In this week’s article, we examine the recent case of VBR Tours, LLC [VBR] v. National Railroad Passenger Corp. [Amtrak] and Yankee Leisure Group, Inc. [Yankee], 2015 WL 5693735 (N.D. Ill. 2015) in which VBR, a tour operator, sued Amtrak and Yankee, a competing tour operator, alleging, inter alia, “a conspiracy to attempt to monopolize the travel package market (and) enter(ing) into a combination, contract and conspiracy”, all in violation of the Sherman Antitrust Act and the Illinois Antitrust Act. For another lawsuit between competitors see Livingston v. United States, 2016 WL 1274013 (D.S.C. 2016) involving access to the Cape Romain National Wildlife Refuge in South Carolina.
Terror Targets Update
New York, New York
In Santora, Callimachi & Goldman, Flagged Two Times in 2014, Ahmad Rahami Passed Scrutiny, wnytimes.com (9/22/2016) it was noted that nytimes.com “Five months later, when Mr. Rahami’s father told the police after a domestic dispute that he was concerned about his son having terrorist sympathies, federal agents again examined his travel history. And again, despite Mr. Rahami’s now having been flagged twice for scrutiny, the concerns were not found to warrant a deeper inquiry, one of the law enforcement officials said. Ahmed Rahami was not interviewed by federal agents. But now, the travel history of Mr. Rahami, who is accused of carrying out bombings in New York and New Jersey last weekend, has become a focus of investigations, a subject made all the more urgent by details contained in a notebook that suggests he drew inspiration largely from the Islamic State. In particular, Mr. Rahami cites a founding member of the Islamic State who called on Muslims around the world to take up whatever arms they could find and spill the blood of nonbelievers”.
San Bernardino, California
Perez-Pena & Goldman, ‘It Finally Clicked That This Wasn’t an Exercise’: Reports Recounts San Bernardino Shooting, nytimes.com (9/9/3026) it was noted that “A new report chronicles in vivid detail the Dec. 2 terrorist attack in San Bernardino, Calif., where Syed Rizwan and his wife, Tashfeen Malik, killed 44 people and wounded 24 others. The couple pledged allegiance to the Islamic State, committed a rampage and died hours later in a wild shootout with the police, when Mr. Farook was shot 25 times and Ms. Malik was shot 13 times. The report contains the first official account of how the killers were identified and tracked down…it reveals a wealth of specifics that had not been made public before, including the number of gunshots, and the horrors that officers and victims encountered”.
In Taub, How Countries Like the Philippines Fall Into Vigilante Violence, nytimes.com (9/11/2016) it was noted that “When campaigning for the Philippine presidency last summer, Rodrigo Duterte promised to kill so many criminals that ‘fish will grow fat’ in Manila Bay from feasting on their corpses. Since taking office on June 30, Mr. Duterte appears to be making every effort to meet that grisly goal. Over 1,8000 people have been killed by the police and vigilantes since then, and the wave of killings shows no sign of subsiding… What drives this explosion of extrajudicial violence-which, far from unique, bears striking parallels to previous waves of killings in Columbia, Mexico, Guatemala, Thailand and elsewhere?…It tends to begin, research suggests, with a weak state and a population desperate for security. Short-term incentives push everyone to bad decisions hat culminate in violence that, once it has reached a level as bloody as that in the Philippines, can nearly be impossible to stop”.
Self-Driving Vehicle Guidelines
In Seal & Miller, Self-Driving Vehicle Guidelines Welcomed by Regulators, Operators and Manufacturers, law.com (9/20/2016) it was noted that “State regulators, industry attorneys and vehicle manufacturers greeted the Federal Automated Vehicles Policy, published by the National Highway traffic Safety Administration and U.S. Department of Transportation on Tuesday, as a positive step toward providing clarity and preventing an undesirable patchwork of local laws….The 116-page policy… includes four major components: (1) a 15-point safety assessment that asks car makers to document where and how a vehicle is designed to function, how system data is recorded, what privacy and cybersecurity protections are built in and how vehicles are programmed to address potential ethical ‘dilemmas’ on the road; (2) A model state policy that covers licensing of drivers who operate autonomous vehicles, registration of driverless cars, liability and insurance; (3) Current federal rules that apply to software-driven cars, including the authority to exempt manufacturers from certain design requirements to enact new rules and recall vehicles or products that pose a substantial safety risk; (4) New regulations, some of which may require congressional approval, including pre-market approval of new products and technologies, oversight of post-sale software changes and enhanced data collection”.
A Self-Driving Uber
In Isaac, What It Feels Like to Ride in a Self-Driving Uber, nytimes.com (9/14/2016) it was noted that “For now, a few square miles in downtown Pittsburgh represent Uber’s dreams of a mobile future, in which people eschew car ownership in favor of hailing a safer, driverless ride directly from their smartphone. I experienced those self-driving ambitions firsthand this week, riding a Boron 6 for about an hour in light downtown traffic. On Wednesday, Uber rolled out a pilot program of its driverless cars to its most loyal customers in Pittsburgh, giving them the chance to hail an autonomous Uber for the first time. With the trial, a handful of test vehicles-Ford Fusions at first-will roam the streets, each car coming with a human safety engineer who has undergone training to reassure riders that the process is safe”.
Consumer Reports On Airlines
In Walker, Secrets to Stress-Free Flying, Consumer Reports, October 2016 p. 19, it was noted that “Last year, U.S. airlines raked in profits totaling $25.6 billion, a 241 percent increase from 2014, according to the DOT. They earned more than $18 billion in so called ancillary revenue, which includes all of those a la carte fees, as well as the sale of frequent flyer miles to the banks that issue their co-branded credit cards and commissions on hotel and car-rental bookings made on their websites, estimates IdeaWorksCompany, an airline consulting firm. Another fee, which most passengers aren’t aware they are paying, is a fuel surcharge. First leveled by the airlines in the 1990s…is still being added to some ticket prices today (sometimes under the generic label ‘carrier-imposed charges’) even though the cost of fuel has dropped precipitously…the airlines are also squeezing passengers by reducing the number of fee=free seats in economy. On United flights, for example, a 5 to 53 percent of the coach cabin seats offer extra leg room, for which a regular economy passenger pays an additional $9 to $299 per flight”.
Metro North Bar Cars Return
In Barron, Metro-North Getting Bar Cars Again, but Don’t Expect a Seat, nytimes.com (9/13/2016) it was noted that “To the list of famous things that have been discontinued only to be resurrected later-Marvel Comics, the Muppets and Twinkies, to name but three-add bar cars on the Metro-North Railroad…The mention of bar cars summoned memories of gray flannel and red ink, except that the bar cars were moneymakers, even in the darkest days of MetroNorth’s predecessor 50 years ago, the New York, New Haven and Hartford Railroad. Those were the days of chugging a beer while the train chugged alone. Or ordering a Manhattan at the train pulled out of Manhattan, or having a martini before it reached Mamaroneck”.
Free Wi-Fi Kiosks Unsavory
In McGheehan, Free Wi-Fi Kiosks Were to Aid New Yorkers. An Unsavory Side Has Spurred a Retreat, nytimes.com (9/14/2016) it was noted that “The Wi-Fi kiosks in New York were designed to replace phone booths and allow users to consult maps, maybe check the weather or charge their phone. But they have also attracted people who linger for hours, sometimes drinking and doing drugs and, at times, boldly watching pornography on the sidewalks”.
Native American Tourism Act
In Native American Tourism Act set to become law, eturbonews.com (9/13/2016) it was noted that the “Native American Tourism and Improving Visitor Experience (NATIVE) Act” has been passed by the Senate and the House and awaits the President’s signature.”’ This bill will empower native communities to tell their own stories and build their own economic opportunities…Visitors are increasingly seeking out a more authentic and historically rich travel experience”.
California Zip Line Fined
In Zip line with no emergency brakes fined $85K following serious rider injuries, eturbonews.com (9/15/2016) it was noted that “Cal/OSHA has cited Big Pines Ziplines $85,000 for serious and willful safety violations uncovered following an unreported rider accident that resulted in a major injury. Cal/OSHA investigators found that Big Pines let riders reach speeds of up to 55 mph on lines more than a quarter-mile long that had no effective emergency braking system. Cal/OSHA also learned that Big Pines continued to operate unsafe zip lines even after the division ordered them to stop…On August 9, 2014, a member of the public suffered a broken leg while riding one of Big Pines’ zip lines in Wrightwood (and) never reported the injury to Cal/OSHA, as is required by law”.
Fire Hazards On Airliners
In Negroni, As More Devices Board Planes, Travelers Are Playing With Fire, nytimes.com (9/11/2016) it was noted that “The (FAA) citing fire hazards, has warned against using Samsung Galaxy Note 7 smartphones on aircraft. Three Australian airlines and the German carrier Lufthansa have outright banned their use onboard. But the threat of airliner fires is not limited to Samsung devices…Qantas…had an onboard fire during a trans-Pacific flight this year when a passenger’s cellphone was crushed in the mechanism of a business-class seat and the phone’s lithium-ion battery ignited”.
Travel Law Article: The VBR Case
In the VBR case the Court noted that “Plaintiff alleges that tour operators purchase tickets from Amtrak and combine them with other components, such as hotels, meals, local transportation, tour guides and admission to tourist attractions, to create a travel package. They sell these travel packages to consumers through two distributional channels. In the first…Amtrak sells tickets to tour operators (which) then sell travel packages to travel agents (which) resell the travel packages to consumers. In the second…Amtrak sells tickets to tour operators, who then sell their package tours directly to consumers. Tour operators profit from (1) commissions on tickets, provided by Amtrak and (2) a mark-up on the total cost of a package. Travel agents…profit by receiving a commission from tour operators”.
“Amtrak owns its own brand of travel packages called Amtrak Vacations. Since 2006, Amtrak has contracted with Yankee, its national tour operator, to run operations under its brand, compensating Yankee through a 19% commission on tickets. Meanwhile, other tour operators have operated their own brands, historically receiving a lower commission. Plaintiff alleges that toward the end of 2007, Amtrak partnered with a travel agent consortium, Vacation.com, to launch an online booking tool called Rail Agent.
“Travel agents and tour operators who were members of Vacation.com could book tickets directly with Amtrak through Rail Agent. By (doing so), they could earn an 8% commission on commissionable trains from Amtrak or a 10% commission if the booking were for a party of 20 or more. The could receive up to 3% additional commission-a ‘commission override’-depending on the growth of their quarterly revenues from the sale of Amtrak tickets. Plaintiffs used these commission to expand its tour offerings, grow its business and increase Amtrak’s sales, becoming one of Amtrak’s ‘best promoters’ based on ‘exceptional customer service and its own marketing investments and talent’”.
“In February 2013, Amtrak submitted a request for proposals for its national tour operator contract. Plaintiff alleges that it submitted a proposal including two key terms. ‘The first key term in VBR’s proposal was a commission rate of 8%, not the 19% or better rate Amtrak had been paying Yankee’. This lower commission allegedly could have saved Amtrak approximately $3 million in commissions over three years. ‘The second key term…was that the commission rate of 8% was to be paid to any travel agent or tour operator, under VBR’s aegis or not, whenever they favored Amtrak with a rail ticket purchase’”.
Amtrak Rejects VBR Proposal
“Amtrak rejected VBR’s proposal, opting for Yankee’s instead. In its contract with Amtrak, Yankee agree to provide extensive services…As compensation for Yankee’s services, Amtrak agreed to provide a commission on the Amtrak rail and Amtrak accommodations portion of a reservation. The term of the contract was five years (with) an option for Amtrak to extend twice for year each time”.
VBR Not Happy
“Plaintiff alleges that Amtrak chose unwisely. There was ‘no sensible reason to pay Yankee $3 million more for poorer performance in contradistinction to the better service that VBR had proven itself capable of, subjectively, and that would cost Amtrak and the American taxpayer $3 million less…. When Plaintiff lost the contract, it contacted Amtrak and learned that ‘Amtrak had not even considered the (at least) $3 million difference’. Amtrak allegedly explained that it had identified Plaintiff’s proposal as nonresponsive. Amtrak subsequently announced that, effective November 1, 2013, it would stop paying commissions to all travel agents and tour operators with two exceptions: (1) Yankee and (2) Vacation.com and AAA, but only until the two associations’ commission contracts expired…Yankee allegedly told VBR that ‘Yankee will enjoy a complete monopoly as all other travel agents and tour operators will be driven out of the Amtrak leisure travel package business’”.
VBR’s Antitrust Complaint
“The complaint alleged antitrust injury through the following mechanism: Paying a 19% or better commission to Yankee while paying VBR, other tour operators and travel agents no direct commission will result in all of those entities other than Yankee departing the market of selling railway leisure tickets. While in the short term consumers might benefit from lower prices for railway leisure packages from Yankee (which will be able to undercut the competition on price to achieve a monopoly in the market), the long-term effect is to remove competition, resulting in higher practices and worse service for consumers. Plaintiff also alleges that Amtrak’s new commission system will cause antitrust injury by reducing Plaintiff’s revenue and hampering its ability to ‘innovate through better technology and marketing’”
No Antitrust Injury
“The Court previously dismissed Plaintiff’s complaint, finding that it failed plausibly to allege antitrust injury. To state an antitrust claim under the Sherman Act, a private plaintiff must allege antitrust injury-that is, ‘injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful’…More specifically, a plaintiff must ‘show that its loss comes from acts that reduce output or raise prices to consumers’…The Court found that Plaintiff failed to plausibly allege antitrust injury because it alleged that Yankee would reduce prices without alleging that those prices would be predatory. The Court noted that ‘[l]ow pries benefit consumers regardless of how those prices are set, and so long as they are above predatory levels, they do not threaten competition. Hence, they cannot give rise to antitrust injury’”.
Plaintiff Seeks Reconsideration
“Plaintiff moved for reconsideration, arguing that it did not and need not allege predatory pricing because its theories of anticompetitive conduct were a refusal to deal, denial of an essential facility, and exclusive dealing, not predatory pricing…Given its clarified understanding of the factual allegations, the Court now addresses whether Plaintiff’s theory of anticompetitive conduct plausibly gives rises to antitrust violation and antitrust injury”.
Refusal To Deal
Under appropriate circumstances a refusal to deal may rise to the level of anticompetitive conduct [see Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) (refusal to deal with competitor even if it offered to pay retail prices suggesting that decision was ‘irrational but for its anticompetitive effect’”]. Distinguishing Aspen the Court noted that Amtrak “continues to offer Amtrak tickets to Plaintiff-just not at Plaintiff’s desired price. Put differently, the commissions are the functional equivalent of a contingent discount offered to wholesalers. When Amtrak removed Plaintiff’s commission, it removed the discount, raising the cost of Plaintiff’s tickets from wholesale to retail prices”.
Denial Of Essential Facilities
“The essential facilities doctrine as articulated in MCI Communications Corp. Am. Tel. & Tel. Co., 708 F. 2d 1081 (7th Cir. 1983) says that ‘firms controlling an essential facility [have] the obligation to make the facility available on non-discriminatory terms’. The purpose of the doctrine is to prevent a monopolist from using its ‘control of an essential facility (sometimes called a ‘bottleneck’) [to] extend monopoly power from one stage of production to another, and from one market into another’…Plaintiff fails to state (such a claim since) a plaintiff must allege four elements: ‘(1) control of the essential facility by a monopolist; (2) a competitor’s inability practically or reasonably to duplicate the essential facility; (3) the denial of the use of the facility; and (4) the feasibility of providing the facility’”.
“Plaintiff’s essential facilities claim is problematic for three reasons. First, it improperly defines the essential facility as Amtrak tickets at wholesale prices, rather than Amtrak tickets alone. Case law does not support a definition of an essential facility that includes a price term…Second, Plaintiff fails to plausibly allege…’the denial of the use of the facility to a competitor’…Consistent with this statement, Seventh Circuit case law has required an absolute denial or its functional equivalent…Plaintiff (here) fails to explain why Amtrak’s commission to Yankee precludes Plaintiff from purchasing Amtrak tickets, or why access at retail prices amounts to a de facto denial of access”.
“For many of the same reasons, the Court continues to believe that Plaintiff fails to allege antitrust injury-in other words, ‘that its loss come from acts that reduce output or raise prices to consumers…To the extent that Plaintiff suggests that reduced innovation without reduced output or increased prices creates antitrust injury, the Court is unpersuaded…But as long as Yankee’s prices are not predatory, antitrust law is not concerned with Plaintiff’s lower profit margins…Plaintiff fails to allege antitrust injury…the Court denied Plaintiff’s motion to reconsider”.
Justice Dickerson has been writing about travel law for 39 years including his annually updated law books, Travel Law, Law Journal Press (2016) and Litigating International Torts in U.S. Courts, Thomson Reuters WestLaw (2016), and over 400 legal articles many of which are available at nycourts.gov/courts/9jd/taxcertatd.shtml. Justice Dickerson is also the author of Class Actions: The Law of 50 States, Law Journal Press (2016). For additional travel law news and developments, especially in the member states of the EU, see IFTTA.org.
This article may not be reproduced without the permission of Thomas A. Dickerson.