The jury has returned its verdict in US Airways's $134 million antitrust lawsuit against travel technology giant Sabre.
The airline, obelow owned by American Airlines Group, persuaded a jury in a US federal court that Sabre's 2011 contract provisions violated US antitrust law. Sabre must pay the company $5 million in damages, which will be trebled, plus attorneys’ fees.
The airline's lawyers successfully argued that Sabre had threatened it, saying that it had to accept a contract on Sabre's terms or else be cut off from a network of thousands of travel agents worldwide who depend on the inventory that the tech giant provides via desktop software.
During contract negotiations, Sabre never offered a deal for less than full-content, the airline said. Full-content contracts typically require an airline to provide the same fares it offers via any other channel, such as its own website, to Sabre, too.
The jury found that Sabre's action violated antitrust law. It only awarded a sliver of the damages the airline had hoped for. But the ramifications of the decision could affect hundreds of millions of dollars of future contract decisions worldwide.
The case — which has gone on for six years in different forms in the US District Court for the Southern District of New York — has been closely watched in the industry because full-content contracts are widespread between major airlines and the three major global distribution systems (Sabre, Amadeus, and Travelport), who act as middlemen for plane ticket sales worldwide.
The 11-person jury sat through months of testimony about the airline's claim that Sabre acted in ways that squelched technology competitors from appearing. The lack of competition allegedly kept the fees high, and the fees were allegedly passed on to consumers who buy tickets via higher fares.
The jury had to decide if Sabre abused its dominant market position in the US to force US Airways to agree to its contract terms.
During the trial, Sabre conceded that it has the largest market share of the three GDSs in North America.
But the Southlake, Texas-based company argued, among other things, that its scale brought enough efficiencies and other benefits to the airlines, to the agencies, and to consumers.
Sabre argued that its fees are justified relative to the cost an airline would incur to distribute its fares comparably by other methods. It said consumers benefited by agents having a full array of options for price comparison.
Yet the airline won its case.
UPDATE: 5:05pm ET:
Sabre has issued a statement on the case:
"The jury sorted through a complicated case that involved hypothetical economic theories, intricate technology discussions, and months of testimony....
"We will continue to defend the interests of consumers who seek transparent and efficient shopping, booking and servicing of travel; we therefore expect to file a motion to set aside the verdict immediately, which would award $5.1 million in single damages to US Airways. To the extent the Court declines to grant the motion to set aside the verdict, we will pursue an appeal.
"Sabre believes it acted lawfully and fairly, and we do not anticipate any impact to existing offerings. In the meantime, we will continue to work with American Airlines, focusing our efforts on helping them drive business success with smart technology."
American Airlines has issued a statement, too:
“We are very pleased with the jury’s decision and greatly appreciate the time and effort they expended during the course of this eight-week trial.
"We have long contended that the contractual provisions at issue – provisions that Sabre has made a condition to participate in its global distribution system – have reinforced Sabre’s market power, stymied competition, and harmed us and the travelers we serve.
"Now that the jury has agreed with us, we hope to see changes in the way our services are sold, and we expect technology and innovation will create even better and more transparent ways for us to distribute our products.”
US Airways also argued that Sabre illegally conspired with Amadeus and Travelport to take actions that dampened competition and kept their fees high.
The jury had to look at claims that the GDSs worked to deliberately not compete for the airlines’ distribution business by offering lower booking fees in exchange for lower airline fares or better airline amenities, thereby harming competition and keeping fees and fares higher than they should have been.
The jury found no proof of conspiracy.
More than 100 people were deposed in the case. In a celebrity touch, one of US Airways' expert witnesses was winner of the Nobel prize Joseph Stiglitz.
But the airline's case wasn't easy. For instance, in one pre-trial transcript, a Sabre lawyer said to the judge that the airlines' main economist experts, including the Nobel prize winner, "could not identify a single competitor foreclosed from this market due to the complained of contract provisions."
The airline had wanted to avoid a jury trial, partly out of concern that the case would be too complicated and jurors might have more of a negative emotional reaction to airlines than to a faceless tech company.
Few industry observers expected the two companies to let the case go to a jury. This autumn, Sabre had offered a financial settlement without admitting liability. But the offer was rejected.
For details of the trial itself, the best coverage has been at The Company Dime.
In 2012, American Airlines settled similar litigation against Sabre. Tnooz estimated that deal to have been worth $280 million. In that case, American was more focused on its attempt to create a direct connection with corporate travel agents, which Sabre's rules prohibited.
Earlier than that, Northwest Airlines (since merged with Delta) had a similar case against Sabre, with a twist that it wanted to charge extra for bookings done through a middleman — thus running afoul of Sabre's contract rules. That case also settled out of court.
Given Sabre's plans to appeal, it is unclear what impact this will have on future full-content provisions in contract negotiations. Presumably, discussions will change in the short-term.
NB: Image by byvalet/BigStock