Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Tour operators alleged to have boycotted competitor, (Jul 31, 2014)

By Linda O’Brien, J.D., LL.M.

Two organizations of independent tour operators unlawfully conspired to monopolize the market for offering tour guide services to cruise ship passengers at the San Juan port by staging a boycott to prevent a competing tour operator from entering and providing services at the port, according to a complaint filed in the federal district court of San Juan (Rico Sun Tours, Inc. v. Edgard Capeles Vargas, July 30, 2014).

Rico Sun Tours (RST) is in the business of offering tours and excursions to tourists visiting Puerto Rico who arrive by airplane or in cruise ships at the San Juan port. San Juan Happy Tours (Happy Tours) and United Tour Guides Cooperative of Puerto Rico (Cooperative) are organization composed of independent tour operators that directly compete with RST.

The complaint alleges that Puerto Rico entered into an economic recession which continues today. The tourism industry is one of the few economic sectors that has shown gradual recovery and, as a significant contributor to the Puerto Rico’s economy, is considered one of the country’s main economic recovery drivers.

According to the complaint, RST and Disney Cruise Line entered into a shore excursion services agreement under which RST would provide offshore tours and excursions to Disney passengers arriving at San Juan port. In July 2013, RST agreed to provide offshore tours and excursions to a Disney ship rerouted to San Jose. RST subcontracted with operators affiliated with San Juan Happy Tours for additional vehicles to meet the demand of Disney’s passengers that booked tours and excursions through RST. The Happy Tours operators formed a conspiracy with labor union representatives and operators affiliated with the Cooperative to impede RST from entering and working at the San Juan port.

The day before the Disney ship arrived in port, the Happy Tours operators canceled their subcontracts with RST, stating that they had been threatened by the union to stop working for RST. RST contacted the union and was informed that Happy Tours operators were not authorized to work with RST and the San Juan port belonged to Happy Tours and the Cooperative, the complaint charges.

The complaint states that, when the Disney ship docked at the San Juan pier, RST began the process of boarding passengers who had paid for RST tours and excursions. The Happy Tours and Cooperatives staged a boycott at the pier, shouted insults and threats, and blocked the dock exits. Due to the boycott, threats of violence, and damage to RST vehicles, RST canceled the tours and excursions booked for that day. As a result, Disney returned passengers’ money and RST did not obtain any revenue or recover the costs incurred in the organization of the previously booked tours and excursions. For their actions, the Happy Tour and Cooperative operators were charged and pleaded guilty to the crime of sabotage of essential services.

The defendants conspired to monopolize the market for the provision of offshore tours and excursions to cruise ship passengers arriving at the San Juan port and to prevent RST from competing in the offering of those services. The suppression of competition has prevented cruise ship passengers from enjoying lower prices and additional tour and excursion options, the complaint alleged.

The cruise ship passenger market is highly concentrated and there are significant barriers to market entry that prevent competitors from rapidly and meaningfully entering into the San Juan port market. A new tour operator must obtain a franchise from the state tourism company and the application may be opposed by existing operators through a process that is contested, burdensome, and protracted.

RST asserts claims for monopolization, horizontal group boycott, unfair competition, tortuous interference with contract, and violations of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, compensatory damages, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 3:14-cv-01583.

Attorneys: Cesar T. Alcover Acosta and Sarika J. Angula Velazquez (Casellas Alcover & Burgos, P.S.C.

Companies: Rico Sun Tours, Inc.; San Juan Happy Tours, Corp.; United Tour Guides Coop of Puerto Rico

News: Antitrust PuertoRicoNews