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DOJ and NY Attorney General Object to Tour Bus Joint Venture
Practical Law Legal Update 2-523-2353 (Approx. 4 pages)
DOJ and NY Attorney General Object to Tour Bus Joint Venture
by PLC Antitrust
| Published on 20 Dec 2012 • USA (National/Federal) |
The Department of Justice (DOJ) and New York State Attorney General filed suit to dissolve the joint venture (known as Twin America LLC) between New York City tour bus operators Coach, USA Inc. and City Sights LLC .
On December 11, 2012, the DOJ issued a press release announcing that it and New York State Attorney General (NYSAG) filed a complaint against the joint venture between New York City tour bus operators Coach, USA Inc. and City Sights LLC, known as Twin America LLC, for violating:
- Section 1 of the Sherman Act.
- Section 7 of the Clayton Act.
- Certain New York state laws.
In their complaint, the DOJ and NYSAG are seeking to dissolve the joint venture and obtain other relief to restore competition in the New York City hop-on, hop-off bus market.
The complaint alleges that:
- Before the joint venture, fierce competitors Coach and City Sights had a combined share of nearly 99% of the hop-on, hop-off bus market in New York City.
- In mid-2008, Coach approached City Sights with a plan to combine forces to improve profitability and allow the companies to raise fares by 10%.
- In March 2009, the parties formed Twin America and increased hop-on, hop-off fares from $49 to $54.
The complaint also alleges that the joint venture violates antitrust laws by:
- Eliminating competition between Coach and City Sights, who had previously proclaimed themselves each others' most significant competitor.
- Creating a virtual monopoly in the hop-on, hop-off tour bus market in New York City, leaving only one remaining competitor with one percent of the market.
- Increasing the prices of hop-on, hop-off bus tours above competitive levels.
In addition, the complaint alleges that significant barriers to entry exist that prevent future entry or expansion sufficient to counteract the joint venture, including:
- Obtaining:
- required approval from the New York City Department of Transportation; and
- access to hard-to-come-by New York City attraction stops.
- Acquiring a large fleet of tour buses.
- Achieving brand recognition.
The joint venture was not reportable under the HSR Act and was therefore not detected until after it began. The NYSAG began investigating the joint venture shortly after its formation. In July and August 2009, it issued subpoenas to both Coach and City Sights. However, the parties successfully delayed the investigation by belatedly filing their joint venture with the Surface Transportation Board (STB). Because they contended the STB had exclusive jurisdiction, approval of the joint venture by the STB would then exempt it from antitrust laws.
The STB denied approval of the joint venture in February 2011 due to lack of public benefits and competitive restraints. In January 2012, the STB denied the parties' requests for reconsideration, allowing the government to file its pending complaint.