The U.S. Department of Justice and the New York State Attorney
General have filed an antitrust lawsuit to dissolve a joint venture
between two New York City tour bus companies that effectively
merged their operations and eliminated competition between
them. This enforcement action demonstrates how collaboration
between competitors, short of a full merger, can attract antitrust
scrutiny. It also highlights how the most effective evidence,
for good or bad, often is a company's own documents.
Coach USA Inc. and City Sights LLC both provide "hop-on,
hop-off" bus tours in New York City. According to the
complaint, they once competed fiercely for the business of NYC
tourists. In early 2009, the two competitors formed a joint
venture, Twin America, into which each contributed all of its New
York City hop-on, hop-off bus tour operations and assets. The
lawsuit claims that this combination created a monopoly in the
"New York City hop-on, hop-off bus tour market" and
enabled Coach and City Sights to increase prices to consumers by 10
percent. In fact, upon forming the joint venture, both
companies immediately implemented price increases, raising base
fares by $5.
The
complaint relies on statements from the companies' own
documents about their intentions for the joint venture and their
views of the market. According to the complaint, one Coach
board presentation described a key benefit of the joint venture to
be " improved profitability," because it assumed a
"10% fare increase." The presentation explained
that, without the transaction, there would be no fare increase
"due to competition." In documents pre-dating the
joint venture, Coach and City Sights each identified the other as
its "sole" or "main" competitor. To
support the complaint's allegation that "hop-on,
hop-off" is in a separate market from other bus service, DOJ
cites a threatened lawsuit between City Sights and Coach, in which
City Sights itself alleged Coach had monopolized the market for
"Double Decker, Hop-on, Hop-off Bus Tours" and identified
Coach and City Sights as the only current competitors in that
market.
The complaint also alleges that the companies delayed an antitrust
investigation by the New York Attorney General by appealing to the
federal Surface Transportation Board to approve the transaction,
which would have exempted the transaction from the antitrust
laws. After more than two years of review, the STB rejected
the parties' request.
The case provides a useful reminder that joint ventures are
subject to antitrust review and may be challenged where they
substantially lessen competition between the parties. Even
transactions that are not subject to the premerger reporting
requirements of the Hart-Scott-Rodino Act may be investigated and
ultimately challenged by federal and state antitrust
enforcers. Parties to a transaction should not assume that a
non-reportable or even completed transaction is untouchable.
Finally, loss of competition between horizontal competitors is a
central antitrust concern and most likely to attract antitrust
enforcement – especially where company documents suggest
their conduct will result in increased prices, reduced capacity,
loss of innovation, or other anticompetitive effects.
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