Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ill.: Amtrak properly dismissed from ticket monopolization suit, (Sep 29, 2015)

By Greg Hammond, J.D.

National Railroad Passenger Corp. (Amtrak) was correctly dismissed from monopolization and refusal to deal claims, the federal district court in Chicago has determined. In denying a tour operator’s motion for reconsideration of a dismissal order, the court concluded that the tour operator failed to state a claim based on its refusal to deal, essential facility, and exclusive dealing theories (VBR Tours, LLC v. National Railroad Passenger Corp., September 28, 2015, Dow, R.).

VBR Tours, LLC and Yankee Leisure Group, Inc. are tour operators that sell Amtrak leisure travel packages to vacation destinations in the United States. VBR filed suit against Amtrak and Yankee, alleging that Amtrak is the only long-distance leisure passenger rail service in the country and that its action to stop paying all other travel agents and tour operators, except Yankee, direct commissions was anticompetitive. Specifically, VBR claimed that Amtrak and Yankee violated the Sherman Act and Illinois Antitrust Act by: (1) monopolizing and refusing to deal, because access to railway leisure tickets with payment of a commission is an essential facility for VBR as a tour operator, and the exclusive commission paid to Yankee demonstrates Amtrak’s refusal to deal with VBR; (2) conspiring to attempt to monopolize, because Yankee agreed to Amtrak’s preferential 19 percent commission; and (3) participating in a concerted action to restrain trade and price discrimination, because Amtrak will pay Yankee at least a 19 percent commission while giving Yankee’s competitors no commission. The court granted dismissal of the antitrust claims in January 2015, and VBR has moved for reconsideration.

Refusal to deal. The court first noted that Amtrak has not terminated its dealings with VBR, and that, to the contrary, Amtrak continues to offer tickets to VBR—just not at VBR’s desired price. Second, VBR essentially pleaded itself out of court by attaching the Amtrak-Yankee contract to its complaint, the court found. By attaching the contract, VBR provided valid business reasons for Amtrak to select Yankee as its tour operator and pay Yankee through commissions. The court noted that a valid reason to provide compensation through commissions to Yankee appears on the face of the contract: by making payment contingent on sales, Amtrak created an incentive for Yankee to sell as many tickets as possible, generating more value for Amtrak. VBR consequently failed to state a monopolization claim based on a refusal to deal that was irrational but for its anticompetitive effects.

Essential facility. VBR also failed to state an essential facilities claim, the court determined. First, VBR improperly defined the essential facility as Amtrak tickets at wholesale prices, rather than Amtrak tickets alone. Second, VBR failed to plausibly allege complete denial of access to Amtrak tickets because it failed to explain why Amtrak’s commission to Yankee precluded VBR from purchasing Amtrak tickets, or why access at retail prices amounts to denial of access. Lastly, the court reiterated that VBR pleaded itself out of court by attaching the Amtrak-Yankee contract, thereby alleging a legitimate business or technical reason for Amtrak’s conduct.

Exclusive dealing. VBR’s theory of anticompetitive conduct based on exclusive dealing failed for two reasons, according to the court: (1) there is no exclusivity because Amtrak continues to sell tickets to tour operators other than Yankee; and (2) even if exclusivity existed, VBR still failed to state a claim because Amtrak did not increase its surplus by hiring Yankee and paying it in the form of an exclusive commission. Rather, Amtrak could have achieved the same effect by acquiring or creating its own tour operator.

Pacific Bell. The court next determined that VBR failed to state a claim under Pacific Bell Tel. Co. v Linkline Commc’ns, Inc., 555 U.S. 438 (2009). Similar to the plaintiff in Pacific Bell, VBR failed to allege a duty to deal at the wholesale level, and failed to allege predatory pricing at the retail level. The court concluded that unless VBR can allege that Yankee will adopt below-cost prices with a dangerous probability of recoupment, it can only show lower prices that benefit consumers.

Antitrust injury. Allegations that the Amtrak-Yankee deal would reduce innovation were not sufficient to allege antitrust injury, according to the court, because either increased price or reduced output is necessary to show antitrust injury. Although VBR alleged it will have less money to develop its products because Yankee will reduce prices, the court found that as long as Yankee’s prices are not predatory, antitrust law is not concerned with VBR’s lower profit margins.

Conspiracy. VBR also failed to state a claim for conspiracy in restraint of trade. Specifically, the court found that Amtrak uses Yankee to accomplish what it could do alone, making the Amtrak-Yankee relationship unlikely to increase Amtrak’s monopoly surplus, raise prices, or decrease output. The defendants’ conduct consequently did not create antitrust injury and is of no “competitive significance,” the court concluded.

The Illinois Antitrust Act claims were properly dismissed along with the Sherman Act claims.

The case number is 14-cv-00804.

Attorneys: Paul J. Kozacky (Kozacky Weitzel McGrath, PC) for VBR Tours, LLC. Diane Green-Kelly (Reed Smith LLP) for National Railroad Passenger Corp. Kenneth L. Racowski (Buchanan Ingersoll & Rooney PC) for Yankee Leisure Group, Inc.

Companies: VBR Tours, LLC; National Railroad Passenger Corp.; Yankee Leisure Group, Inc.

Cases: Antitrust IllinoisNews