The Department of Justice has failed to establish that Sabre’s acquisition of Farelogix will substantially lessen competition, a Delaware federal court has ruled.
In an order issued on Tuesday, Judge Leonard Stark of the US District Court for the District of Delaware rejected the DOJ’s attempt to block Sabre’s $360 million purchase of Farelogix.
The court has sealed the entire opinion outside of its table of contents, which reveals that Judge Stark rejected the DOJ’s market definitions and found that “as a matter of antitrust law, Sabre and Farelogix do not compete in a relevant market”.
Sabre is one of three major global distribution systems that travel booking agencies use to search for and sell airline tickets. Farelogix sells technology to airlines that enables them to connect directly to travel agencies.
The Antitrust Division sued to block the merger in August, arguing that Sabre intended to eliminate a disruptive competitor through the acquisition. The agency said the merger would create anticompetitive effects in the US markets for booking services for airline tickets sold through traditional travel agencies and online travel agencies.
During a two-week trial beginning in January, the DOJ questioned Sabre executives on the company’s rationale for the acquisition and presented testimony from airline executives that described the loss of Farelogix as a “nightmare”.
Judge Stark concluded that the agency had “failed” to identify either a relevant product market or geographic market in which the two companies compete.
Even if the DOJ had established a presumption of competitive harm, the judge said the record does not “demonstrate a reasonable probability that the merger will substantially lessen competition”.
The division also failed to prove that barriers to entry will prevent adequate competition to Farelogix’s technology; that Sabre would eliminate Farelogix’s products or raise prices; and that the merger would harm innovation, Judge Stark held.
The analysis of the DOJ’s expert economist, Cornerstone Research’s Aviv Nevo, was “unpersuasive”, the court found.
In a statement, Sabre said the court’s ruling supports its view that the deal is not anticompetitive.
Sabre said it expects a final decision from the UK’s Competition and Markets Authority (CMA) later this week.
Last month, The CMA said it was concerned that the merger may diminish innovation in the airline technology industry and that blocking the deal may be the only means of resolving its competitive concerns.
Sabre and Farelogix have in turn rejected the notion that the CMA has jurisdiction over the transaction. They contend there is no basis for blocking the deal and have proposed commitments that would allow airlines to access all of Farelogix’s technology regardless of whether they are also a Sabre customer.
The Antitrust Division could not be reached for comment.