market for “booking services” would be eliminated. However, Judge Stark ruled against DOJ’s alleged relevant market. Judge Stark also noted that Sabre operates a two-sided transactions platform, while Farelogix only sells to airlines (one side of the platform). These findings may provide lessons for digital firms operating two-side platforms, such as Apple and Google, that face antitrust scrutiny.
Judge Stark considered DOJ’s alleged “booking services” relevant product market. Judge Stark highlighted several reasons why he was not convinced that this was a relevant product market. Judge Stark noted that he had not heard the term “booking services” used by any industry witness, and, more importantly, Sabre and Farelogix have never offered a standalone “booking services” product for sale in the United States. Further, DOJ’s economic expert was unable to determine the price of booking services and did not attempt to measure the value of the functionality associated with booking services. Critically, DOJ did not provide an expert opinion on whether airlines’ direct sales (referred to as “airline.com”) constituted a bigger competitive constraint on Sabre’s GDS than FLX OC. Airline.com constitutes about half of all tickets booked. Including airline.com in the DOJ’s alleged “booking service” market would make Farelogix’s share de minimis.
Judge Stark also determined that Farelogix and Sabre competed in different markets. Sabre operates a global distribution system (“GDS”) that connects airlines to travel agencies. Farelogix is an innovative airline technology solutions company. Farelogix created Farelogix Offer Creation (“FLX OC”). FLX OC is a solution sold only to airlines that allows airlines to sell services on their own websites and to push those offers onto GDS systems. FLX OC offers only one airline per connection, and thus is not a content aggregator like a GDS. Judge Stark noted that the relevant market is one of providing “transactions” and ruled that two-sided transaction platforms only compete with other two-sided transaction platforms. In other words, Sabre does not compete with Farelogix, because Sabre provides transactions between airlines and travel agencies while Farelogix supplies transaction software solely to airlines.
Despite this ruling, Sabre terminated the acquisition following the UK Competition and Markets Authority’s announcement that it would block the deal. DOJ is moving to vacate Judge Stark’s decision.