Unit 16. Sabre/Farelogix

MERGER ANTITRUST LAW Unit 16: Sabre/FareLogix Class 26

Professor Dale Collins Georgetown University Law Center Fall 2020 Unit 16 SABRE/FARELOGIX

Table of Contents

Sabre/FareLogix Press Release, Sabre Corporation & Farelogix, Sabre Enters Agreement to Acquire Farelogix, Expanding Its Airline Technology Portfolio and Accelerating Its Strategy to Deliver Next-Generation Retailing, Distribution and Fulfillment Capabilities (Nov. 14, 2018)...... 4 Sabre Corporation. Investor Presentation (nov. 14, 2018) ...... 7 U.S. Dep’t of Justice, Antitrust Div., News Release, Justice Department Sues to Block Sabre’s Acquisition of Farelogix (Aug. 20, 2019) ...... 23 Complaint, United States v. Sabre Corp., No. 1:19-cv-01548-UNA (D. Del. Aug. 20, 2019) (assigned to Judge Leonard P. Stark) ...... 24 Opinion, United States v. Sabre Corp., No. 1:19-cv-01548-UNA (D. Del. Apr. 8, 2020) (reported at 452 F. Supp. 3d 97 (D. Del. 2020), vacated, No. 20-1767, 2020 WL 4915824 (3d Cir. July 20, 2020 ...... 45 Press Release, Competition & Mkts. Auth., CMA Blocks Airline Booking Merger (Apr. 9, 2020) ...... 142 Press Release, Sabre Corporation, Sabre Corporation Issues Statement on its Merger Agreement with Farelogix (May 1, 2020) ...... 144

T-Mobile/Sprint Opinion and Order, New York v. Deutsche Telekom AG, No. 1:19-cv-05434 (S.D.N.Y. Feb. 11, 2020) (excerpts pp. 1-10, 167-70) ...... 146

Unit 16 SABRE/FARELOGIX

Sabre/FareLogix

3 5/1/2020 Sabre enters agreement to acquire Farelogix, expanding its airline technology portfolio and accelerating its strategy to deliver next-generat…

PRESS RELEASE Sabre enters agreement to acquire Farelogix, expanding its airline technology portfolio and accelerating its strategy to deliver next-generation retailing, distribution and fulfillment capabilities

Agreement to acquire innovative airline technology company expected to speed the industry toward end-to-end NDC-enabled capabilities

SOUTHLAKE, TEXAS AND MIAMI – NOV 14, 2018 – Sabre Corporation (NASDAQ: SABR) today announced that it has entered into an agreement to acquire Farelogix, a recognized innovator in the travel industry with advanced offer management and NDC order delivery technology used by many of the world’s leading airlines. Sabre expects that upon close, the acquisition will allow the company to accelerate delivery of its end-to-end NDC-enabled retailing, distribution and fulfillment solutions.

Based in Miami, Farelogix provides a suite of SaaS solutions that enables carriers to dynamically create, control, optimize and deliver personalized and differentiated offers across sales channels. These airline- controlled retailing, merchandising and distribution capabilities complement Sabre’s existing retailing and merchandising solutions and future product roadmap.

“Farelogix’s investments in offer management and NDC order delivery will help us accelerate our plans to deliver future-ready retailing, distribution and fulfillment solutions that unlock increased value for the industry,” said Sean Menke, president & CEO of Sabre. “By integrating Farelogix’s capabilities into Sabre’s leading airline technology platform, we’ll be able to offer the innovative and comprehensive solutions that airlines require, backed by best-in-class technology and the deep expertise that our teams bring to market.”

Building upon Farelogix’s GDS- and PSS-agnostic capabilities, Sabre expects to drive faster innovation in the dynamic and highly competitive airline IT space to enable airlines to accelerate their own growth and profitability while benefiting customers across the travel ecosystem.

“For the past few years, Farelogix and Sabre have worked together with shared customers to implement our complementary technologies to solve some of the industry’s toughest challenges. Today’s announcement is a natural evolution of the successful, ongoing collaboration between our two companies,” said Jim Davidson, CEO of Farelogix. “Sabre shares our vision for innovation and has the 4 https://www.sabre.com/insights/releases/sabre-enters-agreement-to-acquire-farelogix-expanding-its-airline-technology-portfolio-and-accelerating-its-str… 1/4 5/1/2020 Sabre enters agreement to acquire Farelogix, expanding its airline technology portfolio and accelerating its strategy to deliver next-generat… leading technology, resources, and global presence to help us scale our solutions and grow our customer base.”

Sabre’s agreement to acquire Farelogix is the next step in its broader effort to become the preferred platform at the center of the business of travel. Among other innovations, Sabre recently launched its digital commercial airline platform with several carriers, delivering end-to-end personalized retailing capabilities to maximize revenue and create a differentiated brand experience. In addition, through its Beyond NDC program, Sabre is partnering with a host of airlines and travel agencies to drive the travel industry forward through the design, development, integration and testing of end-to-end capabilities to process NDC-enabled offers and orders. The acquisition and integration of Farelogix technology will help Sabre accelerate these innovation efforts.

At closing, Sabre will purchase Farelogix for approximately $360 million, funded by cash on hand and revolver borrowing. Farelogix expects full year 2018 revenue of approximately $40 million. The acquisition is expected to be neutral to Sabre’s 2019 Adjusted EPS.

The acquisition is subject to customary closing conditions and regulatory approvals and is expected to close in late 2018 or early 2019. Until closing, Sabre and Farelogix will continue to operate as separate businesses with no immediate changes to daily operations.

Conference Call

Sabre will conduct a conference call today at 11 a.m. ET. The live webcast and accompanying slide presentation can be accessed via the Investor Relations section of the Sabre website, investors.sabre.com. A replay of the event will be available on the website for at least 90 days following the event.

About Sabre

Sabre Corporation is the leading technology provider to the global travel industry. Sabre's software, data, mobile and distribution solutions are used by hundreds of airlines and thousands of hotel properties to manage critical operations, including passenger and guest reservations, revenue management, flight, network and crew management. Sabre also operates a leading global travel marketplace, which processes more than $120 billion of estimated travel spend annually by connecting travel buyers and suppliers. Headquartered in Southlake, Texas, USA, Sabre serves customers in more than 160 countries around the world.

About Farelogix

Farelogix is a recognized leader and innovator in the travel industry. Its groundbreaking technology is modernizing the airline commerce and distribution landscape, and is used by several of the world’s leading airlines. The company’s flagship Airline Commerce Gateway is a technology platform comprised of fully integrated and optimized components for airline-controlled distribution, shopping, pricing, merchandising, and retailing across channels. Recognized for its pioneering role in creating the distribution innovation known today as NDC, Farelogix now provides NDC (Level 3 certified) distribution for more than 20 airlines with connectivity to 10 major PSS systems. Farelogix is headquartered in

5 https://www.sabre.com/insights/releases/sabre-enters-agreement-to-acquire-farelogix-expanding-its-airline-technology-portfolio-and-accelerating-its-str… 2/4 5/1/2020 Sabre enters agreement to acquire Farelogix, expanding its airline technology portfolio and accelerating its strategy to deliver next-generat… Miami, Florida, with offices in Toronto, Canada; and Dubai, United Arab Emirates. For additional information, visit farelogix.com.

Forward-looking statements

Certain statements in this release are forward-looking statements about trends, future events, uncertainties and our plans and expectations of what may happen in the future. Any statements that are not historical or current facts are forward-looking statements. In many cases, you can identify forward- looking statements by terms such as “expect,” “will,” “expect,” “may,” “anticipate” or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Sabre’s actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. The potential risks and uncertainties include, among others, the closing, integration and effects of the acquisition described in this release, the financial performance of the company expected to be acquired, dependency on transaction volumes in the global travel industry, particularly air travel transaction volumes, the recurring nature of revenue streams, maintenance of the integrity of our systems and infrastructure and the effect of any security breaches, reliance on third parties to provide information technology services, implementation of software solutions, exposure to pricing pressure in the Travel Network business, the implementation and effects of new or renewed agreements, the effects of the implementation of new accounting standards, travel suppliers' usage of alternative distribution models, failure to adapt to technological advancements, competition in the travel distribution market and solutions market, the implementation and results of our cost reduction and business alignment program, dependence on establishing, maintaining and renewing contracts with customers and other counterparties and collecting amounts due to us under these agreements, dependence on relationships with travel buyers, changes affecting travel supplier customers, our ability to recruit, train and retain employees, including our key executive officers and technical employees, our collection, processing, storage, use and transmission of personal data and risks associated with PCI compliance, adverse global and regional economic and political conditions, including, but not limited to, economic conditions in countries or regions with traditionally high levels of exports to China or that have commodities-based economies and the effect of "Brexit" and uncertainty due to related negotiations, risks arising from global operations, reliance on the value of our brands, the effects of litigation, failure to comply with regulations, use of third-party distributor partners, the financial and business effects of acquisitions, including integration of these acquisitions, and tax-related matters, including the effect of the Tax Cuts and Jobs Act. More information about potential risks and uncertainties that could affect our business and results of operations is included in Part I, Item 1A, "Risk Factors" in Sabre's Annual Report on Form 10-K for the year ended December 31, 2017, in "Risk Factors" in Part II, Item 1A of Sabre's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, and in subsequent public statements or reports we file with or furnish to the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. Unless required by law, Sabre undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date they are made.

Media Contact: [email protected] Investor contact: [email protected]

6 https://www.sabre.com/insights/releases/sabre-enters-agreement-to-acquire-farelogix-expanding-its-airline-technology-portfolio-and-accelerating-its-str… 3/4 Sabre to Acquire Farelogix

November 14, 2018

Forward-looking Statements Certain statements herein are forward-looking statements about trends, future events, uncertainties and our plans and expectations of what may happen in the future. Any statements that are not historical or current facts are forward-looking statements. In many cases, you can identify forward-looking statements by terms such as “anticipate,” “opportunity,” “will,” “expect,” “help,” “estimate,” “believe,” “well-positioned,” “potential,” “progress,” “seek,” “momentum,” “plan,” “project,” “guidance,” “outlook,” “may,” “should,” “would,” “intend,” or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Sabre’s actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward- looking statements. The potential risks and uncertainties include, among others, the closing, integration and effects of the acquisition described in this presentation, the inability to obtain required regulatory approvals for the acquisition, the timing of obtaining such approvals and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the acquisition, the risk that a condition to closing of the acquisition may not be satisfied on a timely basis or at all, the failure of the proposed transaction to close for any other reason, uncertainties as to access to available financing on a times basis and on reasonable terms, the financial performance of the company expected to be acquired, opportunities and prospects related to the acquisition, industry trends, dependency on transaction volumes in the global travel industry, particularly air travel transaction volumes, the recurring nature of revenue streams, maintenance of the integrity of our systems and infrastructure and the effect of any security breaches, reliance on third parties to provide information technology services, implementation of software solutions, exposure to pricing pressure in the Travel Network business, the implementation and effects of new or renewed agreements, the effects of the implementation of new accounting standards, travel suppliers' usage of alternative distribution models, failure to adapt to technological advancements, competition in the travel distribution market and solutions markets, the implementation and results of our cost reduction and business alignment program, dependence on establishing, maintaining and renewing contracts with customers and other counterparties and collecting amounts due to us under these agreements, dependence on relationships with travel buyers, changes affecting travel supplier customers, our ability to recruit, train and retain employees, including our key executive officers and technical employees, our collection, processing, storage, use and transmission of personal data and risks associated with PCI compliance, adverse global and regional economic and political conditions, including, but not limited to, economic conditions in countries or regions with traditionally high levels of exports to China or that have commodities-based economies and the effect of "Brexit" and uncertainty due to related negotiations, risks arising from global operations, reliance on the value of our brands, the effects of litigation, failure to comply with regulations, use of third-party distributor partners, the financial and business effects of acquisitions, including integration of these acquisitions, and tax-related matters, including the effect of the Tax Cuts and Jobs Act. More information about potential risks and uncertainties that could affect our business and results of operations is included in the "Risk Factors" section in our Quarterly Report on Form 10-Q filed with the SEC on October 30, 2018, in the “Risk Factors” and “Forward Looking Statements” sections in our Annual Report on Form 10-K filed with the SEC on February 16, 2018 and in our other filings with the SEC. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. Unless required by law, Sabre undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date they are made.

Non-GAAP Financial Measures This presentation includes unaudited non-GAAP financial measures, including Adjusted EBITDA and Adjusted EPS. In addition, we provide certain forward guidance with respect to Adjusted EBITDA and Adjusted EPS. We are unable to provide this forward guidance on a GAAP basis without unreasonable effort.

We present non-GAAP measures when our management believes that the additional information provides useful information about our operating performance. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP.

Industry Data This presentation and accompanying comments contain industry data, forecasts and other information that we obtained from industry publications and surveys, public filings and internal company sources, and there can be no assurance as to the accuracy or completeness of the included information. Statements as to our ranking, market position, bookings share and market estimates are based on independent industry publications, government publications, third-party forecasts and management’s estimates and assumptions about our markets and our internal research. We have not independently verified this third-party information nor have we ascertained the underlying economic assumptions relied upon in those sources, and we cannot assure you of the accuracy or completeness of this information. 8 ©2018 Sabre GLBL Inc. All rights reserved. 2 Today’s presenters

Sean Menke Dave Shirk Doug Barnett President & CEO EVP & President, EVP & CFO Travel Solutions

A recognized innovator in travel technology with advanced offer management and NDC order capabilities

Purchase price of $360 million for 100% ownership

Acquisition expected to accelerate Sabre’s strategy to deliver advanced, end-to-end, NDC-enabled retailing, distribution and fulfillment solution to the industry

Sabre Farelogix

Established end-to-end retailing, distribution Innovative GDS- and PSS-agnostic solutions and fulfillment strategy and roadmap for dynamic offer and order management

Industry-wide traction behind Commercial NDC-focused development across Platform and Beyond NDC launches scheduling, pricing, shopping and fulfillment

Global network of technologists and Talented teams to provide new customers for scalability and support perspectives and expertise

Accelerated delivery of end- Tightly integrated PSS- and Increased domain expertise Global customer footprint to-end retailing, distribution GDS-agnostic solutions, to drive innovation and fulfillment enabled by NDC

Farelogix expectations: Deal summary:

✓ 2018 revenue of approximately $40M, ✓ Funded through cash on hand and growth of 25% vs. prior year revolver borrowings ✓ Approximately 85% gross margin ✓ Sabre 9/30/18 pro forma leverage of ✓ 2018 EBITDA of approximately $4M approximately 3.0x ✓ ✓ Strong growth expected in 2019 Subject to closing regulatory approvals, expected to close in late Q4 2018 or ✓ Expected to be neutral to Sabre’s 2019 early Q1 2019 Adjusted EPS and accretive in 2020 ✓ Expect modest integration expenses

12 The information presented here represents forward-looking statements and reflects expectations as of November 12, 2018. Sabre assumes no obligation to update these statements. ©2018 Sabre GLBL Inc. All rights reserved. 6 Results may be materially different and are affected by many factors detailed in the accompanying release and in Sabre’s Q3 2018 Form 10-Q and 2017 Form 10-K. Farelogix offers an industry-leading SaaS platform for next-generation airline retailing and NDC distribution

Highlights SaaS platform

✓ Highly scalable and interoperable SaaS platform, spanning Offer Intelligent Offer Management and NDC Order Order Delivery Management Delivery and deployed by many of Airline-controlled the world’s largest airlines Distributes, offer engines orchestrates and enable ✓ Connectivity across nine leading transacts airline customized offers offers across all airline reservation systems (PSS) including dynamic channels via a and NDC integrations with every pricing and certified NDC API global GDS personalization

✓ SaaS platform combines recurring subscription and transaction revenue

Airline ancillary revenue continues to Travelers seek customized travel grow, reaching $57B in 20171 experiences

$57B Airport Parking, Seat Airport & In-Flight Mobile Boarding Upgrades Wi-Fi Pass

In-Flight Mobile Host Passport-Scanning Purchases (e.g., booking $18B updates, directions)

Additional Automated Payment Additional Miles Baggage Capabilities (e.g., iPay)

2011 2017 Ancillary revenue has been a major contributor to airline 96% of airline executives want to personalize the air profitability as airlines are challenged by flat or declining travel experience for customers by leveraging real-time passenger seat revenue data and analytics2

14 1 CarTrawler Yearbook of Ancillary Revenue (2017), PWC; excludes revenue from non-fee activity such as frequent flier miles to program partners and commissions on car, hotel and insurance attachment. ©2018 Sabre GLBL Inc. All rights reserved. 8 2Accenture Digital Readiness for Customer Experience (2016), study is based on interviews with executives representing a third of the world’s largest airlines based on volume of passengers flown. Modernized offer management and order delivery represent a potential $2B opportunity

Farelogix products help address a ~$2B annual potential revenue opportunity

✓ Airline ancillary revenue totaled $57B in 20171

✓ Ancillaries and customized offers are an $900M area of intense focus and investment for $1,000M airlines

✓ Farelogix products will help address a potential $2B opportunity across the world’s 300 largest airlines2 Offer Management NDC Order Delivery Top 300 airlines

15 1 CarTrawler Yearbook of Ancillary Revenue (2017), PWC ©2018 Sabre GLBL Inc. All rights reserved. 9 2Farelogix analysis of Top 300 airlines, rankings by passengers boarded (PBs) and segmented Accelerating NDC-enabled strategy: anticipated benefits

GDS + Farelogix PSS + Farelogix

Airline Value Airline Value • NDC offers integrated in the GDS GDS Airline IT • Adds NDC platform to SabreSonic, (Travel Network) (Airline Solutions) • Tighter collaboration increases delivery AirVision and AirCentre product offerings quality and timeliness • Integrates PSS-agnostic merchandising engine with PSS Sabre Value • Enhanced opportunity to define technical Sabre Value and commercial standards • Opportunity to sell new and enhanced Offer Management & capabilities • Ability to scale NDC volume quickly Order Delivery across the travel ecosystem • Ability to deliver value to airlines on all (Farelogix) bookings regardless of PSS system or distribution channel

PSS + GDS + Farelogix Airline Value • Fully integrated, end-to-end solution across all distribution channels Sabre Value • Accelerates retailing, distribution, and fulfillment strategy • Deepened customer relationships 16 ©2018 Sabre GLBL Inc. All rights reserved. 10 Sabre’s 225+ airline partners provide new prospects for Farelogix technology

Sabre Airline Solutions Farelogix 225+ airline customers airline customers

IATA NDC Leaderboard Airlines1 Expected Benefits

✓ Sabre and Farelogix customers among leaders in NDC-enabled, next-gen retailing

✓ Unites NDC technology experts to help solve complex problems holistically and accelerate speed of delivery of next-gen solutions

✓ Further strengthens ability to help drive industry NDC standardization critical for further innovations in airline retailing and distribution SabreSonic PSS and/or Farelogix customers

Farelogix NDC technology and airline customer footprint strengthens our commitment to core agency priorities

• Fast-tracks path to fully standardized NDC capabilities for both airlines and agencies ✓ Enables agencies to shop, book, fulfill and manage NDC content efficiently • Reduces time-to-market for airlines to deliver scaled NDC volumes through the GDS ✓ Mitigates agency risk and technology investment costs • Improves omnichannel access to the best offers from both NDC and traditional content ✓ Aligns underlying technology across the direct and indirect channel, creating a path for content symmetry 19 ©2018 Sabre GLBL Inc. All rights reserved. 13 Farelogix team delivers industry depth & innovation

225+ 25+ Brings wide breadth of Culture leverages technical Dedicated technology Years of industry experience experience to solution design, savvy, innovation, diversity, professionals; representing across all members of senior analysis, development, customer service excellence 90% of the company management team deployment and support and teamwork

Jim Davidson Tim Reiz President and CEO Chief Technology Officer 25+ years of experience in the travel industry, Tim is the 30+ years of experience in the travel technology industry with architect and leader behind groundbreaking Farelogix next demonstrated success leading both large multi-national generation airline retailing and NDC distribution organizations and start-ups. technologies. Prior to joining Farelogix in 2005, Jim was President and CEO of NTE, an Internet-based supply chain technology company. Before NTE, he held several senior leadership roles, including President and CEO of Amadeus Global Travel (North America), Theo Kruijssen head of sales and marketing at System One, and Vice Chief Financial Officer President of Marketing at Reed Travel Group/OAG. 25+ years of international financial planning and analysis experience with both large multi-national corporations and start-ups. Named one of 25 Most Influential Executives in the industry by Business Travel News 20 ©2018 Sabre GLBL Inc. All rights reserved. 14 A winning combination

Acquisition is expected to accelerate Sabre’s strategy:

• Speeds delivery of more powerful and tightly integrated, PSS and GDS-agnostic, end-to-end NDC-enabled retailing, distribution and fulfillment solutions

• Expands our pool of outstanding travel technology talent, driving faster innovation

• Increases breadth of customers in NDC and next-gen retailing

R HESGÿTGU

VWXY`abWcaÿefÿghiapqW

4))ÿ!)ÿ5%#ÿ'))

04DÿEFFGE'HGÿDGIG' G H CPQÿ'1 ÿQÿ

ghiapqWÿVWXY`abWcaÿrhWiÿaeÿstequÿrYv`WwiÿxqyhpipapecÿefÿY`Wtep

ÿÿÿdefgÿhfeiÿjkÿÿlkmeÿneÿÿÿÿoÿpqÿÿrgÿ eÿstkÿueg

H6ÿ ÿ!)ÿ ÿ)#CÿÿA#ÿ ÿ#8 ÿ !CPÿ $1ÿ !ÿ%#!$ÿ %ÿS!! !v ÿwxyÿ##!ÿ( !ÿ!)ÿ0#!12QÿE9 H6ÿ ÿ Cÿ 6 ÿ %ÿCÿ0#!12ÿ! ÿ6CB !B6Cÿ !ÿ!ACÿ%!!$1ÿ A ÿ !ÿ# 9ÿ"!!$1ÿ A ÿÿEH !# ! ÿ 6 ÿ##!8ÿ# ÿ !ÿ ##ÿ $ ÿCÿ##Pÿ!C ÿ 6!16ÿ C !#ÿ%$BCB! ÿCÿ!#ÿ A#ÿ1 ÿ !ÿ 6ÿ A#1 %#9ÿÿH6ÿ ÿ Cÿ 6 ÿ 6ÿ( !ÿ8!#Cÿ# ÿ! !ÿ 6 ÿ6 ÿ % ##Pÿ%) Cÿ# ÿCÿ! 9

H6ÿ' ÿA !v ÿ#8 ÿ##1 ÿ 6 ÿ 6ÿ !ÿ8!#Cÿ##!8ÿ %Qÿ 6ÿ#1 ÿ%!!$1ÿ A ÿ!ACÿÿ 6ÿR Cÿ Qÿ ! # ÿÿC Aÿ! !ÿ 6 ÿ6 ÿ !CCÿ8ÿ 6!#!1Pÿ !ÿ 6ÿ A#ÿC PÿCÿ ÿ! Cÿ !ÿ1!8ÿ 1) #P9

z %v ÿ!! Cÿ( !ÿ!)ÿ0#!12ÿ ÿÿC! ÿ)v ÿ ÿ !ÿ $ÿ! ÿÿC Aÿ! !ÿ 6 ÿ6 ÿ%ÿÿ! ÿ ! !)ÿ! !ÿCÿ!A !Q{ÿ Cÿ' ÿ' !Pÿ|#ÿF$ÿ#6ÿ!)ÿ 6ÿ ÿ v ÿ' ÿA !9ÿzE)ÿ##!8Cÿ ! !CQÿ 6ÿ( !ÿ8!#Cÿ#$#Pÿ # ÿÿ616ÿ QÿCCÿ(# PQÿCÿ# ÿ!A !ÿ)!ÿ# ÿCQÿ# #PQÿ A#1ÿ' ! 9{

' ÿ##1Cÿÿ 6ÿ!# Qÿ %ÿ ÿ 6ÿC! ÿ!ACÿ!)ÿ%!!$1ÿ A ÿÿ 6ÿR Cÿ ÿ8 6ÿ!Aÿ}ÿ ÿ!)ÿ#ÿ%!!$1 6!16ÿ A#ÿ1 9ÿÿ %ÿ! ÿÿ1#!%#ÿC % !ÿ P Qÿ!ÿ| Qÿ866ÿ ÿÿC1 #ÿ# )!ÿ 6 ÿ!AC ÿ%!!$1ÿ A ÿ ! # ÿÿCC !ÿ !ÿ! 6ÿ) !# P9ÿÿ0!ÿPÿP Qÿ %ÿ6 ÿ! Cÿ! C Cÿ 6!#!1PÿCÿ Cÿ!A !9ÿÿ0#!12ÿ ÿ !A Aÿ 6!#!1Pÿ!Pÿ 6 ÿ6 ÿ Cÿÿ !ÿCC ÿ 6ÿC ÿ!)ÿ# ÿCÿ 6ÿ ! 9ÿ

' ÿ##1Cÿÿ 6ÿ!# Qÿ0#!12ÿ6 ÿ@ Cÿ6BCCÿ! !ÿCÿ!A !ÿ !ÿ 1 ÿ%!!$1ÿ A ÿ$ 9ÿÿ'# 6Aÿ )##Pÿ#A1Cÿ 6ÿ%# Pÿ !ÿ ÿ !ÿ0#!12ÿ !ÿ1! ÿ#!8ÿ) ÿ8 6ÿ %ÿCÿ 6ÿ! 6ÿ| QÿCÿ !ÿCÿ 6 #ÿ!ÿ| ÿ)!ÿ%!!$1ÿ A 9ÿÿ0#!12ÿ6 ÿ# !ÿ!Cÿ 6ÿCA#! ÿ!)ÿ8ÿ 6!#!1Pÿ 6 ÿ!8 ÿ# ÿ !ÿ$ÿ 8CÿPÿ!)ÿ!)) ÿ !ÿ A# ÿ86!ÿ%!!$ÿ $ ÿ 6!16ÿ A#ÿ1 9ÿÿH6 ÿ8ÿ 6!#!1Pÿ%# ÿ# ÿ !ÿ$ÿ!ÿACÿC !#~Cÿ!)) ÿ !ÿ! ÿ86!ÿ%!!$ÿ 6!16ÿ A#ÿ1 Qÿ#C1ÿ%C# ÿ!)ÿ##Pÿ!C ÿ 6ÿ ÿ8B)Qÿ#!1ÿ Q ÿ! ! QÿCÿ# ÿÿ6! ÿ! ÿA#%#ÿ !ÿ A# ÿ 6!16ÿ %v ÿ#1Pÿ 6!#!1P9

'!C1ÿ !ÿ 6ÿ!# Qÿ)#Cÿÿ 6ÿR9 9ÿ ÿS! ÿ)!ÿ 6ÿ ÿ!)ÿ#8Qÿ %ÿ2 A ÿ6Aÿ$!8#C1Cÿ 6 ÿ(1 0#!12ÿ8!#Cÿ# ÿÿ! Aÿ 6 ÿCÿ) 6ÿ 6ÿ %ÿÿ%!!$1ÿ A 9ÿÿ0!ÿ2#Qÿ!ÿ 6ÿCPÿ %ÿ!Cÿ !ÿ !ÿ%Pÿ0#!12Qÿ %v ÿ6)ÿ # ÿ!))ÿ 2 Cÿÿ!##1ÿ 6 ÿ!ÿ@!ÿR9 9ÿ#ÿ8!#Cÿz6 {ÿ 9ÿÿH6ÿ!##1ÿ#CQ zU6PQÿ% ÿ ÿ 6 ÿ ÿ!{ÿÿ ##PQÿÿ0#!12ÿ2 Aÿ!% ACÿ 6 ÿ%P1ÿ 6ÿ!Pÿ8!#Cÿ##!8ÿ %ÿ !ÿz $ÿ! ÿ !1ÿ! !ÿA 9ÿ! Cÿ! !ÿCÿÿ 9{ÿ

' ÿ##1Cÿÿ 6ÿ!# Qÿ %v ÿ ÿ !ÿ(ÿ0#!12ÿ)!##!8 ÿPÿ! 6ÿ ÿ%Pÿ %ÿ !ÿ #~ÿ ÿ! !Qÿ#C1ÿ 1ÿ !ÿz 6 ÿC!8ÿ0#!129{ÿÿECCQÿ0#!12ÿ6 ÿ#!1ÿ!#Cÿ%! ÿ %v ÿ Qÿ##11ÿ 6 ÿ %ÿ6 ÿ !16 ÿ !ÿ )# ! !9ÿÿ0!ÿ2#QÿÿxQÿ0#!12v ÿSG4ÿ##1Cÿ 6 ÿz %ÿ6 ÿ8#CCÿ ÿ!!!#Pÿ!8ÿÿÿ ÿ !ÿC !Pÿ0#!12 CÿA ÿ! !9ÿ9ÿ9ÿ9{ÿ'Cÿ@ ÿ# ÿPQÿ0#!12v ÿSG4ÿ !#CÿG!ÿ ÿ 6! ÿ 6 ÿ %ÿCÿ 6ÿ! 6ÿ 8!ÿ@!ÿ| z! ÿ !ÿ#A1ÿ 1) ÿ$ ÿ!8ÿ !ÿ Aÿ 6ÿ$ ÿ! !ÿCÿ )#ÿ!A !9{ÿÿT!8ÿ 6 ÿ0#!12ÿ6 ÿ1Cÿ )!! 6!#Cÿÿ%!!$1ÿ A ÿCÿ ÿ! Cÿ !ÿ1!8Qÿ %ÿ $ ÿ !ÿ# ÿ 6 ÿ Pÿ! !ÿ!ÿCÿ)!ÿ##ÿ%Pÿ(1ÿ 9

%ÿS!9ÿ ÿÿ#8ÿ!! !ÿ6C( Cÿÿ ! 6#$QÿH2 9ÿÿ %ÿ! ÿ 6ÿ#1 ÿ1#!%#ÿC % !ÿ P ÿÿ 6ÿR C 9ÿ %v ÿÿA ÿ8ÿ!2 #Pÿwx9ÿ%##!9

0#!12QÿE9ÿ ÿÿ#8ÿ!! !ÿ6C( CÿÿFQÿ0#!C9ÿÿ0#!12ÿ!)) ÿÿ2 B1 !ÿ%!!$1ÿ A ÿ !# !Q $!8ÿ ÿ4ÿS! 9ÿÿEÿQÿ0#!12ÿCÿ!2 #Pÿwÿ##!ÿÿA 9

xaaYq bWcaiÿ !8#!Cÿ %B)#!12)#19C)

eXpqiÿ 23 6 78889@ 91!A!@ BC B B%#!$B % B( !B)#!12 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 1 of 21 PageID #: 1

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

UNITED STATES OF AMERICA,

Plaintiff,

v. Civil Action No.: SABRE CORPORATION, SABRE GLBL INC., FARELOGIX, INC., and SANDLER CAPITAL PARTNERS V, L.P.,

Defendants.

COMPLAINT

Sabre’s proposed acquisition of Farelogix is a dominant firm’s attempt to eliminate a

disruptive competitor after years of trying to stamp it out. Sabre, the largest global distribution

system in the United States, and Farelogix, an innovative technology firm, compete to provide

booking services to airlines. Sabre is the dominant provider of booking services in the United

States, and Farelogix represents a significant and growing threat to Sabre’s dominance.

Farelogix has spurred innovation and brought more competitive pricing to an industry that has

for decades been plagued by tepid competition and outdated technology. As Farelogix explains

on its website: “The airline industry is undergoing core disruption,” and “Farelogix and its

technology solutions are at the center of this disruption.” The proposed acquisition would wipe

out this competition and innovation, harming airlines and American travelers.

24 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 2 of 21 PageID #: 2

I. INTRODUCTION

1. Airlines sell tickets to travelers directly through their websites and call centers

and indirectly through traditional brick-and-mortar and online travel agencies. Travel agencies

are a crucial distribution channel for airlines because many travelers, especially business

travelers, rely on travel agencies to book and manage their travel. Nearly 50 percent of airline

bookings in the United States are made through travel agencies. To sell tickets through travel

agencies, airlines require booking services. Booking services are IT solutions that enable airlines

to deliver their offers to travel agencies and to process resulting orders.

2. Historically, airlines have relied on booking services provided by Sabre and the other two global distribution systems (“GDSs”) to sell their tickets through travel agencies in the

United States. Sabre’s GDS is a computerized system that helps travel suppliers, such as airlines, market and distribute their fares and scheduling information to travel agencies and the traveling public. Sabre and the other two GDSs have resisted innovation, while charging airlines

high booking fees for services that lack the functionality airlines and travelers demand. The

GDSs’ outdated technology has limited airlines’ ability to sell—and travelers’ ability to choose

from—airlines’ entire suite of offerings.

3. For well over a decade, the GDSs have thwarted attempts by new, innovative

competitors such as Farelogix to inject much-needed competition into this industry. As

Farelogix’s CEO told the European antitrust authorities in early 2018, the “GDSs continue to

leverage significant market power to preserve their market position and stifle innovation.”

4. Farelogix has emerged as an innovator that threatens to erode Sabre’s dominance

in booking services for air travel. Farelogix offers an alternative booking services solution, Open

Connect, that allows airlines to bypass the GDSs and connect directly to travel agencies. By

25 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 3 of 21 PageID #: 3

offering airlines an alternative, Farelogix has given them leverage to negotiate lower GDS booking fees and to reduce their reliance on the GDSs for booking services.

5. Farelogix has also pioneered a next-generation technology standard called “New

Distribution Capability,” or NDC. NDC technology, which powers Farelogix’s Open Connect, is poised to transform airline distribution. Unlike the legacy GDS technology, NDC empowers airlines to make a broader, more personalized range of offers to travelers booking through travel agencies. For example, NDC could allow an airline to offer a traveler a bundled fare including priority boarding, in-flight internet, and a morning snack for her weekly flight from Philadelphia to Chicago.

6. Sabre has resisted innovation and opposed adoption of NDC. Sabre was so threatened by NDC that in 2013 it urged the Department of Transportation to block approval of the standard. Farelogix called out Sabre’s “ulterior motive” for opposing NDC, stating that

“today’s battle is one of old vs. new, with the dominant players in the old technology trying to prevent, or at the very least delay, the implementation of the new standard in order to retain artificial control of the distribution marketplace.” Sabre now claims to have accepted NDC, but just last year Farelogix described to European antitrust authorities some of the tactics Sabre and the other major GDSs have deployed in what Farelogix characterized as their “decade of resistance” to innovation. These tactics include what Farelogix described as the GDSs’ strategy to “Undermine and delay NDC even if embracing it on the surface.”

7. Recognizing the competitive threat posed by Farelogix, Sabre for years has tried to box Farelogix out of the industry. According to its own internal documents, Sabre took steps to “shut down” Farelogix after it began gaining customers. Farelogix itself has complained that

Sabre pressured airlines not to use Farelogix’s booking services and retaliated against airlines

26 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 4 of 21 PageID #: 4

that did. Indeed, in 2018, Farelogix’s CEO told another potential purchaser of the company that

for Farelogix’s booking services solution, “the slow adoption was solely and inarguably due to

the blocking and pressure the GDSs put on Farelogix, airlines, and travel agents not to adopt.”

8. Additionally, Sabre’s and the other GDSs’ contracts with airlines and travel

agencies restrict airlines’ ability to avail themselves of cheaper, more advanced booking services

solutions. As recently as 2018, Farelogix denounced these restrictions, complaining that airlines’

GDS contracts “effectively prohibit working with third parties or make doing so cost prohibitive.” In January 2019, a Sabre senior vice president acknowledged that airlines view

Sabre’s restrictions as “abusive but there’s nothing they can do because they need the distribution and they are tied with a contract.”

9. Notwithstanding these tactics, Farelogix—thanks to its innovative technology and competitive pricing—has managed to grow its booking services customer base from one airline in the mid-2000s to over 15 today. As airlines and travel agencies continue to demand and adopt its industry-leading NDC technology, Farelogix is a greater threat to Sabre than ever before.

10. Sabre now seeks to eliminate its disruptive competitor once and for all. Sabre executives have acknowledged that acquiring Farelogix would eliminate a competitive threat and allow Sabre to charge higher prices. In a presentation to Sabre’s CEO, Sabre executives emphasized that buying Farelogix would “Mitigate risk from potential GDS bypass.” And on the day Sabre announced its proposed acquisition of Farelogix, a Sabre sales executive texted a

colleague that one major U.S. airline would “hate” it. The colleague replied, “Why, because it

entrenches us more?” The Sabre sales executive responded that Farelogix has been that airline’s

“Trojan horse to f*** us” and observed that the airline’s “FLX [Farelogix] bill is going up big

time.”

27 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 5 of 21 PageID #: 5

11. If allowed to proceed, Sabre’s acquisition of Farelogix would likely result in increased prices, reduced quality, and less innovation for booking services, causing substantial harm to airlines and American travelers.

12. The proposed transaction is likely to substantially lessen competition in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. The Court, therefore, should enjoin this transaction.

II. DEFENDANTS AND THE PROPOSED TRANSACTION

13. Sabre, a travel technology company based in Southlake, Texas, operates the largest GDS in the United States. All major U.S. airlines distribute offers to travel agencies through the Sabre GDS. Sabre’s 2018 revenues were approximately $3.9 billion. Sabre is the ultimate parent entity of Sabre GLBL Inc., Sabre’s principal operating subsidiary and its signatory to the merger agreement with Farelogix.

14. Farelogix, a travel technology company based in Miami, Florida, sells airlines a next-generation booking services solution called Open Connect, as well as other IT solutions.

Open Connect provides low-cost booking services for airlines selling tickets through travel agencies. Farelogix earned approximately $42 million in revenues in 2018. Farelogix is owned by Sandler Capital Partners V, L.P. (“Sandler”), a private equity fund and a signatory to Sabre’s merger agreement with Farelogix.

15. Sandler conducted a limited sale process in seeking a buyer for Farelogix. At least one other potential buyer—not a competitor—was seriously interested and offered a substantial price. But Sabre—a competitor—ultimately offered a higher price.

16. On November 14, 2018, Sabre agreed to acquire Farelogix in a transaction valued at approximately $360 million.

28 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 6 of 21 PageID #: 6

III. JURISDICTION AND VENUE

17. The United States brings this action, and this Court has subject-matter jurisdiction, under Section 15 of the Clayton Act, 15 U.S.C. § 25, to prevent and restrain

Defendants from violating Section 7 of the Clayton Act, 15 U.S.C. § 18.

18. Defendants are engaged in, and their activities substantially affect, interstate commerce. Sabre and Farelogix both provide booking services to airlines that serve travelers throughout the United States.

19. Venue is proper under Section 12 of the Clayton Act, 15 U.S.C. § 22, and under

28 U.S.C. §§ 1391(b) and (c).

20. This Court has personal jurisdiction over each Defendant. Sabre, Sabre GLBL

Inc., and Farelogix are incorporated in the State of Delaware and are inhabitants of this District.

Sandler is a Delaware limited partnership and is an inhabitant of this District. Sabre, Farelogix, and Sandler have consented to personal jurisdiction in this District for purposes of this lawsuit.

The proposed acquisition would have effects throughout the United States, including in this

District.

IV. INDUSTRY BACKGROUND

A. Sabre Dominates Airline Bookings through Travel Agencies

21. For many airlines, travel agencies are an essential sales channel. Many travelers, especially business travelers, book their flights through travel agencies because they have specific needs or their employer requires them to do so. Sales to these travelers account for a substantial portion of revenue for many airlines.

22. The GDSs—Sabre, Amadeus, and Travelport—operate computerized systems that allow travel agencies to search for and book flights across multiple airlines. In response to a

29 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 7 of 21 PageID #: 7

query from a travel agent, a GDS pulls fare and schedule information from multiple data sources

to construct an airline offer, consisting of a fare on a specific flight. The GDS then aggregates

offers from multiple airlines so that the travel agent can compare travel options and book the

traveler’s chosen itinerary. Thus, the GDSs provide three main functions: they help airlines

construct the initial offer (offer creation); they aggregate offers across multiple airlines (offer

aggregation); and they enable airlines to deliver their offers to travel agencies and to process

resulting orders (booking services). Farelogix and Sabre compete to provide booking services to airlines.

23. Under the traditional GDS payment model, a GDS charges an airline a “booking fee” for each flight segment a travel agency books through the GDS. The GDS then pays an incentive to the travel agency as an inducement to book through the GDS.

24. Airlines sell tickets to travelers through two main types of travel agencies:

traditional travel agencies and online travel agencies. Traditional travel agencies consist of travel

management companies, which serve business travelers, and other brick-and-mortar travel agencies, which serve a mix of travelers, including leisure travelers with complex travel itineraries, such as tour groups. Traditional travel agencies are an important distribution channel for airlines, representing approximately 25 percent of airlines’ bookings made in the United

States.

25. Business travelers book flights through travel management companies because they provide the extensive customer support and reporting functionality that business travelers typically require. Business travelers are the most profitable traveler segment for large, full- service airlines. Business travelers are particularly lucrative customers because they tend to

30 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 8 of 21 PageID #: 8

travel more often and spend more than leisure travelers on purchases such as last-minute flights, refundable tickets, and premium seats.

26. Many traditional travel agencies use a single GDS to book air travel. Some use more than one GDS, but will still use a single GDS to serve a particular corporate client.

Traditional travel agencies cannot readily switch between GDSs because of contractual and

technical restrictions. A traditional agency typically enters into a long-term contract with a GDS

that includes financial incentives committing the agency to book through that GDS and

penalizing the agency for shifting bookings to alternative channels. Some traditional agencies

also rely on other lines of Sabre’s business for IT products. For example, many travel

management companies in Sabre’s network use mid- or back-office software supplied by Sabre

to perform monitoring or reporting for their corporate clients. To ensure consistent support and

reporting for their travelers, corporations typically rely on only one travel management company.

Since traditional agencies cannot easily switch between GDSs, each GDS effectively controls

access to a distinct set of travelers. Thus, airlines must distribute through all three GDSs to reach

all travelers who book their travel through traditional travel agencies.

27. Sabre controls over 50 percent of bookings through traditional travel agencies in

the United States, so airlines must sell tickets through Sabre to reach a broad set of U.S.

travelers. Sabre has even greater control over airline bookings through travel management

companies in the United States. For instance, on August 1, 2019, Sabre reported to investors that

it has “over 80% share within large travel management companies” in North America.

28. The second type of travel agency, online travel agencies, primarily serves cost-

conscious leisure travelers. Leisure travelers book flights through online travel agencies like

Expedia or Priceline because they can comparison shop and book flights, hotels, and car rentals

31 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 9 of 21 PageID #: 9

on the same website. Online travel agencies are an important distribution channel for airlines,

representing about 20 percent of airline bookings made in the United States. Sabre accounts for approximately 50 percent of airlines’ online travel agency bookings in the United States. Thus, airlines risk losing a significant amount of revenue if they forgo using the Sabre GDS to sell tickets through online travel agencies in the United States.

B. Farelogix Is a Competitive Threat to Sabre

29. Over the years, a number of firms, such as ITA Software and G2 Switchworks, have tried and failed to introduce viable alternatives to Sabre and the other GDSs. Farelogix has succeeded where others have failed through persistence and a commitment to innovation. In

2005, Farelogix began working with American Airlines to develop a way to reach travel agencies directly without going through a GDS. Farelogix’s “direct connect” solution (the forerunner to

Open Connect) gave American and other airlines a lower-cost way to sell tickets through travel agents and avoid paying the GDSs’ high booking fees.

30. Farelogix has led the development of NDC, a next-generation data transmission standard that facilitates advanced communications between airlines and travel agents. NDC enables airlines to distribute more complex offers than the legacy GDS technology can support.

Consequently, NDC is widely expected to address many of the current limitations of airline distribution, to the benefit of airlines, travel agents, and travelers. Farelogix’s Open Connect is powered by NDC technology. Open Connect offers airlines an alternative to booking through a

GDS and greater ability to offer ancillary products and services, such as in-flight WiFi or lounge

32 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 10 of 21 PageID #: 10

access, through travel agencies. Farelogix charges airlines a flat subscription fee and a small fee

for each booking enabled by Open Connect.

31. With NDC, the airline, rather than the GDS, controls the content of the airline’s

offers, and the airline selects the IT solution used for booking services. An airline can use a

booking services solution such as Farelogix’s Open Connect to reach a travel agency directly, or

it can distribute its offers through Open Connect to a third-party aggregator or a GDS to perform

the aggregation function for the travel agency.

32. For over a decade, Farelogix’s airline customers have successfully used the threat of switching to Farelogix’s booking services solutions to negotiate better rates and terms with

Sabre and the other GDSs for bookings through both traditional and online travel agencies.

C. Sabre Has Impeded Farelogix’s Ability to Compete

33. Shortly after Farelogix began gaining airline customers, Sabre launched an initiative to “shut down” Farelogix. Sabre took steps to prevent travel agencies from using

Farelogix’s solution in conjunction with Sabre’s GDS, pressured travel agencies not to use

Farelogix’s services, and retaliated against airlines that worked with Farelogix. For example, in

2011, Sabre retaliated against American Airlines for working with Farelogix by burying

American’s flight options in the search results it distributed to travel agencies to make them less visible to travel agents. Farelogix accused Sabre of seeking to “punish” American for adopting

Farelogix’s technology.

34. Sabre has continued to use a broad range of contractual and technical barriers to prevent entry or expansion by suppliers that could threaten its control over bookings through travel agencies. For instance, Sabre’s contracts include provisions that inhibit airlines’ use of an alternative supplier like Farelogix, even when doing so would be less expensive for airlines.

33 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 11 of 21 PageID #: 11

Sabre’s contracts prevent airlines from offering special fares through cheaper distribution channels (such as Farelogix’s Open Connect or an airline’s own website) and require airlines to provide Sabre with the same content on as favorable terms as they provide the other GDSs.

Sabre’s contracts also restrict airlines from rewarding travel agencies for using alternative distribution options, making it difficult for airlines to encourage travel agencies to use Farelogix.

Although these provisions limit airlines’ ability to shift bookings to alternative distribution channels, many airlines accept them because Sabre controls access to a large number of travel agencies, and those travel agencies’ customers are a critical source of the airlines’ revenues.

35. Sabre’s practices have hampered Farelogix’s growth, prompting Farelogix to complain to the federal government in 2013 that “Sabre has wielded its monopoly power in an attempt to destroy Farelogix and prevent competition . . . .”

D. Competition from Farelogix Has Loosened the GDSs’ Grip on Bookings through Online Travel Agencies

36. While Sabre’s practices have limited Farelogix’s ability to work with traditional travel agencies, Farelogix has been more successful in gaining a foothold in bookings through online travel agencies. Notably, two of the largest U.S. airlines use Farelogix to connect directly to one of the largest online travel agencies in the United States. As Sabre acknowledged less than a year ago, “Large OTAs [online travel agencies] are the most likely agency segment to disintermediate our GDS.” Both Sabre and Farelogix expect that airlines will choose to use

Farelogix for bookings through other online travel agencies, including the largest in the United

States. According to one Sabre document, if this agency “strategically shifts volume out of the

GDS channel,” Sabre anticipates that “Other large OTAs [online travel agencies] will likely be fast followers to this strategy and build out their own connections” to airlines.

34 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 12 of 21 PageID #: 12

37. Having Farelogix as an alternative to the GDSs has given airlines leverage to chip

away at the traditional GDS payment model. Traditionally, GDSs charged airlines a fee for each

flight segment a traveler booked through an online travel agency, just as they do for a traditional

agency. Some airlines, however, have successfully used the threat of shifting bookings to

Farelogix to move the GDSs to a “wholesale” payment model for certain online travel agencies.

Under the wholesale approach, an airline does not pay the GDS a booking fee. Instead, the airline compensates the online travel agency directly and the online travel agency pays a technology fee to the GDS for each booking. This change, resulting from competition, has saved at least one U.S. airline millions of dollars per year.

E. Competition from Farelogix Pushed Sabre to Update Its Own Booking Services Technology

38. Competition from Farelogix’s next-generation technology also has driven Sabre to finally begin improving its own outdated technology. For years, Sabre and the other GDSs vehemently opposed the transition to NDC. As airlines and travel agencies began demanding the new capabilities pioneered by Farelogix, however, Sabre eventually started developing its own

NDC booking services technology.

39. In 2017, recognizing that Farelogix was the leader in NDC technology, Sabre began developing a strategy to catch up. As airlines and travel agencies increasingly demanded next-generation technology, Sabre recognized that Farelogix was among the “most relevant threats” to its business. (Likewise, Farelogix identifies Sabre as one of its “key competitors” in next-generation distribution.) Faced with this threat, Sabre developed its own plan to surpass

Farelogix’s next-generation distribution capabilities by 2020. Indeed, the Sabre vice president leading the acquisition negotiations told Farelogix’s investment banker that if Farelogix declined to sell itself to Sabre, Sabre would be “too far down the path in our own plan” and “then we

35 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 13 of 21 PageID #: 13

[Sabre] will be a really tough competitor for them [Farelogix].” Today, Sabre bids on NDC

business in direct competition with Farelogix.

F. Farelogix Is Poised to Compete Even More Intensely with Sabre

40. In spite of Sabre’s efforts to hobble it, Farelogix has steadily built a sizeable base of major airline customers, including some of the largest airlines in the United States. Farelogix already processes more NDC transactions than any other airline technology company.

41. As the industry continues to shift to NDC, Farelogix is poised to grow significantly. In April 2018, IATA, the airline industry trade association responsible for the standardization of NDC, launched a “leaderboard” of airlines that have committed to making 20 percent of their bookings through an NDC-enabled connection by 2020. Nearly half of the airlines on the leaderboard have chosen Farelogix’s Open Connect as their NDC booking services solution. Farelogix and Sabre both project that Farelogix revenues will grow as the adoption of NDC technology expands. Indeed, Sabre conservatively projected that airline tickets booked using Farelogix’s technology will nearly triple between 2018 and 2020.

42. As demand for NDC grows, the industry is approaching a tipping point that threatens Sabre’s business model. A Sabre document from late 2018 recognizes that airlines view NDC as a “pivot point for model change, threatening the GDS.” In May 2019, Farelogix’s

CEO stated that NDC is “past the inflection point” and “it now just becomes kind of the downhill slope of adoption.”

43. Sabre’s proposal to buy Farelogix threatens to forestall this evolution. Instead of innovating to compete with Farelogix, Sabre has resorted to eliminating the competitive threat by acquiring Farelogix.

36 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 14 of 21 PageID #: 14

V. RELEVANT MARKETS

44. If not enjoined, the proposed transaction would result in anticompetitive effects in two relevant product markets: booking services for airline tickets sold through traditional travel agencies and booking services for airline tickets sold through online travel agencies.

A. Product Markets

1. Booking Services for Airline Tickets Sold through Traditional Travel Agencies

45. Booking services for airline tickets sold through traditional travel agencies is a relevant product market. Traditional travel agencies are an important distribution channel for airlines because they serve the most lucrative travel segment, corporate travelers. Most airlines have no reasonable substitutes for the booking services that enable distribution through traditional travel agencies because these agencies control access to the vast majority of corporate travelers. Airlines and online travel agencies are not equipped to provide many of the services required by customers of traditional agencies; thus, airlines generally would be unable to convince these customers to book through alternate channels. A hypothetical monopolist likely would impose at least a small but significant and non-transitory price increase on booking services for airline tickets sold through traditional travel agencies. Accordingly, booking services for airline tickets sold through traditional travel agencies constitutes a relevant product market and line of commerce under Section 7 of the Clayton Act.

2. Booking Services for Airline Tickets Sold through Online Travel Agencies

46. Booking services for airline tickets sold through online travel agencies is a relevant product market. Online travel agencies are an important distribution channel for airlines. Online travel agencies, such as Priceline and Expedia, cater primarily to cost-conscious

37 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 15 of 21 PageID #: 15

leisure travelers. Distribution through online travel agencies represents about 20 percent of

airlines’ bookings in the United States. Airlines would be willing to pay more than they pay

today for booking services rather than lose the opportunity to sell tickets through online travel

agencies. A hypothetical monopolist likely would impose at least a small but significant and

non-transitory price increase on booking services for airline tickets sold through online travel

agencies. Accordingly, booking services for airline tickets sold through online travel agencies constitutes a relevant product market and line of commerce under Section 7 of the Clayton Act.

B. Geographic Market

47. The geographic market is the United States. A hypothetical monopolist of booking services for airline tickets sold through traditional travel agencies or online travel agencies in the United States would impose at least a small but significant and non-transitory increase in price for booking services. Accordingly, the markets for booking services for airline tickets sold through traditional travel agencies in the United States and booking services for airline tickets sold through online travel agencies in the United States are relevant markets.

C. The Acquisition Is Unlawful in Both Relevant Markets

48. The Supreme Court has held that mergers that significantly increase concentration in already concentrated markets are presumptively anticompetitive and therefore presumptively unlawful. To measure market concentration, courts often use the Herfindahl-Hirschman Index

(“HHI”). HHIs range from 0 in markets with no concentration to 10,000 in markets where one firm has 100 percent market share. Courts have found that mergers that increase the HHI by more than 200 and result in an HHI above 2,500 in any relevant market or line of commerce are presumed to be anticompetitive.

38 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 16 of 21 PageID #: 16

49. Sabre’s acquisition of Farelogix would significantly increase concentration in the

already highly concentrated market for booking services for airline tickets sold through online

travel agencies in the United States. The proposed acquisition would result in more than a 350-

point increase in HHI and a post-transaction HHI of more than 4,000 in this market. Thus, the

proposed acquisition is presumptively unlawful.

50. Sabre’s acquisition of Farelogix is also unlawful in the market for booking

services for airline tickets sold through traditional travel agencies in the United States. This market is also highly concentrated today, with an HHI of over 3,500. While Farelogix’s current share in this market is small, largely due to the GDSs’ efforts to freeze it out, Farelogix has been a disruptive and uniquely important constraint on the GDSs in this market. As a result, the elimination of Farelogix as an independent competitor in this highly concentrated market is also likely to substantially lessen competition.

51. In both relevant markets, Farelogix’s market share substantially understates its competitive significance in at least two respects. First, by offering airlines an alternative booking services solution to the GDSs, Farelogix has empowered airlines to negotiate lower prices and more favorable terms, even if the airline ultimately uses the GDS instead of Farelogix for booking services. Farelogix’s competitive significance is therefore not fully reflected in its current market share. Second, Farelogix’s current market share understates its competitive significance going forward. As the industry transitions from legacy to NDC technology,

Farelogix is poised to grow significantly. Defendants’ internal projections reflect this. In short, by eliminating a disruptive entrant with significant potential to grow and compete, the acquisition would substantially lessen competition in both relevant markets, to the detriment of airlines and travelers.

39 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 17 of 21 PageID #: 17

VI. THE PROPOSED ACQUISITION IS LIKELY TO SUBSTANTIALLY LESSEN COMPETITION IN THE RELEVANT MARKETS

A. The Acquisition Would Eliminate Head-to-Head Competition between Sabre and Farelogix and Likely Lead to Higher Prices and Reduced Quality

52. Airlines have successfully used the threat of shifting bookings to Farelogix to obtain better pricing in their GDS contracts on bookings made through traditional and online travel agencies. As Sabre recognized in its 2018 Annual Report, the expansion of “direct connect initiatives” (e.g., Farelogix) enables airlines “to apply pricing pressure on intermediaries [e.g.,

GDSs] and negotiate travel distribution arrangements that are less favorable to intermediaries.”

53. Senior executives of both Sabre and Farelogix have recognized that the

acquisition is likely to result in higher prices. Farelogix’s CFO highlighted in August 2018 that

if Sabre acquired Farelogix, it would be “taking out a strong competitor vs. continued

competition and price pressure in market.” He had previously noted that any GDS that acquired

Farelogix “would increase control over airlines who are now using FLX [Farelogix] as a

negotiation tool during contract renewals.” Similarly, a Sabre sales executive, in a text to a

colleague after this proposed acquisition was announced, observed that Farelogix’s prices for one

major U.S. airline would go up “big time” as a result of the deal.

54. The transaction will likely tighten Sabre’s grip on the online travel agency

market, where airlines have been most successful using competition from Farelogix to erode

Sabre’s market position. Farelogix has demonstrated that it is a credible alternative to Sabre by

enabling major U.S. airlines to connect directly with online travel agencies and helping change

the payment model in the online travel agency market. After acquiring Farelogix, Sabre’s

incentive to continue to offer these options on competitive prices and terms likely would be

diminished.

40 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 18 of 21 PageID #: 18

55. U.S. full-service airlines are particularly likely to be harmed by the transaction.

Distribution through traditional and online travel agencies located in the United States represents an especially significant portion of their revenue. These airlines’ booking services needs are more complex than those of most other airlines that sell tickets in the United States due to their extensive hub-and-spoke networks, the nature of their business models, and the volume of transactions they process. In addition, these airlines cater to business travelers and hence are especially dependent on distribution through traditional travel agencies. For these reasons, U.S. full-service airlines face a different set of competitive constraints than other airlines. Because

Sabre controls most of these airlines’ bookings through U.S. travel agencies, Sabre has significant leverage in negotiating with these airlines. By eliminating Farelogix, Sabre would gain additional negotiating leverage and could target these customers for price increases.

B. The Acquisition Would Lessen Innovation

56. The proposed acquisition also would likely reduce innovation, to the detriment of airlines, travel agencies, and travelers. Farelogix has been the driving force behind the industry’s adoption of the NDC standard and the leader in developing new technology. With Farelogix’s technology, airlines can make offers tailored to the needs of individual travelers booking through a travel agency—functionality Sabre’s outdated GDS technology lacks.

57. Competition from Farelogix pushed Sabre to finally adopt NDC and develop next-generation booking services solutions. After fighting against the adoption of NDC for years, Sabre began investing in next-generation technology only after Farelogix began gaining traction.

58. Competition between Farelogix and Sabre to develop and sell next-generation booking services is already fierce. As the head of Sabre’s deal team warned Farelogix’s

41 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 19 of 21 PageID #: 19

investment banker, if Sabre does not acquire Farelogix, Sabre would be “a really tough

competitor” to Farelogix. Indeed, if the acquisition is enjoined, Farelogix would continue to act

as a disruptor, developing new, innovative solutions in competition with Sabre. Farelogix has a

strong incentive to innovate in order to reap the gains of its innovation. In contrast, Sabre’s

incentive to innovate is tempered by the threat innovative solutions pose to its traditional

business model and aging technology. Without competition from an independent Farelogix,

Sabre’s incentive to invest and innovate in next-generation technology would be diminished.

C. No Countervailing Factors Would Prevent or Remedy the Acquisition’s Likely Anticompetitive Effects

59. New entry or expansion by existing competitors is unlikely to prevent or remedy

the transaction’s likely anticompetitive effects in the relevant markets. There are high barriers to

building out a next-generation booking services solution comparable to Farelogix’s Open

Connect, including the difficulty and time required to integrate customized NDC connections

into complex, unique IT systems like those of Farelogix’s airline customers. Beyond these

technical impediments, the GDSs’ contracting practices—particularly provisions that inhibit airlines’ use of alternative booking services providers—further heighten the barriers to entry.

Despite these significant barriers, Farelogix has persisted for over 15 years, investing more than

$100 million in developing its innovative solutions. Through these efforts, Farelogix has

emerged as a significant threat to Sabre. In-house airline solutions, sponsored entrants, and alternative next-generation booking services providers are unlikely to replace the competitive constraint posed by Farelogix in a timely and sufficient manner.

60. The proposed transaction will not result in verifiable, transaction-specific efficiencies in the relevant markets sufficient to outweigh the transaction’s likely anticompetitive effects.

42 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 20 of 21 PageID #: 20

VII. VIOLATION ALLEGED

61. The United States alleges and incorporates paragraphs 1 through 60 as if set forth fully herein.

62. Unless enjoined, Sabre’s proposed acquisition of Farelogix is likely to substantially lessen competition in the relevant markets, in violation of Section 7 of the Clayton

Act, 15 U.S.C. § 18.

63. Among other things, the proposed acquisition would:

(a) eliminate present and future competition between Sabre and Farelogix;

(b) likely cause prices for booking services to be higher than they would be

otherwise; and

VIII. REQUEST FOR RELIEF

64. The United States requests that the Court:

(a) adjudge Sabre’s acquisition of Farelogix to violate Section 7 of the

Clayton Act, 15 U.S.C. § 18;

(b) permanently enjoin Defendants from consummating Sabre’s proposed

acquisition of Farelogix or from entering into or carrying out any other

transaction by which control of the assets or businesses of Sabre and

Farelogix would be combined;

(d) grant the United States such other relief as the Court deems just and

proper.

43 Case 1:19-cv-01548-UNA Document 1 Filed 08/20/19 Page 21 of 21 PageID #: 21

Dated this 20th day of August, 2019.

Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA:

MAKAN DELARAHIM DAVID C. WEISS Assistant Attorney General for Antitrust United States Attorney

LAURA HATCHER (#5098) BERNARD A. NIGRO JR. Civil Division Deputy Assistant Attorney General United States Attorney's Office District of Delaware 1313 N. Market Street, Suite 400 Wilmington, Delaware 19801 KATHLEEN S. O'NEILL Tel.: (302) 573-6205 Senior Director of Investigations and Litigation E-mail: [email protected]

CRAIG W. CONRATH JULIE S. ELMER Director of Litigation VITTORIO E. COTTAFAVI RACHEL A. FLIPSE JOHN A. HOLLER

Attorneys for the United States PATRICIAA. BRINK Director of Civil Enforcement U.S. Department of Justice Antitrust Division 450 5th Street, NW, Suite 8000 Washington, DC 20530 Tel.: (202) 598-8332 KATHERINE CELESTE Fax: (202) 616-2441 Acting Assistant Chief I E-mail: [email protected] Transportation, Energy & Agriculture Section

44 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 1 of 97 PageID #: 6849

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

UNJTED STATES OF AMERICA

Plaintiff,

v. C.A. No. 19-1548-LPS

SABRE CORP., REDACTED PUBLIC SABRE GLBL INC., VERSION FARELOGIXINC., and (RELEASED APRIL 8, SANDLER CAPITAL PARTNERS V, L.P., 2020)

Defendants.

David C. Weiss, Laura D. Hatcher, and Shamoor Anis, UNITEDSTATES DEPARTMENT OF JUSTICE, Wilmington, DE

Julie S. Elmer, Scott A. Westrich, Sarah P. McDonough, Robert A. Lepore, Aaron Comenetz, Brian E. Hanna, Craig W. Conrath,Dylan M. Carson, Rachel A. Flipse, Michael T. Nash, Jeremy P. Evans, Vittorio Cottafavi,Seth J. Wiener, John A. Holler, Grant A. Bermann, and Katherine A. Celeste, UNITED STATES DEPARTMENT OF JUSTICE, Washington, DC

Attorneys forPlaintiff United States of America

Joseph 0. Larkin and Veronica A. Bartholomew, SKADDEN, ARPS,SLATE, MEAGHER & FLOM LLP, Wilmington, DE

Tara L. Reinhart and Steven C. Sunshine, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Washington, DC

Matthew M. Martino, Michael H. Menitove, and Evan R. Kreiner, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, New York, NY

Attorneys forDefendants Sabre Corporationand Sabre GLBL Inc.

45 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 2 of 97 PageID #: 6850

Daniel A. Mason, PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP, Wilmington, DE

Kenneth A. Gallo, Jonathan S. Kanter, Joseph J. Bia!, and Daniel J. Howley, PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP, Washington, DC

Attorneys for Defendants Farelogix Inc. and Sandler Capital Partners V, L.P.

OPINION

April 7, 2020 Wilmington, Delaware

46 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 3 of 97 PageID #: 6851

INTRODUCTION

The United States Department of Justice ("DOJ" or "government") filed this expedited

antitrust action seeking to permanently enjoin the proposed acquisition by Defendants Sabre

Corporation and Sabre GLBL Inc. (collectively, "Sabre") of Defendants Farelogix Inc.

("Farelogix") and Sandler Capital Partners V, L.P. ("Sandler") (collectively with Sabre,

"Defendants"). Sabre and Farelogix both play roles, which are described in great detail below, in

the airline travel industry. The government contends that allowing Sabre to acquire Farelogix,

and eliminate Farelogix as an independent entity, would harm competition, and thereby violate

Section 7 of the Clayton Act, 15 U.S.C. § 18. DOJ contends Farelogix is an innovative disruptor

in the market for "booking services," a market historically dominated by just three global

distribution systems ("GDSs"), including Sabre, who have tried to stifle innovation in a market in

which they earn billions of dollars annually.

The Court held an eight-day bench trial in January and February 2020. (See D.I. 251,

253,254,255,256,257,258,260,261,263,264,265,266,267) ("Tr.")' After the trial, both

sides submitted detailed proposed findings of fact (D.I. 234, 236) as well as opening and

answering briefs (D.I. 233, 235, 241, 242).

Pursuant to Federal Rule of Civil Procedure 52(a), and having carefully considered the

entire record in this case, the arguments of the parties, and the applicable law, the Court

concludes that DOJ has failed to meet its burden of proof. Therefore, the Court will enter

1 "Citations to the trial transcript are in the form: "([Witness last name] Tr. [page])."

47 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 4 of 97 PageID #: 6852

judgment for Defendants and against the government. The Court will not enjoin Sabre's

proposed acquisition ofFarelogix.

PROCEDURAL BACKGROUND

DOJ filed its complaint on August 20, 2019. (D.I. I) On September 26, 2019, the Court

scheduled a bench trial to begin on January 27, 2020. (D.I. 3 I) After consideration of various

requests relating to the length of the trial (see, e.g., D.I. 147 at 8, 15 (parties initially asking for

two-week trial within three months of case being filed); D.I. 175 at 2 (parties requesting 30 hours

per side)), the Court ultimately allocated each side up to 25 hours for its trial presentation (see

D.I. 197 at 11).

The parties prepared expeditiously and efficiently for trial, raising only two discovery

disputes. (See D.I. 127 at 2-3) Trial began, as scheduled, on January 27 and was completed,

with a full day of closing arguments and questions to counsel, on February 6, 2020.2

2 It should be understood that the Court is issuing this Opinion in the midst of the global coronavirus (COVID-19) pandemic. As readers today (i.e., April 2020) well understand, we are living through a national emergency, in which courtrooms (although not Courts) are largely closed, and most people (including judges, law clerks, lawyers, and assistants) are working remotely from home.

As of this writing, it is generally known and can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned, that the travel industry, and particularly air travel, has been hit particularly hard by the virus. See, e.g., U.S. Department of the Treasury, Procedures and Minimum Requirements for Loans to Air Carriers . .. under . .. the Coronavirus Aid, Relief and Economic Security Act (March 30, 2020), https://home. treasury.gov /system/files/ 136/Procedures%20and%20Minimum%20Requirements %20for%20Loans.pdf (last accessed April 7, 2020); Tr. Mar. 30, 2020 teleconference at 4-5; see generally Fed. R. Civ. P. 201. Understandably, however, no evidence was presented at trial about the impact of the coronavirus, or how its devastation might itself transform the air travel industry. Therefore, and necessarily, the Court has not considered the potential consequences of the virus in making its findings of fact or conclusions of law. To be clear, the Court's forward looking analysis does not (and cannot) take into account the current crisis caused by the pandemic.

48 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 5 of 97 PageID #: 6853

The Court commends all of the many attorneys on both sides for consistently outstanding

performances throughout this litigation and especially at trial.

At trial, the government called the following witnesses,3 including many who were

adverse to DOJ's case:

• Cory Gamer, Vice President ("VP") for Distribution and Sales for American

Airlines ("AA" or "American") (Gamer Tr. 89)

• Michael Radcliffe, Director of Distribution for United Airlines ("United")

(Radcliffe Tr. 169)

• Susan Carter, Senior VP of Marketing for Farelogix (Carter Tr. 235)

Jim Davidson, President and Chief Executive Officer ("CEO") of Farelogix

(Davidson Tr. 364)

• Chris Boyle, VP of Corporate Development and Mergers and Acquisitions for

Sabre (Boyle Tr. 484)

• Theo Kruijssen, Chief Financial Officer ("CFO") ofFarelogix (Kruijssen Tr. 585)

• Sean Menke, President and CEO of Sabre (Menke Tr. 664)

• Gregory Gilchrist, Senior VP Travel Solutions Group for Sabre (Gilchrist Tr. 748)

• Jorge Vilches, former Senior VP of Airline Business for Sabre (Vilches Tr. 785)

(by deposition)

• Chris Wilding, Senior VP Airline Line of Business for Sabre (Wilding Tr. 824)

• Dr. Aviv Nevo, economics expert (Nevo Tr. 878)

• Tom Klein, former CEO of Sabre (Klein Tr. 1072) (deposition)

3 All witnesses testified live at trial, unless otherwise noted.

49 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 6 of 97 PageID #: 6854

• Christina Larson, Managing Director of Sales Analytics, Distribution, and

Planning for Hawaiian Airlines (Larson Tr. 1108) (deposition)

• Jeffrey Lob!, Managing Director of Distribution Strategy, Delta Airlines ("Delta")

(Lob! Tr. 1148)

Defendants, in addition to essentially conducting direct examinations of many of the

above-listed witnesses during the government's case-in-chief, called the following witnesses at

trial:

• Kurt Ekert, President and CEO of CWT (Ekert Tr. 1178)

• Rose Stratford, Executive VP Global Supply Relations and Strategic Sourcing,

BCD Travel (Stratford Tr. 1211) (deposition)

• Werner Kunz-Cho, CEO Fareportal (Kunz-Cho Tr. 1280) (deposition)

• Tim Reiz, Chief Technology Officer for Farelogix (Reiz Tr. 1320)

• Dr. Kevin Murphy, economics expert (Murphy Tr. 1419)

• David Shirk, President of Travel Solutions for Sabre (Shirk Tr. 1580)

• Rocky Wiggins, Senior VP and Chief Information Officer for Spirit Airlines

("Spirit") (Wiggins Tr. 1638) (deposition)

• Tom Gregorson, Chief Strategy Officer for the Airline Tariff Publishing

Company,• better known as "ATPCO" (Gregorson Tr. 1667) (deposition)

• Shane Tackett, Executive VP of Planning and Strategy for Alaska Airlines

(Tackett Tr. 1698)

4 See Carter Tr. 289.

50 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 7 of 97 PageID #: 6855

• Derek Adair, Managing Director of Revenue Management Development for Delta

Airlines (Adair Tr. 1717)

One of the notable features of the trial was the juxtaposition of invariably excellent legal

skill demonstrated by the attorneys combined with numerous witnesses who were not credible

and/or not persuasive on multiple key points, as further explained below in the Court's findings

of fact.

FINDINGS OF FACT

This section contains the Court's findings of fact ("FF"). Certain findings of fact may

also be provided in connection with the Court's legal analysis later in this Opinion.

A. The Parties And Proposed Transaction

1. The United States Department of Justice Antitrust Division ("DOJ'') enforces the

nation's antitrust laws, including by challenging proposed mergers of private companies that may

be anticompetitive. See 15 U.S.C. § 25; D.I. I ,i 17.

2. Sabre Corporation is a Delaware corporation headquartered in Southlake, Texas . . (D.I. 184 (Pretrial Order ("PTO")) Ex. I ,i 2) Sabre Corporation is the ultimate parent entity of

Sabre GLBL Inc., Sabre's principal operating subsidiary and a signatory to the merger agreement

with Farelogix. (Id. ,i 3)

3. Sabre's Travel Solutions division contains its Travel Network and Airline

Solutions business units. (Menke Tr. 679) Travel Network operates Sabre's global distribution

system ("GDS"). (PTO Ex. I ,i 5) Sabre's GDS is the largest in the United States. (PX389 at

-437) Airline Solutions sells other information technology ("IT") products for airlines, including

a passenger service system ("PSS"). (PTO Ex. 1 ,i 7)

51 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 8 of 97 PageID #: 6856

4. In 2018, Sabre's revenues were approximately $3.9 billion. (PTO Ex. I ,r 9)

Most of Sabre's revenues and profits come from GOS booking fees paid by Sabre's airline

customers. (Menke Tr. 665)

5. Farelogix, Inc. is a Delaware corporation headquartered in Miami, Florida. (PTO

Ex. I ,r 11) Farelogix's majority owner is Sandler Capital Partners V, L.P., a private equity fund,

which is also a signatory to Sabre's merger agreement with Farelogix. (Id. ,r 12)

6. Farelogix is an IT provider to airlines and offers a range of products related to

distributing and merchandising airline content. (Carter Tr. 261-63)

7. In 2018, Farelogix's revenues were approximately.million. (DX! 45 at -006)

. Farelogix Open Connect, also commonly referred to as "FLX OC," generates more than half of

Farelogix's revenues. (PTO Ex. I ,r 19)

8. On November 14, 2018, Sabre agreed to purchase Farelogix in a transaction

valued at approximately $360 million (the "acquisition," "merger," or "transaction"). (PTO Ex.

I ,r I)

B. Airlines, Content, And Distribution Generally

9. Airlines sell "content" - tickets and ancillary products and services, such as early

boarding and seat upgrades - directly to travelers through their websites, call centers, and airport

kiosk ticket counters, and also indirectly through travel agencies. (PTO Ex. I ,r,r 4, 22; Stratford

Tr. 1215, 1218) "Ancillaries" are "anything beyond the fare." (Wiggins Tr. 1641)

10. Distribution through airlines' proprietary channels is referred to as direct

distribution, the direct channel, or colloquially, "airline.com." (Carter Tr. 240; PX025 at -943)

52 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 9 of 97 PageID #: 6857

11. Distribution through travel agencies is referred to as the indirect channel or

indirect distribution. (Gamer Tr. 91-92; Radcliffe Tr. 171)

12. The indirect channel accounts for about 40% of airline bookings today. (Murphy

Tr. 1430-31 )5 The vast majority of indirect channel sales - 95% by passenger volume - are made

through a global distribution system ("GOS"). (Id.) The remaining 5% are sales directly

between an airline and a travel agency or corporation ("direct connections"). (Id. )6

13. Travel agencies can be divided into online travel agencies ("OT As") and

traditional travel agencies ("TTAs"), including travel management companies ("TM Cs"). OT As

such as Expedia and Priceline primarily operate through consumer-facing websites and target

leisure customers. (Kunz-Cho Tr. 1281-83) TMCs such as Carlson Wagonlit Travel ("CWT")

and BCD Travel ("BCD") manage business travel for corporations. (Ekert Tr. 1178)

14. For many airlines, travel agencies are a critical sales channel, accounting for a

significant portion of their revenue. (See Gamer Tr. 92 (stating American earns half its revenue

through indirect channel); Tackett Tr. 1703-04)

15. Airlines that sell tickets through travel agencies need to communicate with travel

agencies in a format compatible with the agencies' internal systems. (Gamer Tr. 146-47)

5 The specific numbers in this paragraph do not appear in the trial transcript; they were shown on Dr. Murphy's Demonstrative slide number 7, which was marked confidential at trial, and therefore alluded to but not discussed specifically in open Court. Instead, counsel, the witness, and the Court looked at their own copies of the demonstrative while the witness testified. Although the demonstrative was not admitted into evidence, the Court does not understand there to be a dispute about the specific percentages recited in this paragraph. Ifthere is a dispute, it is not material to any issue in this case.

6 An important but confusing fact in this case is that a "direct connect" is part of the indirect channel of distribution, as it refers to a direct connection between an airline and a travel agency.

53 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 10 of 97 PageID #: 6858

16. When a travel agent creates a booking, the agent typically receives a record of the

booking that is compatible with the agency's IT system, which allows the agent to easily manage

the booking and provide post-booking services like invoicing and duty of care. (Stratford Tr.

1220-21) (explaining automated processes applied to records and limitations of"passive

segments," that is, records of bookings created outside of the GDS)

17. Travel agencies serve their customers by using proprietary systems to shop for and

book flights. (Ekert Tr. 1180-83) For example, a travel agency that serves corporate customers

may use comparison shopping engines that allow the agency to pull up only those options that

adhere to a corporation's travel policies. (Id.) Generally, travel agencies cannot meet the needs

of their traveler customers by searching for and booking flights on airlines' websites. (Stratford

Tr. 1215-16 ( explaining that booking through airline website does not allow BCD to provide

benefits that their customers value); Ekert Tr. 1184-85 (explaining that CWT allows corporate

travelers to access full array of airline content))

18. Airline ticket sales may also be characterized based on whether the passenger is

traveling for business or leisure. (Kunz-Cho Tr. 1282-83)

19. Airlines typically sell to leisure travelers through the direct channel. (Garner Tr.

IOI, 123-25) Leisure travelers tend to have less-complicated itineraries and are more price

conscious. (Ekert Tr. 1184) Thus, leisure travelers typically purchase tickets through an airline's

website, an OTA, or a metasearch engine (e.g., Kayak or Google Flights). (Id.; Murphy Tr.

1439)

20. Business travelers tend to purchase more expensive tickets with more complicated

itineraries ( often booking at the last minute and making changes, all of which usually results in

54 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 11 of 97 PageID #: 6859

higher fares and fees and, thus, more revenue for the airlines), and maybe subject to

employer-specific travel policies. (Radcliffe Tr. 173; Ekert Tr. 1181-82) For these reasons,

business travelers often rely on TMCs to purchase tickets on their behalf. (Ekert Tr. 1183-85)

C. Direct Distribution Channel

21. Airlines prefer that customers search and pay for fares and ancillaries on their

websites because -unlike when a traveler uses an aggregated search tool- an airline's website

displays only that airline's content, airlines can better control the retail experience on their own

websites, and airlines' costs are typically lower when using their own websites. -

Searching for airfares on the airline's website can, therefore, diminish price

transparency and airlines' incentive to compete on price. (Ekert Tr. 1192-93)

22. In 2005, direct distribution accounted for approximately 50% of bookings by U.S.

passenger volume. (Murphy Demonstrative at 26) In 2018, direct distribution accounted for

58.8% of bookings by U.S. passenger volume. (Murphy Demonstrative at 7) 7 In recent years

sales volume has shifted from GDSs to airline.com. (Adair Tr. 1726; Wilding Tr. 864) As a

result, direct channel sales now account for about 50-70% of airline bookings. (Garner Tr. 91;

Wiggins Tr. 1640;

23. Airlines have several tools to encourage travelers to search for and book tickets

through the direct channel. Airlines can make lower price fares available only on their websites.

Airlines can also provide an "advantageous retail experience" on their own

websites. --

7 The two Murphy Demonstrative slides relied on in this paragraph were not admitted into evidence, but the Court understands the data reported here are not in dispute. Any dispute on these points is not material to any issue in this case.

55 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 12 of 97 PageID #: 6860

24. Airlines may also drive bookings to their websites through metasearch engines

such as Kayak and Google Flights. (Tackett Tr. 1701, 1711-12) Metasearch engines attract

price-sensitive leisure travelers who are typically searching for the lowest fare regardless of

airline, and airlines can require the metasearch engine to send the traveler to the airline's website

rather than an OTA to book the ticket. (Tackett Tr. 1701-02, 1712-13)

25. In the early 2000s, the launch of airline websites led to a large volume of indirect

bookings shifting to the direct channel, but over the last decade, the "[c ]hannel shift to direct

distribution has stabilized." (PX245 at -286)

D. Indirect Distribution Channel

26. In the indirect channel, unlike in the direct channel, airline content is sold through

intermediaries such as travel agencies. Travel agencies offer customers many

valuable services, including access to and the ability to book content from thousands of travel

suppliers, including hundreds of airlines. (Ekert Tr. 1179, 1189) This access to content from

many travel suppliers allows travel agencies to provide their customers with comparison

shopping and fare transparency, which travel agencies consider one of their most significant

value propositions. (Stratford Tr. 1243) Accordingly, airlines that use travel agencies can reach

customers who seek to do comparison shopping that they cannot do through airline.com. (Lob!

Tr. 1171-72;

27. The travel industry distinguishes betwee.n two types of travel agencies: online

travel agencies ("OTAs') and traditional travel agencies ("TTAs"). (Gamer Tr. 100-03; Klein

Tr. 1078)

56 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 13 of 97 PageID #: 6861

28. OTAs are travel agencies that sell travel primarily via the internet. (PTO Ex. I

,r 23) OT As cater primarily to cost-conscious leisure travelers who value comparison shopping.

(PTO Ex. 1 ,r 25) Examples of OTAs are Booking.com, Priceline, Expedia, and Fareportal.

(PTO Ex. I ,r 24)

29. OTAs are an important and lucrative distribution channel for airlines. (PX23 7 at

-764; Radcliffe Tr. 172; OTAs enable airlines to reach customers they

might not otherwise reach through airline.com by allowing travelers to comparison shop across

airlines, hotels, cars, and other travel options, a service airline.com does not offer. (Gamer Tr.

124; Radcliffe Tr. 172) OTAs also enable airlines to sell tickets to customers in areas where they

"don't have a large presence," and to customers they might not reach through the direct channel

based on brand loyalty alone. (Tackett Tr. 1703-04)

30. TTAs are comprised of travel management companies ("TMCs") and otherbrick-

and-mortar travel agencies. (Gamer Tr. I 00-03) BCD Travel, CWT, and American Express

Global Business Travel ("Amex GET") are examples of TM Cs. (PTO Ex. I ,r 28)

31. TMCs primarily serve business travelers, which is the most profitable traveler

segment for many airlines because they tend to book more expensive airline tickets than leisure

travelers. (PTO Ex. I ,r,r 27, 29-30) Indeed, business travelers are often required by their

employer to book through a given TMC. (Radcliffe Tr.· 172-73) TM Cs ensure that business

travelers comply with their employers' travel policies, help with duty of care, provide expense

reporting and other back-office support, and manage changes to travel itineraries. (Stratford Tr.

1211-12, 1243-47)

57 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 14 of 97 PageID #: 6862

32. A GDS is a transaction platform that connects a large number of travel suppliers,

suph as airlines, hotels, and car rental companies, to a large number of travel agencies. (Carter

Tr. 266) For instance, Sabre's GDS connects more than 400,000 travel agencies (Radcliffe Tr..

206) to more than 400 airlines (PX253 at -166) and "thousands of car companies or hotel

companies" (Davidson Tr. 442). These connections allow travel suppliers to distribute their

content to travel agencies and create and manage bookings. (D.I. 22 ,r 22) Airlines rely on GDSs

to sell tickets through both OTAs and TTAs. (Gamer Tr. 92, 100-03)

33. The GDSs rely on a "traditional" payment model, under which airlines pay GDSs

like Sabre a "booking fee" for each flight a passenger takes. (Gamer Tr. 107-08) The GDS then

keeps part of the fee and gives the rest to the travel agency as an "incentive payment." (Gamer

Tr. 108; Stratford Tr. 1209-10; see also Murphy Tr. 1435-36 (defining GDS "net fee" as what

GDS retains after paying incentives to travel agencies)) Sabre's contracts with the hundreds of

thousands of travel agencies within its network typically require Sabre to pay travel agencies an

incentive per segment. (Stratford Tr. 1210) While the majority of Sabre's revenue is generated

by GDS booking fees (Menke Tr. 663 ), Sabre also pays out millions of dollars in incentive

payments (Shirk Tr. 1603).

34. GDSs provide various services, including "offer creation;" by using airlines' fare,

scheduling, and availability information, GDSs assemble the flight options that an airline can

provide in response to a travel agent's search. (PX096 at -098; Radcliffe Tr. 190) Offer creation

is also called "constructing an offer" or "shopping." (Gamer Tr. 97)

35. GDSs such as Sabre also provide "normalization" and "aggregation" services by

combining flight options from various airlines, thereby allowing travel agencies to request and

58 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 15 of 97 PageID #: 6863

receive offers from multiple airlines. (PX237 at -752; Gamer Tr. 92; Menke Tr. 718-19) As

BCD's Stratford explained, the aggregation capabilities ofGDSs are their "number one value

proposition" because "customers want us to shop and compare." (Stratford Tr. 1243)

36. Although airlines cannot distribute their full range of products and services

through Sabre's legacy GDS technology (Gamer Tr. 93; Radcliffe Tr. 177-78; Adair Tr. 1719),

GDSs allow airlines to send offers to travel agencies, create bookings when agencies select an

offer, and manage any changes to those bookings (Lob! Tr. 1150; Adair Tr. 1721-22). GDSs also

provide travel agencies additional services and technology, notably mid- and back-office

software. (Radcliffe Tr. 203; Ekert Tr. 1193-94)

3 7. The reach and distribution capability of GDSs allows airlines to distribute their

products and services globally in seconds, without spending millions of dollars on marketing.

(Stratford Tr. 1241) It is critical for all travel agencies that GDSs can provide this aggregation

function in sub-second response times. (Kunz-Cho Tr. 1299)

38. In addition to providing real value to airlines and end-user travelers, the

intermediary players in the indirect distribution channel - especially GDSs and travel agencies -

have strong financial incentives to preserve the travel distribution ecosystem and maintain it in

its current form. GDSs earn billions of dollars each year by charging airlines for each passenger

segment booked through their GDS. (Gamer Tr. 107; Menke Tr. 665; PTO Ex. 1 ,r,r 9-10)

Travel agencies earn a sizable income each year from incentive payments from GDSs for

booking airline tickets through the GDSs. (Stratford Tr. 1209-10; Ekert Tr. 1203-04; PX092 at -

622)

59 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 16 of 97 PageID #: 6864

E. Sabre's Competitors, Including Other GDSs

39. Sabre's GDS is a two-sided transaction platform. (Nevo Tr. 964; Murphy Tr.

1422-23)8

40. As Dr. Murphy explained, "the value of the Sabre [GDSJ ... occurs on two sides,

where on the one side" travel agents value Sabre's GDS "because it gives them access to a wide

range of travel suppliers in a single spot ... Because it's attractive to travel agencies and travel

agencies want to use Sabre to do their side of the business, it's therefore attractive to airlines,

because airlines after all want to sell their product and they want the customers." (Murphy Tr.

1423; see also Murphy Tr. 1425 (GDS "platform provides value to two sets of customers - the

travel agencies and travelers on one side and the travel suppliers, including airlines, on the

other"))

41. Sabre has controlled around 50 percent of the airline bookings made through

travel agents in the United States. (Nevo Tr. 931,947; PX389 at -437)

42. Because of the two-sided nature of Sabre's GDS, the primary competitors for

Sabre's GDS "in the long run" are "the rival GDSs," Amadeus and Travelport. (Murphy Tr.

1433; see also Stratford Tr. 1250; PTO Ex. 1 ,i 31)

43. Chris Wilding of Sabre testified that "travel agencies, when they're looking to a

GDS, they want to make sure that the GDS can provide them with all the relevant content."

(Wilding Tr. 860) Ekert of CWT similarly stated that if "Sabre was to lose content or enable

content but on a noncompetitive basis ... then we have the ability to shift business away from

them to another GDS." (Ekert Tr. 1186)

8 See also US Airways, Inc. v. Sabre Holdings Corp., 938 F.3d 43, 58 (2d Cir. 2019).

60 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 17 of 97 PageID #: 6865

44. As Dr. Murphy explained, "[i]f [Sabre Jdo[es]n't provide [the airline content that]

customers want, they'll lose travel agencies to Amadeus and Travelport, and if they don't provide

what the airlines want and they don't get the airline content, that will cause them to lose on the

travel agency side as well." (Murphy Tr. 1433)

45. Sabre's 2018 10-K filed with the U.S. Securities and Exchange Commission

("SEC") identifies "other GDSs" as competitors, but also lists "local distribution systems and

travel marketplace providers primarily owned by airlines or government entities and direct

distribution by travel suppliers." (PX25 l at -160)

46. In addition to competitive pressures arising from other GDSs, airlines' direct

distribution channels, including airline.com, constitute the "most important short-term

constraint" on Sabre's GDS fees. (Murphy Tr. 1433) While airline.com is "relevant to both

TTA and OTA bookings ... it's especially important for OTA bookings" because "direct channel

is a mouse click away'' (Murphy Tr. 1434; see also id. 1438-39; Adair Tr. at 1726 (testifying that

Delta.com is responsible for roughly 50 percent of Delta's distribution and "volume has gone

away directly from GDSs").

47. Chris Wilding, the Sabre employee responsible for GDS contract negotiations

with airlines, testified: "Airline.com is one of the primary competitors that we face as a GDS."

(Wilding Tr. 860)

48. Because airline.com, including the use of airline.com fostered by metasearch

engines, competes for bookings with travel agencies, it poses a significant constraint on Sabre's

GDS fees, as airlines can undermine the Sabre GDS by withholding content that the airline will

only provide through its own direct distribution channel. (Murphy Tr. 1437-38)

61 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 18 of 97 PageID #: 6866

49. The competition Sabre faces from both airlines' direct channels and the other

GDSs is apparent from the decline in Sabre's "net fee" - i.e., the difference between the GDS fee

charged to airlines and incentives paid to travel agencies. (Murphy Tr. 1435-36) GDS fees have

declined since 2000. (Murphy Tr. 1435-36; see also Stratford Tr. 1250 (testifying that GDSs

compete for BCD' s bookings through incentives))

50. A sizable portion of travel agencies' revenue, sometimes around 10%, comes

from GDS payments. (Ekert Tr. 1203; DX306 at 5; see also DX306 at 1)

51. Among the GDSs, Amadeus offers a New Distribution Capability ("NDC")

application programming interface ("API'') solution (Carter Tr. 270; Shirk Tr. 1629-30), but

Travelport does not (Davidson Tr. 475).

52. To switch GDSs, travel agencies may have to retrain their agents on how to use

the new GDS platform. (Stratford Tr. 1216-17) Travel agencies also often rely on mid- and

back-office systems provided by their GDS, so moving away from their GDS would require a

significant adjustment to their workflows. (Ekert Tr. 1193-94)

53. Travel agencies also face significant switching costs in transitioning customers

from one GDS to another. (Ekert Tr. 1185-86, 1205-06, 1381 (explaining it took CWT■

months and cost to migrate business between GDSs); Stratford Tr. 1216-18)

54. Sabre's GDS contracts with airlines may limit how well airline direct connects

can compete with it., For example, Sabre has had contracts with

62 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 19 of 97 PageID #: 6867

Likewise, Sabre's agency contracts also have other financial elements, like bonuses or

technology grants, that incentivize agencies to book through Sabre. (Ekert Tr. 1381-83)

55. Due to these incentive structures and switching costs, most travel agencies use a

single GDS in a given geography or for a particular corporate client. (Gamer Tr. 119; Ekert Tr.

1185; Stratford Tr. 1216)

56. As a result of these market dynamics, airlines must distribute through all three

GDSs to reach the entire universe of travelers booking through travel agencies. (PTO Ex. I ,i 32)

57. Thus, while GDSs compete with one another, and their competition places some

constraints on Sabre's ability to raise prices, that competition is also constrained.

F. New Distribution Capability ("NDC") ·

58. The New Distribution Capability ("NDC") application programming interface

("API") was initially developed at Farelogix by its Chief Technology Officer, Tim Reiz. (Reiz

Tr. 1324-25)

59. An NDC API is an API that communicates using the NDC schema to enable other

technology systems or third parties - such as GDSs, travel agents, or an airline's own public

facing website - to access an airline's passenger services system ("PSS"). (Carter Tr. 264-65;

Reiz Tr. 1325-27) A PSS houses IT infrastructure critical to an airline's operations, including its

reservations and inventory systems. (PTO Ex. I ,i 8) Hence, an NDC API is one type of API that

enables airlines to communicate offers and orders between the airline's PSS and third parties.

(Stratford Tr. 1253-54)

60. In or around 2012, Farelogix donated the schema it had developed to the

International Air Transport Association ("IATA"). (Carter Tr. 277-78; Reiz Tr. 1325; PX096 at -

63 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 20 of 97 PageID #: 6868

097; PTO Ex. 1 ,i 58) Later in 2012, IATA approved the new standard and labeled it NDC.

(Carter Tr. 277)

61. Since 2012, IATA alone has controlled the development ofNDC as a public and

open standard, releasing two new versions on its website every year since it was first published in

2015. (Gamer Tr. 150; Carter Tr. 278-79) As a result, NDC today"looks nothing like" the

original schema donated by Farelogix in 2012, and Farelogix must now expend additional

resources to "keep up" with NDC. (Carter Tr. 278)

62. NDC is not patent-protected; instead, the NDC schemas are open source and are

available on IATA's website to any third-party company to implement and use. (Carter Tr. 271;

Reiz Tr. 1327) According to IATA's website, more than 160 companies are NDC certified, and

it is realistic for any programmer to become certified. (Reiz Tr. 1327-28)

63. In late 2017, IATA released version 17.2 of the NDC schema, which was the first

"commercially viable" version ofNDC. (Gamer Tr. 150; see also Radcliffe Tr. 208-09;

Davidson Tr. 433) This led in 2018 to a significant increase in the number of airlines looking to

adopt an NDC APL (Radcliffe Tr. 209; Carter Tr. 287-88)

64. In mid-2018, American Airlines announced it would offer an NDC-enabled

corporate bundle - essentially, a package of fares and ancillaries customized to a particular

company's needs with pricing consideration. (Carter Tr. 286-87; Davidson Tr. 424) United

Airlines announced a similar bundle shortly thereafter. (Carter Tr. 286-87)

65. NDC is an XML-based messaging schema designed to facilitate electronic

communication between airlines and third parties for the purpose of distributing airline content. ' (PTO Ex. 1 iJ 15; Reiz Tr. 1324-26) As an XML-based schema, NDC differs from EDIFACT-

64 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 21 of 97 PageID #: 6869

the schema principally used to distribute airline content in the indirect channel today- because it

can accommodate varied and complex airline content. (PX237 at 80-81; Davidson Tr. 444-45;

Reiz Tr. 1324-25; PX246 at - 981 (NDC "allows for enhanced communications between airlines

and travel agents"))

66. NDC allows airlines to present more ancillary products in a more attractive way,

including the potential to enable more personalized offers that bundle fare price with other

products, which can increase airline revenue and consumer choice. (Wiggins Tr. 1648-49; Carter

Tr. 261-62, 276) NDC gives travelers greater choice and enables airlines to increase their sale of

ancillary products. (PX104 at -707 to -708; Radcliffe Tr. 178; Wiggins Tr. 1648) Hence, NDC

allows "increased airline product innovation and consumer choice." (Davidson Tr. 395; see also

PX104 at -707; PX197 at -917, -919 to -920 (outlining new types of offers available through

next-generation technology)) In this way, greater use ofNDC promises to increase revenues for

airlines and travel agents.

67. NDC also shifts two key functions away from the GDS. First, unlike legacy GDS

technology, NDC allows an airline to create its own offer instead of relying on the GDS for offer

creation. (Radcliffe Tr. 190; Carter Tr. 249 ("The whole point ofNDC is for the airline to have

more control over its offer."); Davidson Tr. 385; Lob! Tr. 1151; Adair Tr. 1719) By shifting

offer creation from the GDS to the airline, NDC gives an airline greater control over the

distribution of its products. (Davidson Tr. 385; Adair Tr. 1719; PX300 at -260; PX025 at -953

(Farelogix marketing materials stating NDC API gives airline "[f]ull control over distribution

and channel management, with less dependence on GDS/PSS")) Second, NDC enables airlines

to decouple order management from the GDS bundle, allowing airlines to reduce their

65 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 22 of 97 PageID #: 6870

distribution costs. (Garner Tr. I 07; Radcliffe Tr. 175; PX300 at -253

) In these ways, greater use ofNDC promises to decrease

airlines' costs.

68. Although some airlines still tout the costs savings generated by use ofNDC, more

airlines view NDC technology as being beneficial primarily because of its ability to increase

revenues, not cut costs. (See Carter Tr. 265-66;

Wiggins Tr. I 648)

69. By enabling airlines to totally or partially disintermediate the GOS, NOC poses a

threat to Sabre's traditional business model. (Adair Tr. 1719, 1736-37; PX002 at -885 ("NGO

[Next Generation DistributionJ shifts control to airlines and weakens the GOS value

proposition;" "as an airline gains control of offers, the value of the intermediated channel will

decrease"))

G. Farelogix's FLX OC And Its Uses

70. ~arelogix sells a suite ofIT solutions for airlines. (PTO Ex. 1 ,r 13)

71. Farelogix has no travel agency customers and no commercial relationship with

travel agencies. (Carter Tr. 266-67; PTO Ex. I ,r,r 48-49; PX096 at -097 ("Airlines are our only

customers; No travel agency subscribers"))

66 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 23 of 97 PageID #: 6871

72. Farelogix sells an NOC API product to airlines that it calls "Open Connect,"

which is also referred to as FLX OC. (Carter Tr. 236, 264, 266)

73. Farelogix refers to FLX OC, which is at the "core" of its business (Davidson Tr.

366, 382), and its NOC API as its "order management" or "order delivery" product (Carter Tr.

238; Davidson Tr. 405; see also PX072 at -232; PX025 at -949).

74. FLX OC consists of two main components: an NOC API, which provides the

"pipe" that carries messages between the airline and the travel agency or other third party; and an

orchestration layer, which standardizes and normalizes the content transmitted between the

airline's and third party's internal systems. (PTO Ex. 1 ,r 17; PX025 at -948, -949, -951; Carter

Tr. 238-39, 243, 246-47; Reiz Tr. 1348-49) Farelogix always sells Open Connect and its NOC

API together. (Carter Tr. 264)

75. Since donating the NOC API schema to IA TA, Farelogix must now retrofit legacy

technology to match the latest NOC versions. (Carter Tr. 279; Davidson Tr. 420) Moreover,

Farelogix must maintain several different aging NOC API connections for legacy customers,

going back to versions ofNDC from 2015, which is costly. (Davidson Tr. 421; Reiz Tr. 1331-

32) Because support for these connections is "much more labor intensive," Farelogix must

devote more employees to FLX OC. (Reiz Tr. 1339)

76. Farelogix holds no patents and has no trade secret protection covering FLX OC.

(Carter Tr. 271; Davidson Tr. 417)

77. In the direct channel, airlines can use FLX OC to distribute directly to travel

consumers, including through the airline's own website or a mobile app. (PX081 at

67 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 24 of 97 PageID #: 6872

FLX-000704047; Carter Tr. 283) Two ofFarelogix's current customers use FLX OC for their

own websites. (Carter Tr. 283)

78. Airlines can also use FLX OC in the indirect channel, to reach travel agencies in

three ways. (PX081 at - 046; PX025 at -943; Radcliffe Tr. 178-79) Through each of the three

booking paths, Farelogix allows an airline to send offers, receive bookings, and make changes to

those bookings. (Nevo Tr. 886-87; Radcliffe Tr. 179-80)

79. First, FLX OC enables airlines to establish "direct connects" with travel agencies.

(PX081 at -047; Carter Tr. 283) A direct connect is a link directly between an airline and a travel

agency without an intermediary such as a GDS (and, hence, without paying GDS fees).

(Radcliffe Tr. 175; Tackett Tr. 1705-06; Adair Tr. 1724; PX025 at -953) Thus, a direct connect

is part of the "indirect channel" of distribution and is a form of "GDS bypass." (Garner Tr.

106-07; Carter Tr. 240; PX084 at -887)9

80. Second, FLX OC enables airlines to connect to travel agencies via a non-GDS

aggregator, such as Travelfusion. (Murphy Tr. 1494; see also, e.g., Stratford Tr. 1221

(explaining that BCD uses Travelfusion to access Lufthansa content)) Distribution through a

non-GDS aggregator is another form of GDS bypass. (Carter Tr. 241-42, 284; Murphy Tr. 1494)

81. Third, FLX OC enables airlines to connect to travel agencies who continue to use

a GDS as an aggregator. This delivery path, referred to as "GDS passthrough," enables an airline

to use its Farelogix NDC API to push NDC content to travel agencies using GDS aggregation.

(Carter Tr. 284; Davidson Tr. 367-68; PX084 at -887)

9 A travel agency can access content from an airline's direct connect via a Farelogix proprietary user interface, known as SPRK, or the agency's own aggregation platform. (PX025 at -952; Reiz Tr. 1349-50; see also Gamer Tr. 99-100)

68 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 25 of 97 PageID #: 6873

82. Farelogix is agnostic as to whether an airline chooses the GDS bypass or GDS

passthrough delivery path; either pathway increases the number of bookings made through

Farelogix's NDC API and, therefore, increases Farelogix's revenue. (Radcliffe Tr. 202; Carter

Tr. 265; Davidson Tr. 367-68) Farelogix does not distinguish between GDS bypass and GDS

passthrough in how much it charges its Open Connect customers per ticket. (Davidson Tr. 368)

83. When an airline books through FLX OC, whether in GDS bypass or GDS

passthrough, Farelogix provides the order management services. (Garner Tr. 118; Nevo Tr.

886-88; see also Carter Tr. 238, 244-45)

84. FLX OC is not a GDS. (Radcliffe Tr. 202; Carter Tr. 266) FLX OC "do[es]n't

aggregate content," and offers only "one airline per connection." (Carter Tr. 266-67) FLX OC is

"an input to the airline that the airline can then use to connect to customers or connect to travel

agents .... Farelogix is not a platform. It doesn't bring the set of customers to any airline or

other travel supplier." (Murphy Tr. 1425)

85. FLX OC enables airlines, like AA and United, to distribute differentiated content

to Priceline, Orbitz, and other global OT As (PX025 at -954 ), and enables these airlines to

distribute corporate bundles through TMCs like AmTrav and TripActions (Radcliffe Tr. 195-96;

PX033 at -340, -342). As United's director of distribution explained, Farelogix direct connects

enable airlines to put "interesting content" into the market faster than is possible with the GDSs.

(Radcliffe Tr. 174-76)

86. AA estimated that it is 80-90 percent cheaper to book through a Farelogix direct

connect than through the Sabre GDS. (Garner Tr. 107; PX453 at -969)

69 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 26 of 97 PageID #: 6874

87. Even in GDS passthrough, FLX OC enables airlines to push for lower booking

fees because the airline creates the offers and Farelogix handles order management instead of the

GDS. (Radcliffe Tr. 190-91; see also Wilding Tr. 848-49; PX496 (noting that airlines want to

use NDC to "drive down cost and use as leverage with GDSs"))

see also Davidson Tr. 401-02)

I 08. Also in 2018, Farelogix told a prospective buyer "the slow adoption" of

Farelogix's order delivery products, like FLX OC, "was solely and unarguably due to the

blocking and pressure GDSs put on Farelogix, airlines and travel agencies to not adopt NDC."

(PX072 at -243; see also Davidson Tr. 412)

J. Travel Agencies Prefer GDSs To Direct Connects And Non-GOS Aggregators

I 09. Building individual direct connections to numerous airlines requires travel

agencies to spend millions of dollars in upfront capital. (Ekert Tr. 1196-98; Kunz-Cho Tr.

74 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 31 of 97 PageID #: 6879

1311-12) Ms. Stratford testified that the cost to BCD Travel of building a new agent point of

sale system would be greater than- (Stratford Tr. 1257)

110. Maintaining direct connects raises operating costs "exponentially" for travel

agencies, because servicing bookings made with a direct connect is much costlier than servicing

bookings made using the GDSs. (Ekert Tr. 1196)

111. Two of the largest TMCs in the world, CWT and BCD Travel, have estimated that

if they were to move transactions away from GDSs and to direct connect, costs per booking

would rise approximately $15. (Ekert Tr. 1196-97; Stratford Tr. 1256) Even when a booking is

made outside of the GDS, the travel agency must then bring it back into the GDS to store the

booking information. (Stratford Tr. 1255) This type of booking is "static" (Ekert Tr. 1191;

Stratford Tr. 1255-56); so if, after a booking is completed, the customer needs to make a change,

the travel agency is unable to make that change itself but must instead reach out directly to the

airline (Ekert Tr. 1191; Stratford Tr. 1256). The increased costs of static bookings are ultimately

passed on to the customer in the form of additional fees. (Stratford Tr. 1264-65)

112. Direct connects negatively impact travel agency operations by slowing response

times, in part due to lengthier search processes. (Stratford Tr. 1255 ("[W]e prefer to use the

GDS. Just from an efficiency standpoint, we don't want to go to multiple places to assess

content."); Kunz-Cho Tr. 1298-99 ("[A] request to a large number of providers naturally has a , tendency to cause delays and latencies.")) Removing content, and therefore bookings, from the

GDS channel requires agents to search multiple platforms for travel content, thereby reducing

efficiency and resulting in a "degraded user experience" compared to the GDS. (Ekert Tr.

75 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 32 of 97 PageID #: 6880

I I 91-92; see also Stratford Tr. I 263; Kunz-Cho Tr. 1300) "[H]aving access to a wider array of

airfare content and ancillaries through a single pipe is far more efficient." (Kunz-Cho Tr. 1288)

114. Use of a non-GDS aggregator presents the same added costs and inefficiencies

that make direct connects unattractive to travel agencies. As Mr. Ekert of CWT testified,

aggregators are "highly inefficient for us, and the user experience and quality of what we do is

degraded when we ... access inventory through Travelfusion as compared to the GDSs." (Ekert

Tr. 1190) Rather than the sub-second response times of the GDS, aggregators typically have

response times of 15 to 20 seconds. (Id.) This time delay for every transaction, when multiplied

by tens of thousands of searches for travel content, would result in an "unreal" increase in the

labor costs of travel agencies. (Ekert Tr. 1191-92)

115. In addition, non-GDS aggregators do not provide the services - e.g., mid- and

back~office support and facilitating duty of care - that the GDSs provide, and present similar

added expenses as direct connect transactions. (Ekert Tr. 1198-99 ("Whether that is through

Travelfusion or a, quote, 'non-GDS' direct connect, it is basically indifferent to us."); Stratford

Tr. 1223-24 ("I think the challenge of even using a third-party aggregator today ... is that, again,

you're still searching in multiple places. So I still have to go to the GDS to search."))

76 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 33 of 97 PageID #: 6881

K. Sabre And Farelogix View Each Other As Competitors

116. Notwithstanding Defendants' repeated denials at trial (see, e.g., Kruijssen Tr. 624-

25; Menke Tr. 737), a preponderance of the evidence shows that Sabre and Farelogix do view

each other as competitors, although only in a limited fashion.

117. Sabre considers Farelogix a competitor in developing NDC technology for direct

connects. (PX0 11 at 6 (Sabre document stating, "NDC Connect is similar in concept to our AS

Direct Connect, though priced lower"); PX246 at -989 (listing Farelogix as among "the

competition" for NDC); PX! 97 at -938 (describing Farelogix as "non-GDS competitor[]" in

next-generation offer and order management))

118. The record reflects competition between Sabre's and Farelogix's direct connect

solutions for major airlines.

119. For example, between 2017 and 2019,

120. Sabre and Farclogix also competed to provide an NOC direct connect platfonn to

- (PX3 l 6 at -534) Sabre viewed Farelogix as its "main competitor" for the

opportunity. (PX316 at-534; Gilchrist Tr. 761)

121. Some of the services Sabre and Farelogix offer airlines overlap with each other.

(Gamer Tr. 94, I 18; Murphy 1495-96) Sabre and Farelogix each allow airlines to send their

offers to travel agencies, process orders or bookings, and service those orders. (Lob! Tr. 1150;

Adair Tr. 1721-22)

122. Farelogix identified Sabre as a "key competitor" in order delivery and offer

management. (PX072 at -219)

77 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 34 of 97 PageID #: 6882

123. Some airlines view Sabre's GDS and Farelogix's Open Connect as partial

substitutes.

124. AA has described Farelogix's direct connect technology as "providing a low cost

substitute for GDSs." (PX453 at -968, -972; see also Judicial Notice Order,i 5 (AA describing

GDSs and Farelogix as "Competitive Booking Sources"); PX452 (describing Farelogix as "the

GDSs' leading competitor")

125. Similarly, a United executive testified that Farelogix offers United its only

alternative way to reach U.S. travel agencies, other than going through a GDS. (Radcliffe Tr.

174-76)

126. A Delta executive testified that Farelogix provides airlines with an alternative to

the GDS for distributing content to travel agencies. (Lob! Tr. 1150-53)

127. However, there are also great differences between Sabre's GDS -which provides

services to travel agencies as well as airlines - and FLX OC, which is only an input for airlines.

(Radcliffe Tr. 202-03; Carter Tr. 267, 273)

128. Unlike the Sabre GDS, FLX OC does not create offers, it only delivers them.

(Davidson Tr. 385-86; Vilches Tr. 802-03)

129. In part because Farelogix provides fewer services to airlines, Farelogix's prices

are significantly lower than Sabre's. (Radcliffe Tr. 175; Garner Tr. 107) The cost to airlines for

FLX OC is "roughly a tenth" of Sabre's GDS fee. (Murphy Tr. 1453-54) Dr. Murphy explained

that this disparity is attributable to "comparing the price ofan input to the price of the final

product." (MurphyTr. 1453)

78 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 35 of 97 PageID #: 6883

130. FLX OC is sold on a per-ticket basis and requires airlines to pay a subscription

fee. (Kruijssen Tr. 603; Nevo Tr. 993) By contrast, Sabre's GDS is sold on a per-segment basis.

(Gamer Tr. 107-08; Nevo Tr. 990)

L. Farelogix Has Transformed Its Business Model Several Times

131. Farelogix' s business strategy has changed dramatically multiple times over the

last 15 years. (Carter Tr. 272-73; Davidson Tr. 435-36)

132. Prior to 2009, Farelogix tried- and failed- to be a GDS (Davidson Tr. 442-43),

and tried - and failed - to sell a product to travel agencies that aggregated content from multiple

GDSs (Carter Tr. 272-73). Farelogix abandoned this business model by 2009. (Carter Tr.

272-73)

133. In 2009, Farelogix repositioned itself as a provider of technology solely to

airlines. (Carter Tr. 273) The company focused on a product called Direct Connect, which was

an XML API that airlines could use to create direct connections with travel agencies. (Carter Tr.

273) This period is referred to by Farelogix's head of marketing as "ancient history'' when she

trains new Farelogix employees. (Carter Tr. 274)

134. Farelogix's Direct Connect failed because it did not attract a sufficient volume of

transactions for Farelogix's airline customers, as travel agencies rejected its use. (Carter Tr.

274)

135. By approximately 2011, responding to the airlines' "ancillary awake[ning],"

Farelogix began aggressively marketing FLX M, a software product that had been under

development since 2008. (Carter Tr. 276-77; Reiz 1337-38)

79 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 36 of 97 PageID #: 6884

136. Farelogix also developed three other offer engines to assist airlines in creating

richer offers: FLX Shop & Price, FLX Schedule Builder, and FLX Availability Calculator.

(PX025 at 5; Carter Tr. 239)

137. Farelogix's marketing message in 2020 "very, very rarely" addresses the use of

NDC as a basis for costs savings because now "the message that resonates more with our airlines

... is all about revenue and how much money they can make selling ancillaries through their

NDC pipe." (Carter Tr. 265)

M. Farelogix Is A Successful Competitor, Despite Facing Challenges, And Is Likely To Create Great Value For Sabre

138. Sabre's and Farelogix's portrayal ofFarelogix at trial as a non-unique company

floundering in the NDC API marketplace was unpersuasive.

139. Defendants emphasize there are many other providers ofNDC API's, and this is

true. .. 140. But no other provider ofNDC API enjoys Farelogix's unique combination ofa

history of innovation, experience servicing the largest global carriers, strong reputation, presence

in the United States, and seeming financial stability.

Wiggins Tr. 1645) For over 15 years, Farclogix has built expertise working with

large airline customers. (Davidson Tr. 409,478; PX072 at-223; PX033 at -336-41 (outlining

NDC case studies from Farelogix's work with American, United, Qantas, and Lufthansa))

80 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 37 of 97 PageID #: 6885

141. Farelogix told a prospective buyer in a June 2018 presentation that it is the "NDC

market leader," the "only company" that does NDC order delivery "at scale," and overall "Holds

a Unique and Deeply Rooted Position in a Market with High Entry Barriers." (PX072 at -223,

-226; see also PX025 at -953 (in 2016, Farelogix was "the only provider in the marketplace

delivering NDC offer and order management with production-proven, PSS-agnostic connectivity,

comprehensive functionality, orchestration and support - all fully under the airline's control");

Davidson Tr. 408-11)

142. Farelogix has augmented its NDC APis with proprietary schemas that fill the gaps

in the basic NDC schema. (Davidson Tr. 411) Farelogix also offers dedicated teams for most

airline customers and has a group that assists airlines in connecting to travel agencies or

third-party aggregators. (Carter Tr. 247,253; Davidson Tr. 370; PX025 at -951; PX037 at -938)

143. No other third-party NDC API provider offers the additional capabilities offered

by Open Connect. (Adair Tr. 1721; PX072 at -226 (no other NDC provider supports travel

agency interface like SPRK); see also Garner Tr. 152-53)

144. Large U.S. airlines would not rely on IATA certifications to assess a potential

NDC API provider's suitability (see Garner Tr. 121-22) and do not view IATA certifications as a

reliable measure of IT providers' capabilities (see Radcliffe Tr. 230).

145. Datalex, an Irish travel software company, is the only non-GDS order

management provider other than Farelogix that currently serves a U.S. airline on the NDC

leaderboard (Jetblue). (Nevo Tr. I 022; D.I. 182 (PTO) Ex. I ,1,1 64-65)

81 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 38 of 97 PageID #: 6886

Davidson Tr. 476; Menke Tr. 681; see also Murphy Tr. 1556)

146. OpenJaw, which is owned by a Chinese governmental entity, is unlikely to expand

in the U.S. market, as its relationship with China presents airlines with data security concerns.

Davidson Tr. 656)

147. Other NOC providers, like JR Technologies and TP Connects, are unattractive

because they lack experience supporting an airline with global operations.

148. Hewlett Packard Enterprise ("HPE"), also known as DXC, is not a viable option

even for United Airlines, which uses HPE as its PSS provider.

(PX300 at -257; see also Radcliffe Tr. 213 (citing DXC's lack of

support services and "lack of experience with travel agencies and airlines"))

149. The A TPCO NDC Exchange ("NOC Exchange") is an airline-owned entity that

converts non-NOC APis into standardized NOC APis. (OX210 at -101520; Davidson Tr. 448-

49; Reiz Tr. 1344-45; Gregorson Tr. 1667, 1671) Recently Southwest-a large, complex U.S.

airline, which accounts for a significant portion of the volume of direct connect transactions in

the United States - chose to use the NOC Exchange, despite initially engaging in discussions

with Farelogix. (Davidson Tr. 448-49; Reiz Tr. 1345; Nevo. Tr. 1008) ATPCO was able to

develop NDC connections to Southwest's API connection in two weeks. (Gregorson Tr. 1686)

150. But ATPCO's NDC Exchange does not provide an NOC API for airlines and

lacks other key functionality. (Garner Tr. 122; Gregorson Tr. 1691 (explainingthatNDC

Exchange lacks ticketing capabilities and does not facilitate offer or order management))

82 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 39 of 97 PageID #: 6887

A TPCO' s chief strategy officer confirmed that NDC Exchange does not compete with any

products offered by Sabre or Farelogix; nor do any of ATPCO's other services. (Gregorson Tr.

1689-1690, 1693-1694; PXl41 at 1-2)

151. Airlines themselves are also self-supplying their own NDC APis, which has been

made easier by the updates to the IA TA NDC schema. (Davidson Tr. 433) British Airways and

Delta Air Lines (both of which are considered top 20 airlines worldwide) have self-supplied

NDC APis instead of purchasing a third-party's product such as FLX OC. (Radcliffe Tr. 217-18;

Carter Tr. 271; Davidson Tr. 419-20, 446-47) Air France has also built its own NDC APL

(Radcliffe Tr. 217; Carter Tr. 271)

152. Both American and-have told Farelogix during negotiations that they could

replace Farelogix by self-supplying their own NDC API or choosing an alternate vendor. (Gamer

Tr. 128-29;

153. Farclogix considers airline self-builds to be a significant competitive threat.

(Carter 270-7 I: Davidson Tr. 446-47, 635-36)

154. Farelogix has had to lower its price for FLX OC in each of its negotiations with

155. But airline own-build solutions do not appear to be a feasible, cost-effective

alternative for distribution, even for large U.S. full-service carriers. AA estimated that building

its own NDC API would cost about $40 million and require annual ongoing maintenance and

troubleshooting costs of$20-25 million. (Gamer Tr. 127; see also Wiggins Tr. 1645-46

(building systems for airlines requires "a lot of money")) Smaller U.S. airlines also do not have

plans or the resources to build NDC APis in-house; they would prefer to license third-party IT

83 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 40 of 97 PageID #: 6888

156. Moreover, it would take four to five years for AA or-just to replace

Farelogix's existing capabilities. (Gamer Tr. 127-28, 159-60; see also

Wiggins Tr. 1645-46 (building systems for airlines "takes many years"))

157. NDC is an open standard (Carter Tr. 271; ReizTr. 1326-27) and, as a result, NDC

has enabled many other IT companies - including many new entrants - to compete for and win

NDC AP! bids in the past five years (Carter Tr. 269, 270-71; Reiz Tr. 1327; Gregorson Tr.

1687)). Mr. Reiz, the only technologist who testified at trial and the individual who created the

NDC standard, testified that any company who can build an NDC AP! could do so for a full

service airline. (See Reiz Tr. 1329)

158. Defendants emphasize that in 2018 and 2019, after the introduction of schema

version 17 .2, Farelogix has submitted.bids for FLX OC in response to RFPs, and won only

.ofthose bids. (Cm1er Tr. 269; Davison Tr. 639-40; Murphy Tr. 1471-72)

159. Since 2015, Farelogix has submitted a total of■ bids for its NDC AP! product,

FLX OC. Of those.bids, Farelogix won•- a-success rate. (Carter Tr. 271; Davidson

Tr. 639-40) In that same period, Farelogix has lost NDC AP! bids to competitors such as

Amadeus, Datalex, OpenJaw, and TPConnects. (Davidson Tr. 270)

160. Since 2015, Amadeus has won at least-NDC AP! RFPs. (Davidson Tr. 648)

Amadeus also provides NDC API services to Spirit Airlines. (Wiggins Tr. I 646)

84 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 41 of 97 PageID #: 6889

161. Since 2018, Datalex has won.NOC APl RFP, the same as Farelogix.

/ (Davidson Demonstrative 1; see also Davidson Tr. 467 (admitting Davidson Demonstrative 1)

Datalex currently provides NDC API to Scandinavian Airlines and JetBlue. (Nevo Tr. 1022)

162. Likewise, since 2018, OpenJaw and TPConnects have both won.NOC API

RFP, the same number as Farelogix. (See Davidson Demonstrative 1; see also Davidson Tr. 467

(admitting Davidson Demonstrative 1))

163. DXC - formerly Hewlett-Packard - won-to provide NOC AP! services in

2017. (Radcliffe Tr. 213) Although DXC provides an NDC AP! to a smaller airline (Flybe),

IA TA' s schema standardization makes connections built for smaller airlines no different than

those built for larger airlines. (Reiz Tr. 1329) SAP, one of the largest technology providers in

Europe, currently provides the NDC API for Easyjet, which is a top 20 airline worldwide.

(Davidson Tr. 641)

164. But these facts, and Defendants' characterization of them, merely mask the reality

that Farelogix has won more RFPs than any other NDC AP! provider (Davidson Tr. 648) and has

actually been quite successful in recent years.

165. In April 2018, IATA announced a leaderboard of airlines committed to making at

least 20 percent of their indirect channel bookings via an NDC APl by December 2020. (PTO

Ex. 1 ~ 63) Farelogix provides the NOC A Pl for nearly half of these airlines, including two of

the three U.S. airlines on the list. (PTO Ex. I ~I~[ 64-65; PX094 at -566, -569; Davidson Tr.

373-74, 651)

166. Defendants count as Farelogix "losses" RFPs that remain open or may have been

withdrawn. (Davidson Tr. 653-55) Defendants exclude- whose contract Farelogixjust

85 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 42 of 97 PageID #: 6890

renewed, and its active opportunity with (Davidson Tr. 649, 655-56)

Defendants also wrongly equate every RFP with every other, without accounting for the size and

importance of any particular airline's business-despite the uncontestable fact that Farelogix is

working for two of the largest U.S. carriers: AA and United. (Davidson Tr. 649; Davidson

Demonstrative 1) Nor does Defendants' argument attribute any weight to the fact that

Farelogix' s ability to win recent RFPs may have been impacted by the prospect that, in the near

future, it may be owned by a GDS. (See generally Davidson Tr. 652-53) (Farelogix CEO

acknowledging that some airlines are taking "wait-and-see" approach while merger is pending)

167. Today, Farelogix processes more NDC bookings than any other order

management services provider. (Davidson Tr. 374; PX094 at -569) Farelogix has established a

larger base of airline customers for NDC services than any other provider in the U.S. market.

(Menke Tr. 731-32; PX072 at -223)

168. Farelogix is doing GDS bypass implementations for AA, United, and Lufthansa,

as well as other airlines. (Davidson Tr. 375) AA and United already use Farelogix direct

connects to distribute through OTAs, like Priceline and Orbitz, and TM Cs, including ArnTrav

and TripActions. (Carter Tr. 249-50, 259,261; Radcliffe Tr. 191-92; PX025 at-954; PX033 at

-340, -342)

169. AA and Lufthansa also use Farelogix's NDC API to connect to third-party

aggregators. (Gamer Tr. 95, I 12, 139; Carter Tr. 259-60) For example, CWT and BCD use

Travelfusion to access the Lufthansa Group content distributed through Farelogix's NDC APL

(Reiz Tr. 1352-54)

86 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 43 of 97 PageID #: 6891

170. Farelogix is now handling 26 NDC GDS integration projects, as compared to just

six at the start of 2018. (Carter Tr. 287-88; Davidson Tr. 375-76, 381-82, 439, 441)

N. NDC Will Likely Be Used More For GDS Passthrough Than GDS Bypass

171. To some extent, this case requires the Court to predict whether widespread

adoption ofNDC technology is going to lead to greater use of GDS bypass, essentially

eliminating the role of Sabre's GDS, or whether it is more likely to foster the expansion of GDS

passthrough, by which NDC allows for the creation, delivery, and servicing of richer airline

content through GDSs, including Sabre. The Court finds that NDC will likely be used more for

GDS passthrough than GDS bypass. (See generally Murphy Tr. 1461) ("I think we 're going to

end up with the GDS integration. It just makes too much economic sense.")

172. Farelogix has enabled airlines to establish direct connects with some of the largest

OT As, thereby bypassing the GDSs. (Gamer Tr. 103-04 (about 10-11% of AA's OTA bookings

are made using American's Farelogix NDC API); Radcliffe Tr. 175-76 (describing United direct

connect with Priceline); PX453 at -970)

173. American estimates it has achieved annual cost savings of$35 million from

shifting OTAs to direct connects. (PX453 at -970)

174. One large OT A, Fareportal, established Farelogix-enabled direct connects with

to access certain fare and ancillary content not available on a GDS; it is

also in talks with-for a direct connect. (DX306 at 5-7)

175. However, since 2016, FLX OC ticket volumes resulting from direct connects for

American have declined and for United have stagnated. (Reiz Tr. 1335-36)

87 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 44 of 97 PageID #: 6892

176. Industry participants predict that the volume ofNDC use for GDS bypass - that is,

direct connects and transactions through non-GDS aggregators - is unlikely to grow significantly

in the future. (See, e.g., Ekert Tr. 1186-87; Stratford Tr. 1245-47)

177. Today, and for the foreseeable future, airlines expect a major portion ofNDC

bookings eventually to come from GOS passthrough.

178.

179. Farelogix expects most of its growth to come from GDS passthrough. (Davidson

Tr. 375-76; PX072 at-241)

180. Farelogix CEO Davidson expects "pretty much all" future growth in FLX OC

volumes to "come from GOS passthrough." (Davidson Tr. 442) Farelogix's Carter agreed that

"the number one thing that [Farelogix] hear[s] from airlines now is about plugging into a GDS."

(Carter Tr. 285)

181. Chris Wilding of Sabre reinforced this view, testifying that "every airline I talk

with very much wants [Sabre] to implement NOC . . . . [E]veryone that is working with an NDC

solution wants to have it integrated into the Sabre GDS because they believe that is the best way

to distribute their content." (Wilding Tr. 857)

182. Rose Stratford of BCD Travel believes "broad delivery of systemwide NDC

solutions will be best delivered by the GDS" because "it really is about the infrastructure that

88 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 45 of 97 PageID #: 6893

TMCs have and ... servicing the workflows. The GDSs ... know what those are and

understand the complexities." (Stratford Tr. 1265-66)

183. Travel agencies have informed United that they prefer using the GDSs to direct

connections. (DX246 at -084) ("Big 3 TMCs will wait for the GDSs to deploy NDC

capabilities.")

184. GDS passthrough, not direct connects or transactions through non-GDS

aggregators, has led to the recent increased interest in NDC. (Carter Tr. 287-88) Farelogix is

currently working on 26 GDS passthrough implementations. (Davidson Tr. 381-82)

185. If a particular transaction is processed via GDS bypass, the GDS is cut out and

does not collect any fee. Even when a transaction is conducted via GDS passthrough, GDS fees

are likely to be reduced, since the GDS performs fewer functions than it does when airlines use

non-NDC legacy technology through the GDS.

186. United' s director of distribution expects to pay lower booking fees for GDS

passthrough bookings because United will "take the heavy lifting" of creating and pushing out

offers. (Radcliffe Tr. 190-91; see also Nevo

Tr. I 066-67; PX300 at -260 (United noting that using Farelogix NDC for "GDS pass through

replaces existing legacy technology" and may result in lower GDS segment fees))

187 .. ·As AA's Gamer put it, with GDS passthrough, Sabre's role is reduced to being

just "an aggregator for travel agents." (Gamer Tr. 118)

188. When Sabre established its GDS passthrough connection with American, Sabre's

then- president of Airline Solutions, Shirk, observed that Sabre "need[ed] to be careful to not

89 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 46 of 97 PageID #: 6894

have this over enable Farelogix only to hurt us in all our accounts." (PX308 at -982; see also

Shirk Tr. 1599)

189. Using NDC technology like FLX OC in a GDS passthrough implementation has

also helped airlines persuade GDSs to switch to a "wholesale model" in the OTA market.

(Garner Tr. 108; PX453 at -970 (indicating.AA will not pay GDS fees for OTA bookings where

it offers direct connect option)) Under the wholesale model, the. payment flow shifts: the airline,

not the GDS, pays the travel agency an incentive, and the travel agency pays the GDS a

technology fee for each booking made through the GDS. (Gamer Tr. 108-09)

190. Under the wholesale model, airlines pay less for distribution. (Gamer Tr. 109;

Nevo Tr. 943-44) For example, American estimates that it has achieved cost savings of$66

million per year from shifting OTAs to the wholesale model. (PX453 at -970)

191. Also under the wholesale model, GDSs will likely earn lower fees. (See Davidson

Tr. 108-09; Nevo Tr. 944)

0. Dr. Nevo's Analysis Is Unpersuasive

192. DOJ relies on the economic expert analysis of Professor Aviv Nevo of the

University of Pennsylvania and its Wharton School of Business. (See Nevo. Tr. 876) Dr. Nevo

is well-credentialed, including having served as the Deputy Assistant Attorney General for

Economic Analysis at the Antitrust Division of the Department of Justice, and has testified on

behalf ofDOJ and the Federal Trade Commission in other merger review cases. (See Nevo. Tr.

875-78) In this case, however, his analysis was flawed and, ultimately, unpersuasive.

193. Dr. Nevo testified that he followed "a standard multistep approach," which he

described as starting by "learning about the industry and the market realities because they were

90 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 47 of 97 PageID #: 6895

really kind of the key input into what I do later." (Nevo Tr. 880) Dr. Nevo emphasized the

importance of learning about the particular market he was analyzing, stating "it is important to

ground the analysis in the facts of the industry, to really understand what is going on. . . . This

ultimately is a practical analysis that is aimed to answer a question, and for that I really have to

understand the market and the reality." (Nevo. Tr. 881)

194. After he felt he understood the market realities, Dr. Nevo followed a "three-step

approach:"

First, you define the relevant antitrust market ... [T]hen I go and evaluate the competitive effect. And then, finally, I look to see if there's any mitigating factors that could offset these competitive effects.

(Id.)

195. Unfortunately, Dr. Nevo did not instill confidence at even the first step of this

process: gaining knowledge and familiarity with the airline industry.

196. Dr. Nevo opined that there are relevant product markets for "booking services."

(N evo Tr. 885)

197. According to Dr. Nevo, "booking services" include: (1) transmitting an airline

offer to a travel agency or aggregator; (2) receiving or processing an order or booking; and

(3) receiving or processing changes to the order. (Nevo Tr. 899-900)

198. Witnesses, including those with lengthy service in the airline industry ecosystem,

consistently testified that "booking services" is not a term they use or have heard and, more

importantly, that there is no standalone "booking services" product that either Sabre or Farelogix

91 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 48 of 97 PageID #: 6896

has ever offered for sale. (See, e.g., Carter Tr. 268; Davidson Tr. 443; Wilding Tr. 848; Reiz Tr.

1348)

199. Dr. N evo had to acknowledge that Sabre has not provided "booking services" in a

commercial transaction in the United States; therefore, he is "separat[ing]" out "booking

services" functionality from the services that Sabre actually sells through its GDS platform.

(Nevo Tr. 985-87)

200. At trial, Dr. Nevo was unable to provide a clear answer as to which ofFarelogix's

products other than FLX OC (if any) comprise what he considers the "booking services" product.

(See N evo Tr. 959-6 I)

201. Dr. Nevo was unable to determine a value or price for either Sabre's or

Farelogix's "booking services." (Nevo Tr. 987) When Dr. Nevo was asked the price attributable

to the booking services functionality within Sabre's GDS platform, he explained that "Sabre has

not offered it in the U.S. I believe there is no price." (Id.) When asked the value of the

"booking services" functionality within the Sabre GDS, Dr. Nevo testified that he "did not

quantify what [the] value is" and that it "was not part of [his] analysis." (Id.) When Dr. Nevo

was asked whether he compared the value of the "booking services" functionality in the Sabre

GDS to the value of the "booking services" in FLX OC, he testified: "That is not something that

I've offered, no." (Id.)

202. In attempting to identify and confirm the relevant product market, Dr. N evo

applied the hypothetical monopolist test, which assumes that the hypothetical monopolist

controls all the relevant products in the market for the given geography, then asks whether the

hypothetical monopolist would profitably impose a small price increase (i.e., a small but

92 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 49 of 97 PageID #: 6897

significant and non-transitory increase in price, or "SSNIP") on those products. (Horizontal

Merger Guidelines § 4.1.1 ("Guidelines"); Nevo Tr. 910) If so, the market is a relevant market.

203. Dr. Nevo calculated that a five percent SSNIP on OTA booking services would be

$0.10. (Nevo Tr. 910) He then considered whether an airline would accept the SSNIP and adjust

its fares to reflect the higher costs, or reject the SSNIP and stop using OTA booking services.

(Nevo Tr. 910-12) Dr. Nevo concluded that an airline would accept a SSNIP because it would be

more expensive for an airline to forgo distribution through OTAs than accept the SSNIP. (Nevo

Tr. 910-14) To reject a SSNIP, the airline would need to be able to persuade travelers booking

through OTAs to switch to other distribution channels, or sell additional tickets to different

travelers through other channels. (Nevo Tr. 904, 906-12)

204. Dr. Nevo calculated that a SSNIP on TTA services would be $0.11. (Nevo Tr.

912-13) A SSNIP on TTA services is smaller relative to the average price of airline tickets

booked through TTAs, and business travelers are relatively less price sensitive, so they are

unlikely to shift in response to a small price increase. (Nevo Tr. 912-13) TTAs are a critical

sales channel for airlines, who would rather pay a SSNIP than pull out of all TTAs. (Gamer Tr.

101-02, 109-10; Radcliffe Tr. 172-74, 348-49)

205. The Court does not find Dr. Nevo's SSNIP analysis persuasive, for reasons

explained elsewhere in this Opinion. (See, e.g., infra FF 215-16)

P. The Relevant Product Market For OTAs Has To Include Airliue.com

206. Dr. N evo excluded from his relevant product market all the airline tickets that are

sold directly by airlines to end-user travelers. (See Nevo Tr. 914-15) That is, Dr. Nevo excluded

93 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 50 of 97 PageID #: 6898

airline.com from the relevant market. The Court finds, however, that airline.com has to be

included in the relevant market, at least with respect to the OTA market.

207. Airline.com accounts for approximately half of all airline tickets sold to leisure

travelers in the United States. (Garner Tr. 91; Wiggins Tr. 1640;

208. Airlines believe they can succeed in shifting bookings from the indirect channel

(which involves OT As and TT As) to the direct sales channel (i.e., airline.com). (Lob! Tr. 1165-

66; DX287 at I (Delta distribution strategy documents state that "[d]riving customers to direct

channels is core to our strategy"); see also Tackett Tr. 1702-03 (testifying Alaska Airlines is

seeking to grow volumes in direct channel))

209.

210. Chris Wilding, who has negotiated as many as I 00 GOS agreements with airlines

on behalf of Sabre, testified that airline websites arc "one of the primary competitors that we face

as a GOS" and explained that Sabre continues to sec "a point of [market] share shift from the

GOS channel to the dot com," on average, every year. (Wilding Tr. 860, 864)

211. The competition between OTAs and airline websites has increased with the rise of

mctascarch sites that provide direct channel results alongside OTA results.

Metasearch sites may direct the consumer to the OTA website or the airline's website - in the

latter instance, the sale is a direct channel sale. (Tackett Tr. 1701-02) The metasearch site may

94 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 51 of 97 PageID #: 6899

even permit a consumer to complete a booking through the airline's website without leaving the

metasearch site. (Tackett Tr. 1701-02)

212. Fareportal co-CEO Werner Kunz-Cho testified that there is competition between

OTAs and the direct channel via metasearch sites like Google Flights. (Kunz-Cho Tr. 1300)

213. Defendants' economics expert, Dr. Kevin Murphy of the University of Chicago, 10

opined persuasively, and consistent with the record, that airlines have recognized that much of

their revenues derived through sales via OT As can be replaced by sales through airline websites.

(Murphy Tr. 1438-39, 1485) For an airline, the "closest alternative" to distribution through an

OTA is distribution through its own website. (Murphy Tr. 1552)

214. Dr. Murphy opined that airline direct sales have exerted significant competitive

pressure on GDS fees. (Murphy Tr. 1426) Aside from the Amadeus and Travelport GDSs,

airline.com is the biggest constraint on Sabre's GDS fees. (Murphy Tr. 1433)

215. Even Dr. Nevo agreed that airline.com serves as a competitive constraint on

Sabre's GDS. (Nevo Tr. 1009-10) But in conducting his SSNIP analysis, Dr. Nevo could not

(and did not even attempt to) determine whether airline.com was a bigger competitive constraint

on Sabre's GDS than is FLX OC. (Nevo Tr. 1006, 1026-27)

216. Dr. Nevo's SSNIP tests assume that an airline confronted with a hypothetical

price increase has only two choices: pay the increase or walk away. (Murphy Tr. 1481-82) As

Dr. Murphy explained, however, Dr. Nevo's assumption "ignores" that airlines also have the

10 Dr. Murphy, like Dr. Nevo, has impressive and pertinent qualifications. Dr. Murphy received his Ph.D. in economics from the University of Chicago, has published articles in around 70 journals, and has received both the John Bates Clerk medal and the MacArthur fellowship. (Murphy Tr. 1415-18)

95 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 52 of 97 PageID #: 6900

"ability to withhold content or not reach a deal" with a GDS and instead try to, steer traffic from

OTAs to airline.com. (Murphy Tr. 1481)

Q. U.S. Point Of Sale Is Not The Relevant Geographic Market

217. Bookings made through travel agents located in the United States are referred to

by Dr.Nevo as "U.S. point of sale." (Nevo Tr. 897, 1017; see also Wilding Tr. 836,853) To Dr.

Nevo, an OTA has a U.S. point of sale if its IP address has a U.S. address. (Nevo Tr. 897) A

TTA has a U.S. point of sale ifit is physically located in the U.S. (Id.)

218. Dr. Nevo opined that there is a relevant market for "booking services" with a U.S.

point of sale because "[i]t's not practical for an airline to substitute away from a U.S. point of

sale." (Nevo Tr. 897-98) Airlines cannot easily induce travelers to switch from booking through

U.S. travel agencies to booking through travel agencies in other parts of the world, and they

cannot easily replace sales to travelers in the United States with sales to travelers in other

countries. (Id.)

219. Sabre's GDS business has a strategy for the U.S. market and appears to separately

track its market share for U.S. point of sale and rest-of-world point of sale. (PX389 at -437) For

certain airlines, Sabre's GDS charges a lower price for U.S. point-of-sale bookings as compared

to rest-of-world point-of-sale bookings. (Wilding Tr. 852-53; PX389 at -437)

220. However, DOJ failed to persuade the Court that U.S. point of sale - that is, travel

agencies located in the U.S. - is the relevant geographic market. The reasons Dr. Nevo gave for

his opinion are unsupported by the record.

221. Dr. N evo said that his geographic market is based on "who the customer for the

product is." (Nevo Tr. 1016) But, as Dr. Nevo recognized, Farelogix's customers for FLX OC

96 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 53 of 97 PageID #: 6901

are airlines. (Id.) Thirteen of 15 FLX OC customers are airlines based outside of the United

States. (Nevo Tr. 1018) Yet the point of sale Dr. Nevo used for his relevant market is not where

the airline using FLX OC is based, as one would assume if the market is based on "who the

customer" is. Instead, Dr. Nevo's point of sale is where the travel agent- with whom Farelogix

has no relationship, and who does not use FLX OC - is based.

222. Dr. Nevo further explained that the geographic market for technology products

"depends on how they're priced," i.e., whether it is a product "that you can buy in the U.S. that

has a different price than if you buy it, for example, in Israel." (Nevo Tr. 1017-18) But Dr. Nevo

provided no evidence that the transaction fee for FLX OC varies by the location of the travel

agency that purchases a ticket. (Nevo. Tr. I 070)

R. DOJ Did Not Prove It Is Entitled To A Presumption Of Competitive Harm

223. DOJ contends that Dr. Nevo's market analysis gives rise to a presumption that the

proposed merger will lead to coinpetitive harm. The Court disagrees.

224. Dr. Nevo measured market concentration using the Herfindahl-Hirschman Index

("HHI"). (Nevo Tr. 919-20) The HHI is a standard measure used in economic literature and is

calculated by computing the share of each firm in the market, squaring the shares, and summing

them. (Nevo Tr. 919-20; Guidelines § 5.3) An industry with an HHI over 2,500 is considered

highly concentrated, and a merger that causes an increase in HHI of more than 200 points raises

significant competitive concerns. (Nevo Tr. 915-16, 920-21; Guidelines§ 5.3)

225. In calculating shares for his alleged market for booking services sold through

OTAs, Dr. Nevo calculated that Farelogix had 3.9% market share in 2018, while Sabre had

48.0% market share. (Nevo Tr. 917) Using Sabre's projections for 2020, Dr. Nevo calculated

97 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 54 of 97 PageID #: 6902

that Farelogix would have 12.5% market share in 2020, while Sabre would have 43.7% market

share. (Nevo Tr. 917) Using 2018 data, Dr. Nevo calculated a post-merger HHI level of 4,268,

with a post-merger change in HHI of 371. (Nevo Tr. 920-21) Using Sabre's projections for

2020, he calculated a post-merger HHI of 4,465, with a change in HHI of 1,093. (Id.) These

calculations would support a presumption of competitive harm, as they all exceed the standards

set out in the Guidelines.

226. In calculating shares for his alleged market for booking services sold through

TTAs, Dr. Nevo calculated that Farelogix had 0.1% market share in 2018, while Sabre had

54.8% market share. (Nevo Tr. 922)1' Using Sabre's projections for 2020, Dr. Nevo calculated

that Farelogix will increase to 6.4% market share in 2020, while Sabre would drop to 51.1 %

market share. (Id.) Using 2018 data, Dr. Nevo calculated a post-merger HHI level of3,895, with

a post-merger change in HHI of 6. (Id.) Using Sabre's projections for 2020, he calculated a

post-merger HHI of 4,085, with a change in HHI of 657. (Nevo Tr. 922-23) These calculations

would support a presumption of competitive harm, as all but the post-merger change based on

2018 data exceed the standards set out in the Guidelines.

11 Dr. Nevo's market share calculations in the TTA market included bookings made through Southwest's "self-build" APL (Nevo Tr. 921 ). Because Southwest does not compete to provide "booking services" for other airlines, its inclusion in these calculations is conservative, as it makes the reported market shares lower than they would otherwise be. (Nevo Tr. 921-22)

Some of specific data cited in this paragraph do not actually appear in the trial record, as neither Dr. Nevo nor Dr. Murphy expressly stated all the numbers during their testimony and their demonstratives were not admitted into evidence. The relevant numbers and calculations appear in the expert reports (which were also not admitted). The Court understands there to be no dispute between the parties as to how Dr. Nevo calculated his HHI numbers or the resulting numbers if the adjustments suggested by Dr. Murphy are made. While the parties disagree about the import of the HHI analyses, and whether Dr. Nevo's or Dr. Murphy's analysis is more pertinent, they do not disagree as to what figures result from each expert's inputs.

98 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 55 of 97 PageID #: 6903

227. Dr. Murphy identified flaws in Dr. Nevo's HHI analyses.

228. With respect to the OTA market, Dr. N evo excluded all sales made through

airline.com. (Murphy Tr. 1480-81) IfDr. Nevo's calculations using 2018 data are corrected so

that airline direct channel sales are included in his alleged market for booking services sold

through OTAs, the result is a post-merger HHI level of 1115 and a change in HHI of 19.

(Murphy Tr. 1485) If Dr. Nevo's calculations using Sabre's 2020 projections are corrected so

that airline direct channel sales are included in his alleged market for booking services sold

through OTAs, the result is a post-merger HHI level of 1127 and a change in HHI of 53.

(Murphy Tr. 1485) All four of these numbers fall below the Guidelines criteria (i.e., 2500 and

200) for presumptive competitive harm.

229. With respect to the TTA market, Dr. Nevo attributed all sales from GDS

passthrough to Farelogix, not to any GDS. (Nevo Tr. 919; Murphy Tr. 1483-86) However, when

an NOC-enabled sale is made through a GDS in a passthrough, it is the GDS that maintains the

connection as well as the commercial relationships with travel agencies and airlines; the NDC

provider (such as Farelogix) does not replace the GDS but, instead, acts as an upstream, vertical

complement to the GDS. (Carter Tr. 269; Murphy Tr. 1446-48, 1456-58) It is the GDS, not

Farelogix, that gets paid for this passthrough transaction, as even Dr. Nevo recognizes. (Nevo

Tr. 1068-69) Consequently, the sale through GDS passthrough is more properly understood as a

sale by the GDS, not by Farelogix. (Murphy Tr. 1486)

230. IfDr. Nevo's calculations using 2018 data are corrected so that GDS passthrough

sales are credited to the GDS, not the NDC API supplier, the result is an HHI level of 3,895 and

the HHI change is just 6. If Dr. Nevo's calculations using Sabre's 2020 projections are corrected

99 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 56 of 97 PageID #: 6904

in the same manner, the result is an HHI level of 3,898 and an HHI change of 19. 12 This is

ambiguous support for a presumption of harm in the TTA market, as 3,895 and 3,898 exceed the

Guidelines criteria, but 6 and 19 do not.

S. Sabre's Story Is Not Credible

231. Sabre contends that it does not view NDC, even when used for GDS bypass, as a

threat. Sabre further contends that the principal reason it wants to acquire Farelogix is for its

FLX M product, not for FLX OC or to address the risk of GDS bypass and passthrough. The

Court does not believe Sabre.

232. Sean Menke, Sabre's CEO, testified that GDS bypass is not a threat to Sabre.

(Menke Tr. 736-41) This testimony is not credible as it does not comport with the record.

233. Sabre's 2018 10-K identified "direct connect initiatives ... bypassing the GDSs"

as a risk factor for Sabre's business. (PX251 at -162; see also id. at -162-63 (also identifying

direct distribution through airline.com as another risk factor))

234. The I 0-K contains another section on competition, which notes that the "travel

distribution market is highly competitive, and [Sabre is] subject to competition from other GDS

providers, direct distribution by travel suppliers and new entrants or technologies that may

challenge the GDS moder' - a concept which includes at least GDS bypass - and that "[a]ny

inability or failure [by Sabre] to adapt to technological developments or the evolving competitive

landscape could harm [Sabre's] business operations and competitiveness." (PX251 at -166)

( emphasis added)

12 These specific figures are not in the trial record, but they are in Murphy's expert report. As with other data described above, the Court understands the parties to be in agreement as to these numbers but not as to their relevance and import.

100 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 57 of 97 PageID #: 6905

235. PX343 at -188, which is a slide from Sabre's planning forecast for 2020, also

shows that Sabre views direct connect as a forward-looking risk: it states that "risks center

around ... [n]ew airline models and ability for the tnajor carriers to shift share to direct connect."

(See also Shirk Tr. at 1621-22

; PX 156 at -953; PX497)

236. Defendants' expert, Dr. Murphy, also concluded that direct connects can be a

competitive constraint on GDSs and that "GDS bypass is somewhat of a threat" to Sabre.

(Murphy Tr. 1520, 1558-59)

23 7. Even Menke admitted ( eventually) that Sabre would be impacted if even a portion

of the market shifts to GDS bypass. (Menke Tr. 739, 746)

238. The Court does not find credible the Sabre witnesses' testimony that none of the

uses ofFarelogix technology is viewed as a threat to Sabre. It would be irresponsible for Sabre's

leadership not to understand that GDS bypass, and even GDS integration and the wholesale

model, are threats to Sabre's traditional revenue flow.

239. Because GDS bypass is a threat to Sabre, and because Farelogix is a major player

in enabling GDS bypass, it is logical to conclude that part of Sabre's interest in acquiring

Farelogix is to mitigate the risk from GDS bypass. Notwithstanding CEO Menke's unequivocal

denial that there is "any connection" between GDS bypass and Sabre's "reason for buying

Farelogix" (Menke Tr. 744), other evidence - including internal Sabre documents -prove that

this is part of Sabre's motivation.

240. Chris Boyle, who led Sabre's evaluation of the proposed Farelogix acquisition,

sent a presentation to Menke identifying as part of the "value" of acquiring Farelogix that it

101 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 58 of 97 PageID #: 6906

would "[m]itigate risk from potential GDS bypass." (PX0l 1 at 3; PX012 at 7; see also Boyle Tr.

506-07) Menke then forwarded a version of this presentation containing the "mitigate risk"

language to the chairman of Sabre's board of directors. (Menke Tr. 741)

241. Boyle testified the "mitigate the risk of GDS bypass" bullet point was inserted at

the last minute into a July 2018 draft internal powerpoint deck, that it was done by two

subordinates during a hectic period, that the bullet is inconsistent with the rest of the document as

well as an earlier deal rationale document from February 2018, and that he deleted the bullet after

he noticed it because it did not reflect his views. (Boyle Tr. 506, 516-17, 544-46, 553-57; see

also DX086) The final presentation prepared for Sabre's board of directors to approve the

Farelogix transaction did not include "mitigating the risk of GDS bypass" as a rationale for the

deal. (DX145)

242. However, ordinary course documents indicate that, in fact, Boyle did participate in

the meeting where the slide was created and suggest he likely deleted the bullet in September

2018 after speaking with Sabre's antitrust counsel. (Boyle Tr. 513-16, 519-35; PX024; PX0J4;

PX492; PX493; PX494; PX495; PX439)

243. Menke testified that the principal reason Sabre is interested in acquiring Farelogix

is to own the FLX M merchandising product. (Menke Tr. 744-45 (explaining that Sabre's

primary focus was on Farelogix' s "merchandising capabilities to help our online customers sell

the products and services that they want"); see also Boyle Tr. 552-53 (Farelogix deal leader

testifying that interest in acquiring Farelogix, an idea Sabre had abandoned in 2017, was

"instigat[ ed]" by interest in "their merchandising engine"))

102 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 59 of 97 PageID #: 6907

244. FLX OC generates the majorityofFarelogix's revenue. (Davidson Tr. 379)

Approximately two-thirds ofFarelogix's employees work on Open Connect and NDC API, while

far fewer Farelogix employees (around 15) work on FLX M. (Davidson Tr. 379, 382-83)

245. Internal Sabre documents do show that Sabre is according substantial value to

Farelogix's FLX Mand the further value that could be created by integrating it into Sabre's

technology. (DX145 at-005 (November 10, 2018 presentation made to Sabre's board of

directors for approval of the Farelogix acquisition, indicating that transaction would enable

airlines to "integrate[] PSS-agnostic merchandising engine with PSS"); see also Boyle Tr. 552-53

(explaining that Sabre viewed FLX M "as a key building block, an ability to create an offer with

a flexible rules engine [that] we hadn't done ourselves"); Gilchrist Tr. 781-82 (acquiringFLX M

"will give [Sabre] inroads in [to] new customers that we can't currently do business [with] today

as far as merchandising is concerned" and "[f]or [Sabre's] existing PSS customers who have

struggled without merchandising capabilities [offering Farelogix's merchandising solution] will

give [Sabre] a much, much stronger level of capability''))

246. While the Court finds that integration ofFLX-M into Sabre's offerings will

promote innovation and enable Sabre to better compete against its GDS counterparts, this is only

one motivation for Sabre's desire to acquire Farelogix. Other motivations are dealing with an

entity Sabre views as a competitor and threat and transforming NDC technology from a risk to an

opportunity for innovation and integration, including by obtaining control over FLX OC, the

employees who work on it, and the revenues generated from it.

103 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 60 of 97 PageID #: 6908

247. As the Court has already found (see supra FF Part K), Sabre and Farelogix view

each other as competitors, both to supplyNDC APis and for a component of the traditional full

service GDS.

248. In a presentation created for a potential acquirer, Farelogix described Sabre and

Amadeus as its primary "Order Delivery'' competitors, both in their development ofNDC APis

and in "traditional GDS distribution until NDC is fully adopted." (PX072 at -219)

249. Similarly, Sabre strategy documents identify Farelogix as one of Sabre's "most

relevant threats" and as a competitor in next-generation distribution. (PX048 at -802; see also

PX005 at -927; PX197 at -938 (describing Farelogix as.a "non-GDS competitor[]" in

next-generation order management))

250. In a February 2, 2018 deal discussion presentation, Sabre's Boyle noted that

Farelogix's technology solutions would help Sabre "bring[] NDC-enabled distribution to scale in

the marketplace." (Boyle Tr. 555) (referencingDX086 at 4) Sabre's November 10, 2018

presentation seeking approval from its board of directors detailed how combining with Farelogix

would accelerate Sabre's "NDC-enabled strategy." (DX145 at 5) (describing several value

propositions of possible merger with Farelogix, including that Farelogix "has key building blocks

that complement our organic plans enabling at-scale NDC+," "NDC Offers integrated in the

GDS," "Immediate access to NDC API," "Ability to scale NDC volume quickly," "Adds NDC

platform to leading Sabre product offering") These benefits are not limited to acquisition of

Farelogix's FLX M product but also will be derived from Sabre's acquisition ofFLX OC.

104 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 61 of 97 PageID #: 6909

T. Sabre's Promises About Post-Merger Pricing And Availability

251. On August 9, 2019, Sabre CEO Menke sent letters to current Sabre and Farelogix

airline customers, making commitments concerning what Sabre would do following its

acquisition ofFarelogix. (Menke Tr. 720-22; DX225)

252. Specifically, Mr. Menke wrote that after the acquisition, Sabre will:

(a) Continue to offer and support Farelogix's NDC APis and Open Connect capabilities to any third parties and all outlets that wish to use them to connect to Sabre, other GDSs, other distribution partners, or directly to travel agents;

(b) Continue to offer Farelogix's NDC APis and Open Connect capabilities to airlines and other third parties for both GDS bypass and GDS pass-through;

(d) Commit to make Farelogix's NDC APis and Open Connect available at industry competitive rates that are no greater than they are today;

(e) Provide at least the current level of support (or more) for the capabilities;

(f) Continue to invest in the development ofFarelogix's capabilities at levels no less than current levels; and

(g) Offer to extend any existing Sabre GDS contract or Farelogix contract on the same terms for a period of at least three years past the current termination date.

(DX225)

105 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 62 of 97 PageID #: 6910

253. A three-year extension ofFLX OC contracts would provide airlines that currently

use FLX OC time to find an alternative supplier before their next negotiation with Sabre or with

other GDS providers.

254. Notwithstanding that the Court does not believe Sabre's story about why it seeks

to acquire Farelogix (see supra FF Part S), the Court does believe that Menke intends to abide by

the commitments he has expressed to customers and the market. However, as the government

correctly notes, Sabre has not memorialized its offer in any legally binding agreement, and no

airline has accepted Sabre's offer. (Menke Tr. 730) Furthermore, CEOs - and even firm cultures

- can change.

U. Most, But Not All, Players In The Airline Travel Ecosystem Support The Proposed Transaction

255. Most of the players in the airline travel ecosystem- including especially travel

agencies and airlines - support the proposed transaction. Several of those who do not, American

Airlines and United Airlines, have obvious interests in seeing the deal die.

256. Kurt Ekert, CEO of CWT, testified that the proposed acquisition "will enable

Sabre to ... offer much better value to the airlines than they can today." (Ekert Tr. 1199) He

added that "if Sabre at scale ... is able to make NDC a reality, well, that means we don't have to

go and make fundamental changes to how we operate our business." (Ekert Tr. 1201)

257. Werner Kunz-Cho, CEO ofFareportal, stated, "Sabre with a Farelogix merger

will be able to embrace a wider array of content, particularly in the low cost carrier domain

which is very important to us." (Kunz-Cho Tr. 1316; see also id. 1290-91 (noting one benefit of

merger will be enhanced ability to meet growing traveler demand for ancillaries))

106 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 63 of 97 PageID #: 6911

258. BCD Travel noted in a letter to DOJ that the Sabre-Farelogix combination "will

benefit the travel industry as a whole - by accelerating the adoption of the [NDC] protocol - as

well as the travel agencies that use global distribution systems (GDSs) such as Sabre, and

companies and travelers we serve." (DX284 at I)

259. Rocky Wiggins, Chief Information Officer at Spirit Airlines, testified that the deal

"is a great step" because "it would accelerate Sabre's capability in the NDC area." (Wiggins Tr.

1658; see also id. 1661-62 (agreeing with proposition that combining with Farelogix "is another

example of Sabre['s] commitment to deliver the end to end NOC-enabled retailing, distribution

and fulfillment technology required to accelerate ... profitability and growth"))

260.

261. As far as the record shows, the entities opposing the proposed acquisition arc two

of the largest airlines in the United States, American and United Airlines."

262. Both American and United have previously attempted to acquire Farelogix.

Specifically, in 2015, United considered a joint venture with AA to acquire Farclogix and gain

"strategic influence over product direction" at Farelogix. (PX299; see also Radcliffe Tr. at 223)

Staiting in 2017, United began considering another offer to acquire Farclogix. (Radcliffe Tr.

224-25) That cffmt ended in 2018. (Radcliffe Tr. 225-26)

see also Adair Tr. 1720-21 (Farelogix is "an airline-centric entity" that "think[s] about how airlines want to solve the problems"))

107 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 64 of 97 PageID #: 6912

263.

264. AA's opposition to the transaction is in tension with its offer to Sabre to publicly

support the proposed merger if Sabre were lo agree lo grant significant concessions on

commercial terms ti (DX202; see also Garner Tr. 155-56, 158)

V. The Merger's Likely Impact On Pricing, Innovation, And Leverage

265. Based on the evidence, the Court predicts that the merger of Sabre and Farelogix

will not increase prices nor deter innovation, even though it may reduce one source of airlines'

leverage in negotiating with GDSs.

266. During negotiations leading to the Sabre-Farelogix transaction, some

consideration was given to whether acquiring Farelogix would enable Sabre to raise prices.

Sabre's and Farelogix's CEOs discussed whether the transaction could lead to a "possible uplift

on GDS transaction fees.'' (Boyle Tr. 496-97; see also PX227 at -130 ("[T]his is something we

discussed on the phone and you had a strong level of confidence surrounding the opportunity."))

Farelogix and its private equity owner, Sandler, believed Sabre would be able to increase Sabre's

booking fees post-merger. (Boyle Tr. 486-87, 492-93, 495; PX006 at -279; PX009 at -037) In

August 2018, Farelogix's CFO noted that, for Sabre, buying Farelogix could reduce the "price

pressure in [the] market." (PX187 at -960; see also Kruijssen Tr. 615-16) On the day the

108 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 65 of 97 PageID #: 6913

acquisition was announced, a Sabre senior vice president wrote: AA' s "FLX bill is going up big

time." (PX140 at -639; see also Gilchrist Tr. 751)

267. Even though the Court rejects Sabre's story about not perceiving GDS bypass as a

threat and about acquiring Farelogix principally for FLX M, the Court does find credible Sabre's

representations to the market that it intends to hold or even lower prices for FLX OC if it

succeeds in acquiring Farelogix. Doing so would be consistent with the internal financial

modeling Sabre used in deciding to pursue the transaction.

268. As part of Sabre's due diligence, Chris Boyle created three sets of projections to

model the value of a potential acquisition: the Farelogix "Management Case," "Sabre Base

Case," and "Sabre Synergy Case" models. (PX015 at 59; see also Boyle Tr. 538-40) Sabre's

Board relied on Boyle's projections to approve the deal. (Menke Tr. 717-18) The FLX OC

projections in the "Sabre Synergy Case" mirror those in the "Sabre Base Case" and both models

project FLX OC prices decrease over time. (Boyle Tr. 567-70) In all three cases, the projected

revenue per ticket was lower than current FLX OC prices. (Boyle Tr. 569)

269.

270.

109 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 66 of 97 PageID #: 6914

271. The record is not devoid of contrary evidence. In January 2019, after a particular

airline asked for no change to its current Open Connect terms with Farelogix, Sabre quoted that

airline a price nearly.times higher than Farelogix's pricing. (Compare PX393 at-079;

PX392 at-026-27; Wilding Tr. 828-30 -segment) with Davidson Tr. 413-14; PX087 at

-734; PX0I I at 6 )

272. Still, on the whole, the Court is persuaded that the most likely impact on pricing is

that prices will remain the same or be reduced following the transaction.

273. Bringing Farclogix's technology in-house will foster Sabre's integration ofNDC

into its ODS, allowing it to respond more effectively to market demand.

274. Since at least 2017, Sabre's ODS business has been "under urgent pressure from

key airline carriers" - including - "to

deliver NOC capabilities in the near-term." (PX24 I at -318; see also Menke Tr. 685)

275. In 2017, AA began paying a S2 per booking inceJ1tive to travel agencies for any

bookings made using NOC technology. (PX072 at -300) Farclogix's CEO, Davidson, told his

board that AA 's NOC incentive program would put pressure on ODSs to speed up their GOS

passthrough implementation efforts. (Davidson Tr. 374-75; PX097 at -235) Likewise, Sabre

viewed as a "commercial action to force ODSs to incorporate NOC

connectivity." (PX241 at-318)

276. Faced with this pressure, in August 2017, Sabre laid out a strategy to catch up to

and surpass Farelogix's next-generation offer and order management capabilities by 2020.

(Menke Tr. 682-83; PX197 at -937 to -938; PX002 at -914 (Sabre recognizing an "opportunity

110 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 67 of 97 PageID #: 6915

... to leapfrog" Farelogix's NDC API)) Sabre recognized that ifit did not invest in

next-generation distribution technology, there would be a "tipping point" at which large airlines'

efforts to bypass the GDSs could lead to a steep fall in Sabre's GDS booking volume. (Boyle Tr.

504-06; PX005 at -046, -048-49 (listing FLX OC customers Lufthansa, AA, Qantas, and United

as carriers with "GDS bypass motivation"))

277. Acquiring Farelogix, and integrating its FLX OC NDC API into its GDS, will

allow Sabre to use new technology to deliver services airlines and agencies are demanding in a

more efficient manner. (See, e.g., Kunz-Cho Tr. 1307) (Fareportal CEO testifying that "this

merger will likely help innovation and allow Sabre to provide better content in ways that airlines

wish to see that content displayed")

278. Additionally, Farelogix's Tim Reiz, the inventor of the NDC API and the only

technologist to testify at trial, has considered developing a new type of PSS, but could not do so

due to Farelogix's limited resources. (Reiz Tr. 1371-73) Reiz is excited by the prospect of

joining Sabre and the opportunity, potentially, to develop a next generation PSS and artificial

intelligence technologies. (Reiz Tr. 1346)

279. At least some individuals within Sabre believe that acquiring Farelogix will help

Sabre gain leverage over airlines in the next round of negotiations. One Sabre senior vice

president predicted that AA 's Gamer would "hate" the Farelogix deal because "it entrenches us

more," vividly describing an independent Farelogix as American's "Trojan horse to f--- us."

(Gilchrist Tr. 750-51; PX140 at -639)

280. In 2017, United's director of distribution advised United's leadership that

partnering with Farelogix for NDC distribution would "improve[] United's position" in

111 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 68 of 97 PageID #: 6916

upcoming contract negotiations with Sabre, Amadeus, and Travelport. (PX300 at -253; see also

Radcliffe Tr. 187) He added that, even in the most recent GDS negotiations, "[t]he existence of

the direct connect alternative powered by Farelogix gave me the ability to command a lower

price from the GDSs" and otherwise obtain "better terms." (Radcliffe Tr. 189; see also id. at

181-82 (United has "certain freedoms in the [GDS] agreement that are made possible because of

the existence of a bypass opportunity"))

281. United's director of distribution wrote to colleagues that "[i]fa GDS owns

Farelogix, they may ... remove a major threat that is out there in the industry that helps apply

pressure to GDSs when we negotiate. Without that alternative in the market, we lose leverage."

(PX299 at -770; see also Radcliffe Tr. 184-86) He described the acquisition as the "stuff of

nightmares" and "the worst case scenario coming true." (PX301 at -261; see also Radcliffe Tr.

231-34)

282. Similarly, Delta's managing director of distribution strategy testified that having

Farelogix as a GDS alternative improved Delta's bargaining position with the GDSs. (Lob! Tr.

1152-54)

283. It follows that the loss ofan independent Farelogix will somewhat reduce airlines'

leverage in the next round of negotiations with GDSs.

LEGAL STANDARDS

Section 7 of the Clayton Act prohibits any merger "in any line of commerce or in any,

activity affecting commerce in any section of the country" whose "effect[s] ... may be

substantially to lessen competition, or to tend to create a monopoly." 15 U.S.C. § 18. To prevail

on a claim under Section 7, the government must show a "reasonable probability that the merger

112 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 69 of 97 PageID #: 6917

will substantially lessen competition." Brown Shoe Co. v. United States, 370 U.S. 294, 325

(1962). While the government need not prove anticompetitive effects "with 'certainty,'" FTC v.

H.J. Heinz Co., 246 F.3d 708, 719 (D.C. Cir. 2001), it is "not enough" to show "[t]he mere

possibility of the prohibited restraint," FTC v. Consol. Foods Corp., 380 U.S. 592, 598 (1965)

(internal quotation marks omitted).

Courts considering a Section 7 merger challenge follow a burden-shifting framework.

First, the Court determines whether the government has established a prima facie case that the

proposed merger is anticompetitive by (I) identifying the proper relevant market and (2) showing

that the effects of the merger are likely to be anticompetitive. See FTC v. Penn State Hershey

Med. Ctr., 838 F.3d 327, 337-38 (3d Cir. 2016). If the government succeeds at this first step, the

Court next determines whether the defendants have rebutted the government's prima facie case.

See id. at 337. Finally, if defendants do successfully rebut the government's prima facie ~ase,

"the burden of production_ shifts back to the [g]overnment and merges with the ultimate burden

of persuasion, which is incumbent on the [g]overnment at all times." Id. Ultimately, the

government's burden is to prove, by a preponderance of the evidence, a reasonable probability

that the merger it seeks to enjoin will substantially lessen competition. See United States v.

Anthem, Inc., 236 F. Supp. 3d 171, 192 (D.D.C. 2017), aff'd, 855 F.3d 345 (D.C. Cir. 2017).

"The relevant market is defined as the area of effective competition." Ohio v. American

Express Co., 138 S. Ct. 2274, 2285 (2018) (internal quotation marks omitted) ("Amex"). It

consists of two components: a "product market" and a "geographic market." Brown Shoe, 370

U.S. at 324. A properly-identified relevant market "must correspond to the commercial realities

of the industry." Amex, 138 S. Ct. at 2285 (internal quotation marks omitted).

113 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 70 of 97 PageID #: 6918

"[D]etermination of the relevant market is a necessary predicate to a finding ofa violation

of the Clayton Act." Brown Shoe, 370 U.S. at 324. Because "[p]laintiffs have the burden of

defining the relevant market," the failure to properly define either a product or geographic market

is fatal to plaintiffs' case. Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 436-42

(3d Cir. 1997); see also FTC v. Tenet Health Care Corp., 186 F.3d I 045, 1053 (8th Cir. 1999).

DISCUSSION

I. DOJ Failed To Establish A Prima Facie Case

Based on the Court's findings of fact, set out above, and as further explained below, the

Court concludes that DOJ failed to establish a prima facie case that the merger of Sabre and

Farelogix will violate Section 7 of the Clayton Act. Specifically, DOJ has not identified a proper

relevant market. As a matter of antitrust law, Sabre, a two-sided transaction platform, only

competes with other two-sided platforms, but Farelogix only operates on the airline side of

Sabre's platform. Even if that were not the law, DOJ's market analysis fails because it does not

relate to the relevant product market or the relevant geographic market. In the alternative, even if

the Court were to assume that DOJ has identified a relevant product market, and were to assume

that the record at least supports a prima facie case that the effects of the merger are likely to be

anticompetitive, the Court further concludes that Defendants have rebutted the government's

prima facie case. After making credibility determinations, drawing the reasonable inferences the

Court deems most warranted, and weighing the evidence, the Court concludes that the

government has failed to prove by a preponderance of the evidence that the Sabre-Farelogix

transaction is reasonably probable to substantially lessen competition.

114 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 71 of 97 PageID #: 6919

A. As A Matter of Antitrust Law, Sabre And Farelogix Do Not Compete In A Relevant Market

The first dispositive flaw in the government's case is that, as a matter of antitrust law,

Sabre, which is a two-sided platform facilitating transactions between airlines and travel

agencies, does not compete with Farelogix, which indisputably only interacts with airlines and is

not a two-sided platform. Due to the combination of the Supreme Court's 2018 Amex decision,

holding that "[o ]nly other two-sided platforms can compete with a two-sided platform for

transactions," 138 S. Ct. at 2287, and the Second Circuit's 2019 finding that the Sabre GDS is a

two-sided transaction platform, Sabre and Farelogix do not compete in a relevant market.

In Amex, the United States and several states alleged that American Express violated

Section I of the Sherman Act by requiring merchants to agree to "anti steering" contract

provisions that prohibited merchants from discouraging the use of American Express cards. Id.

at 2283. The Court first evaluated the relevant market and concluded that "the credit-card market

is one market, not two." Id. at 2283, 2285-87. It noted that credit-card networks like American

Express were what economists call "two-sided platforms:" entities that "offer □ different products

or services to two different groups who both depend on the platform to intermediate between

them." Id. at 2280, 2286. According to the Court, these platforms "cannot raise prices on one

side without risking a feedback loop of declining demand;" thus, the Court held, "courts must

include both sides of the platform" when defining a relevant market for purposes of antitrust

analysis. Id. at 2285.

The Court emphasized that "it is not always necessary to consider both sides of a

two-sided platform," such as when "the impacts of indirect network effects and relative pricing in

115 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 72 of 97 PageID #: 6920

that market are minor." Id. at 2286. However, the Court continued, it is always necessary to

consider both sides of"two-sided transaction platforms" that "facilitate a single, simultaneous

transaction between participants" and "cannot make a sale unless both sides of the platform

simultaneously agree to use their services." Id. at 2286-87. These platforms, according to the

Court, "suppl[y] only one product - transactions." Id. at 2286. Because these transactions

necessarily involve both sides of the market, "[o ]nly other two-sided platforms can compete with

a two-sided platform for transactions." Id. at 2287. In other words, for two-sided transaction

platforms, "competition cannot be accurately assessed by looking at only one side ... in

isolation." Id.

DOJ argues that Amex does not govern here, but its arguments are unavailing. At trial

DOJ suggested that Amex may be limited just to the credit card industry, but DOJ points to

nothing in Amex to support such a conclusion. (See Tr. 1834-35) DOJ also observes that the

record in this case, including from Defendants' expert Dr. Murphy, shows that "GDSs can face

competition from one-sided competitors." (D.I. 233 at 13) (citing Murphy Tr. 1521-22) While

the government has accurately characterized the record, the facts presented in the instant case

cannot change the binding precedential law issued by the Supreme Court.

DOJ maintains that Sabre and Farelogix are competitors because "a firm can compete in

more than one market [a ]nd the booking services portion of the Sabre GDS competes in a

one-sided booking service market." (Tr. 1831) However, Amex establishes that two-sided

transaction platforms such as the Sabre GDS supply "only one product:" the transactions that link

both sides of the market. Amex, 138 S. Ct. at 2286. Because Farelogix indisputably does not

116 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 73 of 97 PageID #: 6921

supply this product - it offers services to airlines, not to travel agencies - it does not compete

with Sabre.

While relatively few courts have had an opportunity to apply Amex, the Second Circuit

has, in a different case that happened to be all about Sabre's GDS. In US Airways v. Sabre

Holdings Corp., 938 F.3d 43, 48-49 (2d Cir. 2019) ("US Airways"), US Airways alleged that

Sabre's restrictive contract provisions and "monopoliz[ation of] the distribution of system

services to Sabre subscribers" violated Sections I and 2 of the Sherman Act, respectively. A jury

found that the relevant market was one-sided - and also that, even if the market were two-sided,

US Airways had proven competitive harm - and returned a verdict for US Airways. See id. at 53.

On appeal, the Second Circuit vacated the jury verdict, determining it was based on the

jury's "erroneous" conclusion that "the relevant market was one-sided." Id. at 57-58. Applying

Amex, the Second Circuit held that the Sabre GDS is a two-sided transaction platform because it

"offer[s] different services to different groups of customers - to airlines, access to travel agents;

to travel agents, flight and pricing information - and [it] connect[s] travel agents to airlines in

simultaneous transactions." Id. at 58. Thus, according to the Second Circuit in US Airways, "the

relevant market for such a platform must as a matter oflaw include both sides." Id.

DOJ is correct that the Second Circuit's US Airways decision was directed to a different

legal question, was based on review of a different factual record than the one created here, and is,

of course, not binding precedent in the Third Circuit. 14 However, the Court agrees with

Defendants that, for purposes of understanding Amex, there is no meaningful distinction between

14 As best as the Court can tell, the Third Circuit has not yet had occasion to consider Amex.

117 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 74 of 97 PageID #: 6922

Section I Sherman Act claims and a Section 7 Clayton Act merger challenge. (See D.I. 235 at

11-12) 15 This Court finds the Second Circuit's application of Amex to the very same Sabre GDS

platform this Court is required to consider highly persuasive authority and chooses to follow it..

Moreover, DOJ agrees that the Sabre GDS operates in a two-sided market. (Tr. 1831, 1836; see

also D.I. 233 at 15 (acknowledging that at least Sabre's aggregation function "is properly

classified as a two-sided service"))

From these conclusions it necessarily follows that DOJ cannot prevail on its claim as a

matter of law. "Only other two-sided platforms can compete with a two-sided platform for

transactions," Amex, 138 S. Ct. at 2287, and Farelogix is not a two-sided platform, as even DOJ

concedes (see Tr. 1836). Even if "it is not always necessary to consider both sides of a two-sided

transaction platform," it is necessary to do so where, as here, both sides of Sabre's GDS platform

"facilitate a single, simultaneous transaction between participants." Id. at 2286-87. Airlines on

one side of Sabre's GDS cannot make a sale to travel agencies on the other side of the GDS

"unless both sides of the platform simultaneously agree to use" Sabre's GDS services. Id. at

2286. This is a requirement in order for Sabre's GDS to provide its product: "transactions." Id.

Even if all of this were not the case, and if it were possible as a matter of law for

Farelogix on one side of the two-sided GDS platform to be found to compete in a relevant

market, the evidence presented by DOJ does not adequately account for the fact that Farelogix is

a one-sided player and Sabre is a two-sided transaction platform. That is, DOJ has failed to

15 See also United States v. Grinnell Corp., 86 S. Ct. 1698, 1705 (1966) ("We see no reason to differentiate between 'line' of commerce in the context of the Clayton Act and 'part' of commerce for purposes of the Sherman Act."); Hornsby Oil Co. v. Champion Spark Plug Co., 714 F.2d 1384, 1393 n.9 (5th Cir. 1983); Kellam Energy, Inc. v. Duncan, 616 F. Supp. 215,218 n.3 (D. Del. 1985).

118 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 75 of 97 PageID #: 6923

produce evidence that the anticompetitive impact of the merger on the airline side of the GDS

platform would be so substantial that it would sufficiently reverberate throughout the Sabre GDS

to such an extent as to make the two-sided GDS platform market, overall, less competitive. DOJ

did not even try to meet this burden. Instead, DOJ (and its expert, Dr. Nevo) "look[ed] at only

one side" of the Sabre GDS "in isolation," which "cannot" result in an "accurate □ assess[ment]"

of competitive effects. Amex, 138 S. Ct. at 2287. Thus, again, given Amex and US Airways, DOJ

cannot, as a matter oflaw, make out a prime facie case of a Section 7 Clayton Act violation.

Finally, the government warns that a conclusion that, as a matter oflaw, Sabre and

Farelogix do not compete for purposes of antitrust law would give "any GDS ... carte blanche to

buy any one-sided competitor, free from scrutiny under Section 7." (D.I. 233 at 13) The Court is

not persuaded ( although, even if it were, the Court would still be compelled to follow the

Supreme Court's decision inAmex). Rather, Amex provides that if the government seeks to stop

a GDS from buying a "one-sided competitor," it must show that this purchase will harm

competition on both sides of the two-sided market- i.e., the market for travel services to airlines

and the market for travel services to travel agencies. Here, however, the government only

attempted to demonstrate harm to the airlines side of the two-sided market. It has, thus, failed to

meet its burden.

Notwithstanding this dispositive ruling, the Court will proceed and, in the remainder of

this Opinion, assess the government's attempt to meet its burden on the assumption, in the

alternative, that Farelogix and Sabre could be found to compete in a relevant market, even though

119 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 76 of 97 PageID #: 6924

they are not both two-sided platforms. 16 As explained below, the Court finds that DOJ has failed

even when given the benefit of that assumption.

B. As A Factual Matter, DOJ Failed To Identify A Relevant Product Market

"The outer boundaries of a product market are determined by the reasonable

interchangeability of use or the cross-elasticity of demand between the product itself and

substitutes for it." Brown Shoe, 370 U.S. at 325. Thus, products comprising a relevant market

"need not be identical, only reasonable substitutes." United States v. Energy Sols., Inc., 265 F.

Supp. 3d 415,436 (D. Del. 2017). To determine the reasonable interchangeability of products,

courts consider "price, use, and qualities." Queen City Pizza, 124 F.3d at 437.

DOJ argues that the relevant product market consists of "booking services" sold through

online travel agencies ("OTA") and brick-and-mortar traditional travel agencies ("TTA"). (D.I.

233 at 9) In the government's view, "[t]hese markets encompass the nexus of competition that

exists between Sabre and Farelogix and are the appropriate focus for analyzing the competitive

effects of this merger." (Id.) According to DOJ's economics expert, Dr. Nevo, "booking

services" are a "component of what we saw in the GOS bundle ... of getting the offer from, after

it was created using the airline data and getting it either through the travel agency or through the

16 The Court does so for multiple reasons, including the present lack of guidance from the Third Circuit on applying Amex, the possibility of appellate review in this case, the expedited nature of this litigation, and the enormous resources the parties and the Court have devoted to this case. Additionally, as is clear from the findings of fact, the Court has found as a matter of real-world economic reality that Sabre and Farelogix do compete to a certain extent, so resting a decision in this case entirely on a determination oflaw that Sabre and Farelogix cannot compete in a relevant market is not a comfortable result. Further, the US Airways decision was issued after the government filed this case, so it also does not seem right to summarily terminate DOJ' s case based on a non-binding subsequent decision from an appellate court in a case in which the government was not even involved.

120 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 77 of 97 PageID #: 6925

aggregator that then gets it to the travel agency." (Nevo Tr. 899) The Court concludes that DOJ

failed to identify a relevant product market.

DOJ's product market is flawed for several reasons. Foremost among them is that DOJ

selectively (without persuasive explanation) dissects Sabre's overall GDS services into what

DOJ refers to as "booking services." In doing so, DOJ improperly excludes the services Sabre's

GDS provides to travel agencies, inconsistent with Amex, as already discussed above. But even

as a factual matter, DOJ' s proposed "booking services" product market does not accurately

correspond to what actually is transacted in a market relevant to the proposed transaction.

As Defendants aptly put it: "DOJ contends that a single technical functionality of Sabre's

unitary GDS transaction platform, which is sold in a two-sided market, can be extracted from the

GDS and placed in competition against a slice ofFLX OC, which is sold in a different, one-sided

market." (D.I. 235 at 12) "No party can expect to gerrymander its way to an antitrust victory

without due regard for market realities." It's My Party, Inc. v. Live Nation, Inc., 811 F.3d 676,

683 (4th Cir. 2016).

DOJ urges the Court not to "[f]ocus[] on the breadth of Sabre's entire bundle ofGDS

products" but instead to evaluate the one "submarket" of "booking services," which DOJ says is

a "one-sided product." (D.I. 233 at 13-15) However, DOJ has not proven that the Sabre GDS's

"booking services" is a "well-defined submarket [that] constitute[s] a relevant product market."

Tunis Bros. Co. v. Ford Motor Co., Inc., 952 F.2d 715, 723 (3d Cir. 1991). DOJ failed to show

that the Sabre GDS "booking services" is a distinct product that generates separate demand.

Thus, DOJ's proposed product market is at odds with the "commercial realities of the industry."

Amex, 138 S. Ct. at 2285 (internal quotation marks omitted).

121 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 78 of 97 PageID #: 6926

Both sides introduced evidence that the Sabre GDS platform performs several different

functions, including aggregating and normalizing content, automating rules set by corporate

travel policies, and creating offers for travel agencies. (See, e.g., FF 34-36) The Court agrees

with Defendants that the correct interpretation of the record is that the subset of Sabre services

DOJ labels "booking services" are not a separate product but, instead, have "no independent

economic significance." (D.I. 235 at 13)

Dr. Nevo's testimony failed to persuade the Court that there is separate demand for

Sabre's "booking services." Dr. Nevo acknowledged that Sabre's "booking services" are not

sold as a separate product in the market, but are only "sold as part of a bundle," so he himself

"separate[d] them" for his analysis. (Nevo Tr. 985-86) Besides seeming to be an arbitrary

exercise, Dr. Nevo's approach is unpersuasive also because he was unable to identify basic

features of his purported product. For instance, Dr. N evo could not identify a price of the Sabre

GDS 's "booking services" functionality because, as he testified, "Sabre has not offered it in the

U.S. I believe there is no price." (Nevo Tr. 987) Dr. Nevo further testified !bat he "did not

quantify what [the] value is" of the Sabre GDS "booking services," as !bis "was not part ofmy

analysis." (Id.) Fundamentally, Dr. Nevo gave the Court no solid basis to conclude that

"booking services" is a product customers are demanding from Sabre. 17

11 · An analogy can be made to tying cases, in which a plaintiff must prove "an agreement by a party to sell one product [or service] but only on the condition that the buyer also purchases a different (or tied) product [or service]." Avaya, Inc., RP v. Telecom Labs, Inc., 838 F. 3d 354, 394 (3d Cir. 2016). In these cases, "the answer to the question whether one or two products are involved turns not on the functional relation between tbem, but rather on the character of the demand for the two items." Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 19 (1984), partially abrogated on other grounds by Illinois Tool Works, Inc. v. Independent Ink, Inc., 54 7 U.S. 28 (2006). Thus, "to identify a distinct product market" for a service !bat is included in a larger "package" of services, a plaintiff must show "sufficient demand for the purchase of [!bat]

122 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 79 of 97 PageID #: 6927

As part of its effort to show that Sabre offers "booking services," DOJ points to Sabre's

"new NDC API" that it has tried to sell to two airlines (D.1. 233 at 15), as well as Dr. Nevo's

testimony that "[i]n kind of the early 2000s, there was a case where the Brazilian Airline asked

Sabre to help it in creating a kind of a direct connect product" (Nevo Tr. 937; see also D.I. 233 at

15). Even this evidence, however, fails to show that the Sabre GDS platform includes a distinct

"booking services" component that generates separate demand; at best, it shows that Sabre has

tried to market an entirely different product that provides booking services. 18

Accordingly, DOJ' s proposed product market - which assumes a Sabre "booking

services" product exists ( or at minimum can be meaningfully and non-arbitrarily separated out

from Sabre's actual GDS functionality) and competes with Farelogix's FLX OC - fails to

"correspond to the commercial realities of the industry." Amex, 138 S. Ct. at 2285 (internal

quotation marks omitted). DOJ failed to show that a portion of Sabre's GDS and Farelogix's

FLX OC are reasonable substitutes for one another.

There are other flaws in DOJ' s efforts to identify a relevant product market. One is that

the OTA booking services market improperly excludes sales made by airlines in the direct

service[] separate from [the package]." Id (emphasis added); see also Avaya, 838 F.3d at 397; Collins v. Associated Pathologists, Ltd., 844 F.2d 473, 477-78 (7th Cir. 1988) (holding that because "no separate demand exists for pathological services that is sufficient to create a separate market [from hospital services]," pathological and hospital services "combine in the form of one product, not two tied products").

18 Likewise, while DOJ attempts to show "distinct demand for booking services and aggregation services" by suggesting that Farelogix and Travelfusion offer these services on a standalone basis (see D.I. 241 at 3), this evidence does not demonstrate that Sabre offers these products on a standalone basis; nor does it establish that Sabre participates in these product "submarkets."

123 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 80 of 97 PageID #: 6928

channel on their websites, at kiosks, and through call centers. That is, DOJ wrongly excludes

airline.com from the OT A market.

Courts can determine the "boundaries" of a product market by "examining ... practical

indicia" such as "industry or public recognition of the submarket as a separate economic entity,

the product's peculiar characteristics and uses, unique production facilities, distinct customers,

distinct prices, sensitivity to price changes, and specialized vendors." Brown Shoe, 370 U.S. at

325. Hence, courts evaluating whether different products are in the same product market often

examine real-world market conditions, like whether customers "switch back and forth between

[the] products," or if firms "compete against each other" to offer these products. Energy Sols.,

265 F. Supp. 3d at 437-38.

Substantial evidence supports the Court's conclusion that airline.com is reasonably

interchangeable with the travel services the Sabre GDS offers through OTAs. Airline.com and

OTA both target leisure travelers. (See, e.g., Gamer Tr. 101, 123-25; Radcliffe Tr. 172;

Kunz-Cho Tr. 1282-83) End-user travelers switch back and forth between OTAs - like Expedia

and Price line - and airlines' own websites. (See, e.g., FF 46, 211) Defendants' expert, Dr.

Murphy, persuasively explained how airline.com is the "closest alternative consumers can see" to

OTAs. (Murphy Tr. 1553) He added that airline.com is the "most important short-term

constraint" on GDS fees, because airline.com is only "a mouse click away'' from OTAs.

(Murphy Tr. 1433-34) Even Dr. Nevo testified that he "believe[s] that there is some competitive

pressure [to GDSs] from airline.com" (although he could not say whether airline.com exerts

more or less competitive pressure on Sabre's GDS than FLX OC does). (Nevo Tr. 1009-10)

124 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 81 of 97 PageID #: 6929

Further, airlines view OTAs as competitors with airline.com and believe they can steer at

least a substantial portion of OTA sales to their own direct sales channels. (See Murphy Tr.

1438-49; Lob! Tr. 1165 (Delta Director of Distribution testifying Delta is "hoping that customers

will choose" Delta's direct channels); DX287) Airlines can switch from offering at least some of

their leisure traveler tickets from OTAs to airline.com.

DOJ insists that Defendants are wrong, and that airline.com is properly excluded from the

OTA market, because Dr. Murphy did not use the small but significant and non-transitory

increase in price ("SSNIP") test to evaluate whether airline.com should be included in the

relevant product market. (D.I. 233 at 17-18) As an initial matter, the burden is on the

government to show that airline.com is not part of the relevant OTA market, and it has failed to

meet that burden. fu any case, while the SSNIP test is a "common method" that courts can use to

define the relevant market, see Penn State Hershey, 838 F.3d at 338, it is not the only one. Here,

the Court is evaluating economic "practical indicia" to assess whether products are "reasonably

interchangeable," which is another permissible analysis. Brown Shoe, 370 U.S. at 325; see also

Energy Sols., 265 F. Supp. 3d at 437-38. Doing so, the Court concludes that airline.com and

OTAs are reasonably interchangeable.

DOJ also tries to justify excluding airline.com from the OTA booking services market on

the grounds that airlines cannot "replace enough of their OTA bookings with airline.com to make

forgoing OTA distribution economically feasible." (D.I. 233 at 18) But the test for a relevant

product market is whether the "commodities [are] reasonably interchangeable by consumers for

the same purposes" - not whether it is feasible to convert all users to only one of those

commodities. United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377,395 (1956); see

125 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 82 of 97 PageID #: 6930

also Tunis Bros., 952 F.2d at 722; FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109, 122 (D.D.C.

2004) ("In determining interchangeability, therefore, the Court must consider the degree to which

buyers treat the products as interchangeable, but need not find that all buyers will substitute one

commodity for another."). 19

For at least these reasons, DOJ has failed to identify a relevant product market.20

C. DOJ Failed To Identify A Relevant Geographic Market

The relevant geographic market is comprised of the area where customers look to buy a

seller's products or services. See Tunis Bros., 952 F.2d at 726 ("[T]he geographic market is not

comprised of the region in which the seller attempts to sell its product, but rather is comprised of

the area where his customers would look to buy such a product."). Here, the evidence shows the

customers of the purported "booking services" are airlines. (See, e.g., FF 70-71, 221) Therefore,

the relevant geographic market must be based on where airlines look to purchase these services.

(See Neva Tr. 906, 1016)

19 It is not as clear whether airline.com must be included in the "TTA booking services" market. TTAs primarily serve business travelers and offer specific support services that these travelers request, which are not available from airline.com. (Radcliffe Tr. 172-73, 335; Ekert Tr. 1184) There is also a lack of evidence that airlines view TT As as an alternative to airline.com or that airline.com exerts competitive pressure on TT As. It may be, then, that DOJ' s TTA market analysis is somewhat less flawed than its OTA market analysis.

20 The Court agrees with Defendants that, to the extent DOJ is now inviting the Court to "unilaterally change the defective market allegations if necessary to save its case," it would be wrong for the Court to do so under the circumstances here, which include that both parties (and the Court) have already devoted enormous resources to the case the government chose to bring. (D.l. 235 at 2; see also id. at 18-20; D.l. 242 at 2 n.3; see generally D.I. 233 at 30 n.6 (DOJ: "The Court is not limited to considering the markets that the Government alleged; if the Court finds harm in any relevant market based on the evidence presented, the Court may find a Section 7 violation."))

126 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 83 of 97 PageID #: 6931

DOJ relies on Dr. N evo' s analysis that the relevant geographic market is "U.S. point of

sale," that is, for TTAs those travel agencies located in the U.S. and for OTAs those travel

agencies having an IP address in the U.S. (See Nevo Tr. 836,853,897; FF 217-18) DOJ reasons

that airlines looking to sell tickets in the U.S. will only use travel agencies operating in the U.S.

because U.S. travelers will not use foreign travel agencies. (D.I. 233 at 19-21; D.I. 241 at 6-7)

The Court disagrees with the government. Instead, the Court agrees with Defendants that

DOJ's geographic market is a "contortion," wrongly "focus[ing] not on FLX OC's actual

customers in the upstream market (i.e., the airlines), but rather those customers' customers in the

downstream market (i.e., the travel agencies or travelers)." (D.I. 242 at 3) The airlines' demand

for travel agency services is not a useful starting point for the geographic market analysis because

airlines that use "booking services" (assuming, for the sake of argument, this is an accurate and

meaningful description of a relevant product) need not - and frequently do not - sell their tickets

through travel agencies. Indeed, airlines that use "booking services" such as FLX OC can (and

do) distribute their tickets through several means other than travel agencies, such as their own

websites or mobile apps, or through non-GDS aggregators. (See, e.g., PX081 at -047; Carter Tr.

283-84)

Moreover, the evidence shows that airlines do not look only within the United States to

purchase "booking services." As Dr. Nevo testified, the vast majority ofFarelogix's customers,

13 out of 15, are airlines located outside the United States. (Nevo Tr. 1018) Farelogix also

competes with foreign competitors for bids. (See, e.g., FF 145-46, 159-63) Likewise, when

Sabre marketed a standalone direct connect product - what DOJ labels a Sabre "booking

services" product - Sabre tried selling it to airlines located outside the United States. (Gilchrist

127 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 84 of 97 PageID #: 6932

Tr. 761; PX316 at -534; Nevo Tr. 937; see also D.I. 233 at 15) Thus, DOJ's proposed

U.S.-based geographic market is at odds with commercial realities. Additionally, there is no

evidence that the transaction fee for FLX OC varies by the location of the agency that purchase a

ticket. (See FF 222)

For at least these reasons, DOJ has failed to identify a relevant geographic market. See

Dicar, Inc. v. Stafford Corrugated Prods, Inc., 2010 WL 988548, at *12 (D.N.J. Mar 12, 2010)

("Where, as here, there is no indication that a consumer would be unable to purchase a product

abroad, the Court will not arbitrarily limit the geographical market to the U.S."); E & E Co., Ltd.

v. Kam Hing Enters., Inc., 2008 WL 3916256 at *8 (N.D. Cal. August 25, 2008) (finding

plaintiff did not adequately allege relevant market when it "fail[ed] to indicate why similar bed

coverings originating from other countries would not be reasonably interchangeable by

consumers for the same purposes") (internal quotation marks omitted). This failing (like others

already described by the Court) is dispositive.

II. Even Assuming DOJ Made Out A Prima Facie Case, The Record Does Not Demonstrate A Reasonable Probability That The Merger Will Substantially Lessen Competition

A. DOJ Is Not Entitled To A Presumption Of Anticompetitive Harm

Because DOJ has not identified the relevant market where competition occurs - and has

offered evidence of likely harm only with respect to its flawed markets - it cannot prove the

second step of its prima facie case: that "the effect of the merger in [the relevant] market is likely

to be anticompetitive." Penn State Hershey, 838 F.3d at 337-38. However, even ifDOJ were

correct that the relevant market is "booking services" at the "U.S. point of sale," DOJ has still

failed to prove likely harm to competition in this market.

128 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 85 of 97 PageID #: 6933

At trial, DOJ presented Herfindahl-Hirschman Index ("HHI") measurements to show that

Sabre's acquisition ofFarelogix would harm competition in the relevant market. (D.I. 233 at

21-23) Even assuming that DOJ identified the correct market, this evidence was not persuasive.

HHI is a commonly-used measurement of market concentration. See Penn State Hershey,

838 F.3d at 346. As the Third Circuit has explained:

The HHI is calculated by summing the squares of the individual firms' market shares. In determining whether the HHI demonstrates a high market concentration, we consider both the post-merger HHI number and the increase in the HHI resulting from the merger. A post-merger market with a HHI above 2,500 is classified as "highly concentrated," and a merger that increases the HHI by more than 200 points is "presumed to be likely to enhance market power." The Government can establish a prima facie case simply by showing a high market concentration based on HHI numbers.

Id. at 346-47 (internal citations omitted).

DOJ offered HHI evidence for both of its proposed markets. To calculate HHI in the

"OTA booking services" and "TTA booking services" markets, Dr. Nevo relied on 2018 market

share data, Sabre's projections for Farelogix's growth, and Farelogix's own projections. (Nevo

Tr. 916-21) Dr. Nevo testified that in both the "OTA bookings services" and "TTA booking

services" markets, the post-merger HHI greatly exceeds the threshold for a highly concentrated

market (2,500) and the increase in HHI exceeds the level at which enhanced market power is

presumed (200). (Nevo Tr. 920-23)

But Dr. Neva's HHI cannot be relied on because it ignores industry realities. In

calculating market shares in the "OTA booking services" market, Dr. N evo excluded airline.com

- but Dr. N evo' s own testimony, and much other evidence besides, showed that airline.com

exerts competitive pressure on the Sabre GDS. (See, e.g., Nevo Tr. 1009-10; FF 206-16)

129 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 86 of 97 PageID #: 6934

Likewise, when calculating market shares in the "TTA booking services" market, Dr. Nevo

attributed sales generated by GDS passthrough to Farelogix rather than to the GDS - even though

the GDS controls the sale and the commercial relationship. (See Nevo Tr. 917-18; Murphy Tr.

1486; FF 229) When these errors are corrected, the HHiresults look much different. As Dr.

Murphy showed at trial, adding airline.com market shares to the "OTA booking services" market

and attributing GDS passthrough sales to the GDS in the "TTA booking services" market yields

post-merger HHI levels and increases that do not give rise to a presumption of harm to

competition. (See Murphy Tr. 1485-86; FF 228, 230) DOJ's HHI analysis, therefore, does not

satisfy DOJ's prima facie burden and does not entitle DOJ to a presumption of harm to

competition.

B. DOJ Did Not Prove A Reasonable Probability Of Anticompetitive Harm

Because DOJ does not enjoy a presumption of anticompetitive harm, had DOJ proven a

relevant product and geographic market, it would still be the government's burden to prove,

considering all of the evidence - including that produced by Defendants to rebut DOJ's prima

facie case - that the merger of Sabre and Farelogix is reasonably probable to substantially lessen

competition. Even if the Court were to reach this part of the analysis (which it does solely as an

alternative to the other deficiencies already identified in the government's case), the Court would

conclude that DOJ has failed to meet its burden. Some of the reasons for this conclusion are

discussed below.

130 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 87 of 97 PageID #: 6935

1. DOJ Failed To Prove That Barriers To Entry Prevent Adequate Competition To FLX OC

"Barriers to entry are factors, such as regulatory requirements, high capital costs, or

technological obstacles, that prevent new competition from entering a market in response to a

monopolist's supracompetitive prices." Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 307

(3d Cir. 2007). While not a required element of a Section 7 \claim, evidence of barriers to entry

in the relevant market can "bolster[]" the government's case. FTC v. Univ. Health, Inc., 938

F.2d 1206, 1220 (11th Cir. 1991); see also FTC v. H.J. Heinz Co., 246 F.3d 708, 717 (D.C. Cir.

2001). In addition, defendants can rebut the government's prima facie case by showing that the

relevant market exhibits low barriers to entry. See Energy Sols., 265 F. Supp. 3d at 443.

DOJ identifies three barriers to entry in the relevant market: ( 1) the technological

challenge of building an "NDC booking services solution;" (2) the "need for a good reputation

and track record serving major airlines;" and (3) GDS contract provisions that discourage airlines

and travel agencies from switching to "new entrants." (D.I. 233 at 32) DOJ has failed to

persuade the Court that any one or a combination of these barriers significantly affects the

analysis here.

The record does not establish that building an adequate "NDC booking services solution"

is particularly difficult. As several witnesses testified, the schema for developing a marketable

NDC API product is publicly available, which has allowed numerous companies to begin

offering NDC API services. (Davidson Tr. 433, 439; Neva Tr. I 038-39) For example, Farelogix

Chief Technology Officer Tim Reiz testified that programmers can easily compete with

Farelogix for NDC API services "[b ]ecause they have web services that they can connect to the

131 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 88 of 97 PageID #: 6936

airline syst~ms." (Reiz Tr. 1342-43) Marketplace evidence supports these witnesses. Datalex

and Amadeus have successfully built and marketed NDC AP! services for several airlines. (FF

160-61) Likewise, Delta, British Airways, and Air France have built and supplied NDC AP Is for

themselves. (Carter Tr. 271; Davidson Tr. 446-47; Adair Tr. 1732; FF 151) While executives

from American Airlines and United Airways believe only Farelogix can provide adequate NDC

AP! services (Gamer Tr. 121; Radcliffe Tr. 229-30), the totality of the evidence persuades the

Court that these are personal (or company) preferences, not market realities.

Farelogix' s vigorous competition with rival NDC AP! providers further undermines

DOJ' s remaining arguments. Farelogix has competed for bids to supply NDC AP! services with

at least eight other companies, losing bids to

(Cai1er Tr. 270-71) While, in the overall context, Farelogix has competed well against other

NOC API suppliers (see FF 164-70), and has some unique advantages (see FF 140-50), these

other suppliers have also enjoyed success, demonstrating that new entrants can develop a "good

reputation and track record" despite Farelogix's established position in the market. The large

number of suppliers who have won bids further suggests that GOS contract provisions have not

shut out new NOC AP! providers.

At trial, and again in the post-trial briefing, the parties devoted a great deal of attention to

what was marked as Davidson Demonstrative I, which listed NOC AP! projects Farelogix bid on

in recent years, purporting to depict the results of its efforts. In the Court's view, DOJ has the

more persuasive interpretation of this demonstrative. It shows - consistent with the facts

supported by the record - that Farelogix has fared just fine in recent years.

132 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 89 of 97 PageID #: 6937

Furthermore, Farelogix

currently provides its services to two of the largest U.S. airlines as well as the largest airlines in

Australia and Mexico. (See Davidson Demonstrative I; Davidson Tr. 469; FF 166) Farelogix is

currently working on 26 GDS integration installations, far more than any other NDC API

provider (as far as the record reveals). The Court is not persuaded by Defendants' puzzling

attempts at trial to portray Farelogix as a failure.

Notwithstanding all this, however, the reality that Farelogix is competing successfully

against other NDC API suppliers does nothing to alter the fact that there arc not significant

barriers to entry into, and success in, the NDC API market.

2. DOJ Failed To Prove That A Post-Merger Sabre Will Harm Competition By Eliminating Fl.,X OC Or Raising FLX OC Or GDS Prices

The Court is persuaded that at various points Sabre has viewed FLX OC as a competitive

threat. Among other things, Sabre believed that FLX OC was "a real alternative to the GDS"

(PX367 at -277-78), and that Farclogix's NDC technology has

(PX247 at -766). fmther, the Court is persuaded that some at Sabre viewed the

acquisition of Farelogix as way to neutralize tbis perceived tbreat, including employees who

wrote that the deal would "[m]itigate risk from potential GDS bypass" (PX0I I at 3; PX0l2 at 7),

in a document that was at one point sent to Sabre's board (see, e.g., FF 240-41). The record also

demonstrates that, historically, Sabre has resisted change while Farelogix has been a pioneering

innovator and disruptor of the airline travel services ecosystem. (See FF 101-08) Moreover, this

evidence suggests that Sabre will have the incentive to raise prices, reduce availability of FLX

OC, and stifle innovation.

133 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 90 of 97 PageID #: 6938

Nevertheless, DOJ has not persuaded the Court that Sabre will likely act consistent with

its history or these incentives and actually harm competition if it is permitted to complete the

acquisition ofFarelogix. This is yet another problem for the government's case because the

claim the government has brought necessarily requires the Court to undertake a forward-looking

analysis. See generally United States v. Baker Hughes, 908 F.2d 981,988,991 (D.C. Cir. 1990)

(explaining that merger analysis "focus[es] on the future" and requires Court to "[p]redict[]

future competitive conditions").

The evidence does not suggest that Sabre is acquiring Farelogix to eliminate FLX OC

from the marketplace. Rather, it supports the opposite conclusion: that Sabre intends to continue

offering FLX OC by integrating it into the Sabre GDS platform, allowing Sabre to better meet the

demands of airlin~s and travel agencies. In a 2018 presentation to Sabre's board of directors,

Sabre's management sought approval for the merger by arguing it would allow Sabre to integrate

FLX OC's NDC capabilities. (See DX145 at -005; see also Boyle Tr. 555 (Sabre VP of

Corporate Development testifying that deal is intended, in part, to "bring[] NDC-enabled

distribution to scale in the marketplace"); DX086 at -037) Several industry participants have

applauded the deal for this very reason. (See, e.g., FF 256-60) All of this is consistent with the ' strong evidence that the future of airline ticket distribution is more likely to be characterized by

GDS passthrough- i.e., integrating NDC capabilities into the GDS platform - rather than GDS

bypass. (See, e.g., PX081 at -045-47; supra FF Part N)

Further supporting these conclusions are the public commitments Sabre CEO Menke has

made, including to continue offering FLX OC to airlines (at their current or better prices) after

the merger closes. (See supra FF Part T) DOJ did not persuade the Court that Sabre is likely to

134 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 91 of 97 PageID #: 6939

raise prices for its GDS platform after the merger, even though the Court has found that the

merger will likely reduce some of the leverage airlines currently have in negotiations with Sabre.

(See FF 265, 279-83) While a Farelogix board member recommended that Sabre increase its

post-merger GDS booking fees (see Boyle Tr. 494-95; PX007 at -734), no evidence has been

presented that anyone at Sabre or Farelogix has taken steps to act on this recommendation. (See

also FF 265-77) Also, because Sabre competes with rival GDS providers Amadeus and

Travelport for travel agency customers, it faces constraints on the prices it can charge. Indeed,

CWT CEO Kurt Ekert testified that "if ... Sabre was to lose content or enable content but on a

noncompetitive basis to how another GDS provides that, then we have the ability to shift

business away from them to another GDS." (Ekert Tr. 1186; see also Murphy Tr. 1433)

DOJ also failed to persuade the Court that the merger is likely to lead to higher prices for

FLX OC. DOJ points to Sabre's January 2019 proposal to raise an airline's post-merger price for

FLX OC services. (D.I. 233 at 25; see also Gilchrist Tr. 751-60; Wilding Tr. 828-30; PX392 at

-026-27; FF 271) However, that airline rejected Sabre's proposal, with one Sabre employee

reporting that the proposal "caused a kerfuffle." (PX393 at -079; see also Gilchrist Tr. 758) If

anything, this evidence suggests that Sabre will face serious resistance if it tries to raise FLX OC

prices after the merger.

Farelogix's rivals will likely further constrain Sabre's ability to raise prices for FLX OC.

As discussed above, Farelogix now vigorously competes with - and often loses business to -

other NDC API providers. Farelogix also faces some threat that airlines will self-supply NDC

API services (although many airlines do not view this as an attractive option). Thus, it is

135 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 92 of 97 PageID #: 6940

unlikely that Sabre will be able to raise prices on FLX OC services without driving customers to

competitively priced alternatives.

For at least these reasons, DOJ failed to prove that Sabre, after the merger, will likely

harm competition by raising prices or eliminating FLX OC. 21

3. DOJ Did Not Prove That The Merger Will Harm Innovation

"A merger can substantially lessen competition by diminishing innovation if it would

'encourag[e] the merged firm to curtail its innovative efforts below the level that would prevail

in the absence of the merger."' United States v. Anthem, 236 F. Supp. 3d at 229-30 (quoting

2010 DOJ and FTC Horizontal Merger Guidelines§§ I, 6.4 (2010)) While DOJ argues that

Sabre's purchase of Farelogix will "reduce competition to innovate" (D.I. 233 at 28), the Court is

not persuaded.

DOJ offers nothing more in support of its contention than vague theories from Dr. Nevo,

who testified that the merger involves "taking an innovative firm that has been driving, driving

ahead, creating the industry shakeup, and putting that under a firm that does not have the same

incentive." (Nevo Tr. 950-51) These generalities do not help the Court conclude that the merger

would harm innovation.

Moreover, the record evidence, overall, suggests the opposite. While it is undisputed that

Farelogix developed the original NDC schema and has been an innovator (see FF 58; see also

supra FF Part I), no party offered evidence that Farelogix has more recently created or introduced

innovative products or services. Further, as has been repeatedly noted, the public availability of

21 Because DOJ failed to prove a relevant market, the Court need not and will not address Dr. Nevo's SSNIP analysis in any greater detail than it already has elsewhere in this Opinion.

136 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 93 of 97 PageID #: 6941

the NDC schema has allowed (and will continue to allow) new firms to enter the market and

compete successfully with FLX OC.

DOJ also failed to persuade the Court that Sabre is purchasing Farelogix to delay

innovation. (See D.I. 233 at 28) As discussed above, the evidence suggests that Sabre seeks to

integrate FLX OC into its platform, not eliminate it, and that in doing so Sabre is following the

industry trend towards GDS passthrough. (See, e.g., supra FF Parts N, S)

Finally, the Court is persuaded that the merger may well promote innovation, as

numerous witnesses have forecast. (See, e.g., Ekert Tr. 1199-1201 (CWT CEO stating that

merged Sabre-Farelogix could offer additional technology services to airlines and allow travel

agencies to "drive more high yield traffic to the airlines"); Kunz-Cho Tr. 1316 (Fareportal CEO

stating that merged entity "will be able to embrace a wider array of content, particularly in the

low cost carrier domain which is very important to us")) Moreover, Farelogix Chief Technology

Officer Tim Reiz credibly predicted that the merger will allow him to develop new projects (such

as a next-generation PSS) using artificial intelligence, because he would have access to Sabre's

resources, including data, the lack of which was previously a "roadblock." (Reiz Tr. 1346-47)

On balance, then, DOJ has not proven that the Sabre-Farelogix merger will harm

innovation.

CONCLUSION

The Court recognizes that the outcome here may strike some, including the litigants, as

somewhat odd. On several points that received a great deal of attention at trial - whether

Farelogix is a valuable company enjoying relative success in the market, whether Sabre and

Farelogix compete, whether Sabre understands GDS bypass is a threat, whether Sabre stands to

137 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 94 of 97 PageID #: 6942

lose revenue even from the expansion ofGDS passthrough, and Sabre's motivation for its

proposed acquisition of Farelogix - the Court is more persuaded by DOJ than by Defendants.

This is largely due to the surprising lack of credibility on these points of certain defense

witnesses, including Sabre CEO Menke, Sabre deal leader Boyle, and Farelogix CEO Davidson.

Despite these findings and conclusions, however, Defendants have won this case. This is

because the burden of proof was on DOJ, not Defendants. Defendants opted to tell the Court a

story that is not adequately supported by the facts, but it was their choice whether to do so, and

their failing does not determine the outcome of this case. Instead, it is DOJ which, under the law,

has the obligation to prove its contention that the Sabre-Farelogix transaction will harm

competition in a relevant product and geographic market. DOJ failed. It based its case on the

expert analysis of Dr. Nevo, but that analysis - including Dr. Nevo's explanation and defense of

it- was simply unpersuasive. Unlike Defendants' evidentiary failings, DOJ's are dispositive.

Under our laws, and in our (regulated) market economy, private entities like Sabre and

Farelogix are generally free to enter into agreements and relationships with one another, whether

or not the government prefers that they do so. IfDOJ is to get the Court to enjoin such a

transaction, it must meet its burden of proof. Here, the government has not done so.

Accordingly, the Court must enter judgment for Defendants.

APPENDIX

CLOSING THE COURTROOM AND SEALED PORTIONS OF THE RECORD

While the public enjoys a "common law right of access [] to judicial proceedings and

records," this right is "not absolute." In re Avandia Marketing, Sales Practices and Prods.

Liability Litig., 924 F.3d 662,672 (3d Cir. 2019). To overcome the presumption of access,

138 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 95 of 97 PageID #: 6943

parties must show that the information they seek to protect is "the kind of information that courts

will protect and that disclosure will work a clearly defmed and serious injury to the party seeking

closure." Id. at 672; see also Genentech, Inc. v. Amgen Inc., C.A. No. 17-1407-CFC D.I. 659 at

6 (D. Del. Mar. 30, 2020). Such information includes "sources of business information that

might harm a litigant's competitive standing." Avandia, 662 F.3d at 679. Moreover, in granting

a party's request to protect information, courts "must [1 Jarticulate the compeUing,

countervailing interests to be protected, [2] make specific findings on the record concerning the

effects of disclosure, and [3] provide[] an opportunity for interested third parties to be heard." Id.

at 672-73 (internal quotations omitted and numerals added). Further, they must "conduct a

document-by-document review of the contents of the challenged documents." Id. at 673 (internal

formatting and quotations omitted).

This issue often emerges in trials of government challenges to a proposed merger based

on antitrust concerns, during which witnesses almost inevitably discuss sensitive business

information such as prices, forward-looking strategy, and analyses of competitive conditions. To

balance the public's right of access with the parties' interest in avoiding competitive injury,

courts routinely close the courtroom when witnesses discuss "competitively sensitive

information," while otherwise allbwin&, full public access. See, e.g., FTC v. Tronox Ltd.,

18-cv-01622 D.I. 80 at 8-9 (D.D.C. July 26, 2018) (agreeing to seal courtroom for witness

testimony about "competitively sensitive information"); FTC v. Wilhelmsen et al., 18-cv-00414

D.I. 62 at 85, (D.D.C. May 29, 2018) ("[W]e will have portions of the trial in which there's

confidential commercial information that will be elicited. And so I'm going to have to close the

139 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 96 of 97 PageID #: 6944

courtroom briefly."); FTC v. Sysco Corp., 15-cv-00256 D.I. 183 at 465-66 (D.D.C. June 26, 2015)

(sealing courtroom to "accommodate confidential business information").

The Court followed this approach during trial. At various points, the litigants and several

third parties asked the Court to close the courtroom to protect competitively sensitive

information, such as forward-looking business analyses, commercial agreements, and strategic

plans. (See, e.g., D.I. 212 at 3-5; D.I. 219 Ex. I at 1-2) There were no objections to these

requests. The Court evaluated each request separately, and granted requests to close the

courtroom after describing the requesting party's interest in protecting commercially sensitive

information or specifically referring to prior rulings where it had articulated this interest. (See,

e.g., Tr. 20 ("[T]here is some forward-looking financial competitively sensitive information that

... is not something that ... the public necessarily has a right to know because of the clearly

defined and serious injury that it would cause to those defendants and to the third parties,

particularly as they contemplate further transactions, negotiations, [ and] agreements, in the

future."); Tr. 87 ("So I am persuaded for the reasons discussed earlier, the reasons in the letters I

received over the weekend, the declaration that I received over the weekend as well as further

discussion today that, particularly what I have been told about the NDA, that this witness is

bound by ... that it is appropriate to close the courtroom for limited portions of the testimony

that will discuss those commercially sensitive negotiations."); see also Tr. 196-97, 229, 360-61,

662-63, I 088) The Court also allowed limited redactions of documents for the same reasons it

occasionally limited access to the courtroom and ensured that the parties made the complete

redacted record of the trial available to the public in a timely manner. (See D.I. 252, 254, 256,

259, 262, 264, 266, 268; see also Tr. 1742-43)

140 Case 1:19-cv-01548-LPS Document 277 Filed 04/08/20 Page 97 of 97 PageID #: 6945

The parties also provided the Court with a helpful summary of the limited information

they believed would need to be redacted if it were included in this Opinion. (See D.l. 271) With

the parties' cooperation, the Court will be able to issue a public version of this Opinion quickly,

notwithstanding its length.

The Court commends counsel for working cooperatively with one another to ensure the

efficient presentation of the evidence at the expedited trial while assisting the Court in ensuring

the public's access to the courtroom, the trial record, and this Opinion.

141 4/10/2020 CMA blocks airline booking merger - GOV.UK GOV.UK

1. Home (https://www.gov.uk/) 2. Business and industry (https://www.gov.uk/business-and-industry) 3. Business regulation (https://www.gov.uk/business-and-industry/business-regulation) 4. Competition (https://www.gov.uk/business/competition) 5. Mergers (https://www.gov.uk/business/competition-mergers)

Press release CMA blocks airline booking merger

Following an in-depth investigation, the CMA has blocked Sabre’s proposed takeover of Farelogix.

Published 9 April 2020

From: Competition and Markets Authority (https://www.gov.uk/government/organisations/competition-and-markets- authority)

Among other products and services, Sabre and Farelogix supply software solutions which help airlines to sell flights via travel agents including those that operate online. Their IT solutions enable airlines to create add-ons to tickets sold through travel agents such as seats with extra leg room, WiFi and meals. Additionally, the 2 companies offer services to help airlines connect with passengers via travel agents.

Following its in-depth “Phase 2” investigation (https://www.gov.uk/government/news/sabre-s-takeover-of-farelogix-raises- competition-concerns), the Competition and Markets Authority (CMA) has found that Sabre’s purchase of Farelogix could result in less innovation in their services, leading to fewer new features that may be released more slowly. Fees for certain products might also go up. As a result, airlines, travel agents and UK passengers would be worse off.

Farelogix has developed technology that allows airlines to offer more choice to passengers who purchase tickets from travel agents by way of customising their flight experience through, for example, booking specific meals or seats with extra leg room. Sabre does not currently offer this new technology but is investing in developing it. If Sabre were to buy Farelogix it will be unlikely to develop the technology itself. Airlines, and ultimately their passengers, will lose out from both this lack of innovation and the insufficient competition between the remaining companies in the market.

142 https://www.gov.uk/government/news/cma-blocks-airline-booking-merger 1/2 4/10/2020 CMA blocks airline booking merger - GOV.UK Additionally, Sabre is one of the main established businesses worldwide that airlines can use to connect to travel agents. The CMA has found that Farelogix offers airlines a good alternative. Sabre is also investing in its ability to better meet airlines’ needs. The CMA considers that Farelogix’s continued independence will likely help motivate Sabre to innovate further, giving airlines more choices in connecting to travel agents that will allow tickets and extra products to be sold through travel agents in more innovative ways.

Martin Coleman, Chair of the CMA inquiry group, said:

The products and services that Sabre and Farelogix provide ultimately affect many passengers flying in and out of the UK. The two companies are helping drive technological change in this industry and we are concerned that the merger will see airlines and their UK passengers miss out on the benefits from continued innovation.

We recognise that our decision in this inquiry comes at a time of uncertainty and disruption in the global travel industry due to the COVID-19 pandemic. It remains important that we protect competition among businesses that provide services to airlines and the benefits such competition can bring for airlines and passengers. We never take decisions to block mergers lightly and in this case the evidence of harm is clear.

The US Department of Justice (DoJ) carried out a separate review and took Sabre and Farelogix to court to block the merger on the basis of concerns in one of the two areas where the CMA has found problems. On 7 April, the US District Court of Delaware decided to clear the deal, with the DOJ free to appeal that decision. The CMA’s job is to protect competition in the UK for the benefit of UK consumers and its processes, and grounds for assessment, are different to those in the USA.

For more information, visit the Sabre / Farelogix merger inquiry (https://www.gov.uk/cma-cases/sabre-farelogix-merger- inquiry) web page.

For media queries, contact the CMA press office on 020 3738 6460 or [email protected].

Published 9 April 2020

Explore the topic

Mergers (https://www.gov.uk/business/competition-mergers)

143 https://www.gov.uk/government/news/cma-blocks-airline-booking-merger 2/2 5/1/2020 Sabre Corporation Issues Statement on its Merger Agreement with Farelogix « Sabre

PRESS RELEASE Sabre Corporation Issues Statement on its Merger Agreement with Farelogix

SOUTHLAKE, Texas – May 1, 2020 – Sabre Corporation, the leading software and technology company that powers the global travel industry, today issued the following statement from Sabre President and CEO Sean Menke regarding its merger agreement with Farelogix:

“Sabre and Farelogix have agreed to terminate the parties’ merger agreement, which expired at midnight on April 30. We continue to believe that the transaction was not anti-competitive, a result confirmed by the U.S. federal district court’s decision in Sabre’s favor. Unfortunately, the United Kingdom’s Competition and Markets Authority (CMA) – acting outside the bounds of its jurisdictional authority – has prohibited the transaction. We strongly disagree with the CMA’s decision.

"We remain committed to our long-term goal of creating a new market for personalized travel. Positioned at the center of the business of travel, Sabre is a critical component of the travel ecosystem. We are uniquely situated to create solutions that expand the distribution access of rich content via the Global Distribution System (GDS) marketplace and also help airlines create personalized offers for their customers, including the development of NDC-enabled solutions.”

###

About Sabre Corporation Sabre Corporation is a leading software and technology company that powers the global travel industry, serving a wide range of travel companies including airlines, hoteliers, travel agencies and other suppliers. The company provides retailing, distribution and fulfilment solutions that help its customers operate more efficiently, drive revenue and offer personalized traveller experiences. Through its leading travel marketplace, Sabre connects travel suppliers with buyers from around the globe. Sabre’s technology platform manages more than $260B worth of global travel spend annually. Headquartered in Southlake, Texas, USA, Sabre serves customers in more than 160 countries around the world. For more information visit www.sabre.com.

Media Contacts:

Kristin Hays [email protected]

Heidi Castle [email protected] 144 https://www.sabre.com/insights/releases/sabre-corporation-issues-statement-on-its-merger-agreement-with-farelogix/ 1/2 Unit 16 SABRE/FARELOGIX

T-Mobile/Sprint

145 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 1 of 173

~:LECJRON_ICAl»l:/¥'tllil. UNITED STATES DISTRICT COURT ~ll If' II: ___, ___.....,.;.a,.;'11: SOUTHERN DISTRICT OF NEW YORK L i"'ILED: .. ~--; .\ J / 2:;tt \/ · ------x STATE OF NEW YORK, et al., 19 Civ. 5434 (VM) Plainti , DECISION AND ORDER - against -

DEUTSCHE TELEKOM AG, et al.,

Defendants. ------x VICTOR MARRERO, United States District Judge.

TABLE OF CONTENTS

INTRODUCTION ...... 2

I. FINDINGS OF FACT ...... 10

A. SPECTRUM AND MOBILE WIRELESS NETWORKS ...... 12

1. Spectrum ...... 12

2. Mobile Wireless Network Infrastructure .... 14

B. GENERATIONAL STANDARDS FOR MOBILE WIRELESS SERVICES ...... 17

C. COMPETITION IN THE RMWTS MARKET ...... 19

1. Mobile Network Operators ...... 20

a. Verizon and AT&T ...... 20

b. T-Mobile ...... 21

c. Sprint ...... 23

2. Mobile Virtual Network Operators ...... 25

3. DISH as a Potential Market Entrant ...... 26

D. THE PROPOSED MERGER ...... 2 8

E. REVIEW OF AND CHALLENGES TO THE PROPOSED MERGER ...... 30

i 146 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 2 of 173

1. Federal Regulatory Review ...... 30

2. Plaintiff States' Challenge ...... 33

II. CONCLUSIONS OF LAW ...... 34

A. PLAINTIFF STATES' PRIMA FACIE CASE ...... 36

1. The Relevant Product Market ...... 36

2. The Relevant Geographic Markets ...... 4 6

3. Market Share Analysis ...... 52

B. DEFENDANTS' REBUTTAL CASE ...... 54

1. Efficiencies of the Proposed Merger ...... 5 7

a. Merger Specificity ...... 66

b. Verifiability ...... 72

2. Sprint's Status as a Weakened Competitor ...... 8 4

a. Sprint's Network Quality and Customer Perception ...... 86

b. Sprint's Financial Difficulties ...... 91

c. Other Competitive Means Available to Sprint ...... 94

3. Federal Agency Review and DISH as a New Entrant 102

a. FCC and DOJ Review and Remedies ..... 102

b. Market Entry by DISH ...... 106

i. Sufficiency of DISH' s Entry .... 109

ii. Likelihood of DISH's Entry 117

iii. Timeliness of DISH's Entry 123

C. ADDITIONAL EVIDENCE OF ANTICOMPETITIVE EFFECTS ...... 127

1. Coordinated Effects ...... 129

ii 147 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 3 of 173

2. Unilateral Effects ...... 138

D. PARTICULARITIES OF THE WIRELESS TELECOMMUNICATIONS INDUSTRY ...... 143

1. The RMWTS Market is Exceptional ...... 144

a. Complexity of the Relevant Market ... 144

b. Dynamics of the Relevant Market ..... 147

c. Market Dynamics in the Courts ...... 148

d. Dynamics of the Wireless Telecommunications Industry ...... 151

e. Market-Specific Behavior in Complex and Dynamic Industries ...... 154

f. New T-Mobile's Likely Post-Merger Behavior ...... 159

g. The Posture of Sprint ...... 163

CONCLUSION ...... 167

ORDER ...... 170

iii 148 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 4 of 173

Plaintiffs, the States of New York, California,

Connecticut, Hawaii, Illinois, Maryland, Michigan,

Minnesota, Oregon, and Wisconsin, the Commonwealths of

Massachusetts, Pennsylvania, and Virginia, and the District

of Columbia (collectively, "Plaintiff States"), acting by

and through the respective Offices of their Attorneys

General, brought this action against Deutsche Telekom AG

("□T•), T-Mobile US, Inc. ("T-Mobile•), Softbank Group

Corp. ("Softbank") , and Sprint Corporation ("Sprint," and

collectively with DT, T-Mobile, and Softbank, "Defendants")

seeking to enjoin the proposed acquisition of Sprint by T

Mobile (the "Proposed Merger"). Plaintiff States claim that

the effect of the Proposed Merger would be to substantially

lessen competition in the market for retail mobile wireless

telecommunications services (the "RMWTS Market" or "RMW'rS

Markets"), in violation of Section 7 of the Clayton Act,

codified at 15 0.S.C. Section 18 ("Section 7"). Defendants

counter that the Proposed Merger would in fact increase

competition in the RMWTS Market and that Plain ti States

have thus failed to state a claim for relief.

The Court held a bench trial to adjudicate Plaintiff

States' claim from December 9 to December 20, 2019 and

heard post-trial closing arguments from both sides on

January 15, 2020. The Court now sets forth its findings of

1 149 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 5 of 173

fact and conclusions of law pursuant to Rule 52 (a) of the

Federal Rules of Civil Procedure.

INTRODUCTION

Adjudication of antitrust disputes virtually turns the

judge into a fortuneteller. Deciding such cases typically

calls for a judicial reading of the future. In particular,

it asks the court to predict whether the business

arrangement or conduct at issue may substantially lessen

competition in a given geographical and product market,

thus likely to cause price increases and harm consumers. To

aid the courts perform that murky function demands a

massive enterprise. In most cases, the litigation consumes

years at costs running into millions of dollars. In

furtherance of their enterprise, the parties to the dispute

retain battalions of the most skilled and highest-paid

attorneys in the nation. In turn, the lawyers enlist the

services of other professionals engineers, economists,

business executives, academics all. brought into the

dispute to render expert opinions regarding the potential

procompetitive or anticompetitive effects of the

transaction.

The qualifications of litigants' specialists,

impressive by the titles they have held and the tomes their

CVs fill, can be humbling and intituidating. And those

2 150 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 6 of 173

witnesses' authoritative views stated on the stand under

oath in open court can leave the lay person wondering

whether word so expertly crafted and credentialed can admit

room for error or even doubt. Together, counsel and experts

amass documentary and testimonial records for trial that

can occupy entire storage rooms to capacity.

Multiplying the complexity of antitrust proceedings,

while also adding to the outlay of time and resources they

demand, is the role of the federal government. In many

cases, as occurred in the action at hand, the United States

of America steps into the fray. Acting through the United

States Department of Justice ( "DOJ") or regulatory

agencies, or both, the government intervenes to express its

interest for or against the underlying transaction, filing

objections or support, or imposing conditions that could

affect its viability.

Perhaps most remarkable about antitrust litigation is

the blurry product that not infrequently emerges from the

part I huge expenditures and correspondingly exhaustive

efforts. Each side, bolstered by the mega records of fact

discovery and expert reports it generates, as supplemented

by the product of any governmental investigation and

resulting action, offers the court evidence the party

declares should guide the judge in reaching a compelling

3 151 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 7 of 173

and irrefutable decision in the declarant' s favor. In fact,

however, quite often what the litigants propound sheds

little light on a clear path to resolving the dispute. In

the final analysis, at the point of sharpest focus and

highest clarity and reliability, the adversaries' toil and

trouble reduces to imprecise and somewhat suspect aids:

competing crystal balls.

The case now before the Court follows the pat tern.

Plaintiff States contend that T-Mobile's merger with Sprint

will likely stifle competition in the RMWTS Market, even in

the short term, forcing consumers to pay higher prices for

use of their cell phones. In support, they cite the results

of their experts' spectral efficiency studies, engineering

modeling, and computer-run data analytics. Defendants,

similarly reinforced by their stellar cast of authorities,

proclaim with equal conviction and no less intensity that

after the merger, under a market newly energized by New T

Mobile' s more vigorous competition, the prices consumers

will pay for wireless services likely will not only not

increase, but actually will decline. Accordingly, the

parties' costly and conflicting engineering, economic, and

scholarly business models, along with the incompatible

visions o.f the competitive future their experts' shades-of

gray forecasts portray, essentially cancel each other out

4 152 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 8 of 173

as helpful evidence the Court could comfortably endorse as

decidedly affirming one side rather than the other .1

The resulting stalemate leaves the Court lacking

sufficiently impartial and objective ground on which to

rely in basing a sound forecast of the likely competitive

effects of a merger. But the expert witnesses' reports and

testimony, however, do not constitute the only or even the

primary source of support for the Court's assessment of

that question. There is another evidentiary foundation more

compelling in this Court's assessment than the abstract or

hypothetical versions of the relevant market's competitive

future that the adversaries and their experts advocate.

Conceptually, that underpinning supports a projection of

what will happen to competition post-merger that emerges

from the evidence in the trial record that the Court heard,

admitted through the testimony of fact witnesses, and

1 This outcome recalls the heated conflicts over what the r,~ounders meant :i.n framing particular provisions of the Constitt;.tion, often engendering unproductive textua.=_, historical, and doctrinal debates about which Justice Robert Jacksor_ remarked: "A century and a half of partisan debate and scholarly speculation yields no net result but only supplies more or less apt quotations from respected sources on each side of any question. They largely cancel each other .. u Yo1.1:£1gstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 634-35 (1952) (Jackson, J., concurring). Nonetheless, in the discussion be.2.ow the Court thoroughly considers the trial testimony and related document at ion offered by all the expert witnesses and explains where and why it found the presentations convincing in some respec-:s, but in others :inconv.::_ncing and on balance not sufficiently credi~able~

5 153 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 9 of 173

evaluated with respect to its credibility and the weight it

deserves.

How the future manifests itself and brings to pass

what it holds is a multifaceted phenomenon that is not

necessarily guided by theoretical forces or mathematical

models. Instead, causal agents that engender knowing and

purposeful human behavior, individual and collective,

fundamentally shape that narrative. Confronted by such

challenges, courts acting as fact-finders ordinarily turn

to traditional judicial methods and guidance more aptly

fitted for the task. Specifically, they resort to the own

tried and tested version of peering into a crystal ball.

Reading what the major players involved in the dispute have

credibly said or not said and done or not done, and what

they commit to do or not do concerning the merger, the

courts are then equipped to interpret whatever formative

conduct and decisive events they can reasonably foresee as

likely to occur.

For this purpose, however, the courts rely less on the

equipoise of mathematical computations, technical data,

analytical modeling, and adversarial scientific assumptions

that the litigants proffer. Rather, they apply the judge's

own skills and frontline experience in weighing,

predicting, and judging complex and often conflicting

6 154 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 10 of 173

accounts of human conduct, those actions and inactions

drawn from the factual evidence. In performing that

function, courts employ various behavioral measures that

even the most exhaustive and authoritative technical expert

study could not adequately capture or gauge as a reliable

prognosticator of likely events set in motion fundamentally

by business decisions made by various live sources:

relevant market competitors, other market participants,

public agencies, and even consumers.

Evaluation of the likely competitive effects of a

prospective business merger implicates these observations.

The task provides the Court occasion to engage in such a

prophetic role. To this end, the Court weighs what actions

taken by the parties to the merger and other proponents

could substantially influence consumer choices and thus

affect competition and product pricing in the relevant

markets.

In this context, several considerations emerge from

the evidentiary record that the Court regards as especially

relevant and compelling. Foremost. among them is the

plausibility and persuasiveness of particular witnesses'

trial presentations based on various behavioral guideposts

that the Court details in Section II.D.

7 155 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 11 of 173

During the two-week trial of this acti.on the Court had

ample occasi.on to observe the witnesses and assess their

credibility and demeanor on the witness stand, and to

consider the weight their testimony warranted in the light

of the pointers referred to here and articulated below. As

elaborated, in crafting the framework for its decision, and

applying the evidence and governing legal principles, the

Court took those considerations Jnto account. The Court

adopted this course because it regards as a guiding

principle the proposition that behavioral drives and

motivational forces such as those suggested serve to

actuate as well as to restrain personal and business

practices. Hence, they can function as a forecasting

device, providing the Court substantial guidance about how

the corporate officers and companies involved in the case

are likely to conduct themselves under particular market

conditions prevailing after a merger.

The approach detailed above assists the Court's

adjudication by shedding light on a bas question

presented here that was intensely debated by the part

and that is central to a resolution of their dispute:

whether a deeply embedded pattern of commercial conduct

closely and publicly associated with a company or executive

is likely to be abandoned or substantially altered after a

8 156 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 12 of 173

merger so as to openly embrace a materially conflicting

course, especially in the short term.

More significant for the purposes of deciding the

issues before the Court is another salient point. The

considerations the Court references here as supplying

persuasive guidance also figure as judicial stock-in-trade,

encompassing things courts commonly weigh in rendering

predictive rulings such as, for instance, the judgment

calls they routinely make in determining whether a rational

person would or would not behave in a particular way, or

whether to grant or deny bail, or to impose a custodial

sentence, where in each case the likelihood of the

defendant's reoffending if released comes into question.

Weighing the evidence in the trial record, and mindful

of the considerations described here, the Court rejects

Plaintiff States' objections on three essential points.

First, the Court is not persuaded that Plaintiff States'

prediction of the future after the merger of T-Mobile and

Sprint is sufficiently compelling insofar as it holds that

New T-Mobile would pursue anticompetitive behavior that,

soon after the merger, directly or indirectly, will yield

higher prices or lower quality for wireless

telecommunications services, thus likely to substantially

lessen competition in a nationwide market. Second, the

9 157 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 13 of 173

Court also disagrees with the projection Plaintiff States

present contending that Sprint, absent the merger, would

continue operating as a strong competitor in the nationwide

market for wireless services. Similarly, the Court does not

credit Plaintiff States' evidence in arguing that DISH

would not enter the wireless services market as a viable

competitor nor live up to its commitments to build a

national wireless network, so as to provide services that

would fill the competitive gap left by Sprint's demise.

Accordingly, the Court concludes that judgment should be

entered in favor of Defendants and Plaintiff States'

request to enjoin the Proposed Merger should be denied.

I. FINDINGS OF FACT2

This is a case about competition in the retail market

for mobile wireless telecommunications services. The

significance of these services, as described in greater

detail in Section II.D. below, has increased greatly since

their inception roughly four decades ago, transforming from

solely a method of voice communication to a critical means

for consumers to manage countless facets of their daily

lives. Among the variety of consumer uses enabled by these

2 While the Court has reviewed and considered all of the live testimony and accompanying exhibits admitted in evidence in connection with the trial in this matter, the Court addresses only those portions of the evidence relevant to its legal conclusions.

10 158 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 170 of 173

portion of the population and to the national economy as

raising a constraint on anticompetitive behavior and as a

powerful incentive for vigorous competition. This

observation lends support to two predictions central to

this proceeding. First, given the size and national

significance of the wjreless services market, and the

heightened public interest and governmental scrutiny it

engenders, New T-Mobile is not likely, especially in the

near term, to pursue raising prices or lowering quality of

wireless service by means of either coordinated or

unilateral effects. Hence, Plaintiff States' concerns and

projections of such outcomes of the Proposed Merger are not

well-founded. Second, the expanse and importance of the

wireless industry that generate ever greater competitive

pressures and demands of consumers and other industrial

forces also give persuasive weight to evidence forecasting

that Sprint is not likely to survive as a major competitive

carrier of national scope and market impact.

CONCLUSION

Having been tasked with predicting the future state of

the national and local RMWTS Markets both with and without

the merger, and relying on both the evidence at trial and

the various judicial tools available, the Court concludes

that the Proposed Merger is not reasonably likely to

167 159 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 171 of 173

substantially lessen competition in the RMWTS Markets.

Despite the strength of Plaintiff States' prima facie case,

which might well suffice to warrant injunction of mergers

in more traditional industries, a variety of considerations

raised at trial have persuaded the Court that a presumption

of anticompetitive effects would be misleading in this

particularly dynamic and rapidly changing industry. T

Mobile has redefined itself over the past decade as a

maverick that has spurred the two largest players in its

industry to make numerous pro-consumer changes. The

Proposed Merger would allow the merged company to continue

T-Mobile' s undeniably successful business strategy for the

foreseeable future.

While Sprint has made valiant attempts to stay

competitive in a rapidly developing and capital-intensive

market, the overwhelming view both within Sprint and in the

wider industry is that Sprint is falling farther and

farther short of the targets it must hit to remain relevant

as a significant competitor.

Finally, the FCC and DOJ have closely scrutinized this

transaction and expended considerable energy and resources

to arrange the entry of DISH as a fourth nationwide

competitor, based on its successful history in other

consumer industries and its vast holdings of spectrum, the

168 160 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 172 of 173

most critical resource needed to compete in the RMWTS

Markets. DISH's statements at trial persuade the Court that

the new firm will take advantage of its opportunity,

aggressively competing in the RMWTS Markets to the benefit

of price-conscious consumers and opening for consumer use a

broad range of spectrum that had heretofore remained

fallow.

The Court remains fully mindful that among its various

likely prospects, one possibility a merger of this

magnitude raises is that of a less competitive future in

the RMWTS Markets. However remote, that concern must be

taken seriously. The Court, however, does not believe that

such a possibility is reasonably likely in light of the

numerous considerations discussed above. Accordingly, the

Court concludes that Plaintiff States have failed to prove

a violation of Section 7 and thus declines to enjoin the

acquisition of Sprint by T-Mobile. 28

28 Because the Court concludes that Plaintiff States have not proven Defendants vie.Lated Section 7, :'..t need not evaluate whether enjoining the Proposed Merger would be in the public interest. §e~ Chiste v. Hotels.com L.P., 756 F. Supp. 2d 382, 407-08 (S.D.N.Y. 11 2010) {''Injunction is not a separate cause- of action; it is a re:medy. ).

169 161 Case 1:19-cv-05434-VM-RWL Document 409 Filed 02/11/20 Page 173 of 173

III. ORDER

For the reasons stated above, it is hereby

ORDERED that the request of plaintiffs, the States of

New York, California, Connecticut, Hawaii, Illinois,

Maryland, Michigan, Minnesota, Oregon, and Wisconsin, the

Commonwealths of Massachusetts, Pennsylvania, and Virginia,

and the District of Columbia, for an injunction pursuant to

Section 7 of the Clayton Act, 15 U.S. C. Section 18, to

restrain the proposed acquisition of Sprint Corporation by

T-Mobile US, Inc. is DENIED, and the Clerk of Court is

directed to enter judgment in favor of defendants Deutsche

Telekom AG, T-Mobile US, Inc., Softbank Group Corp., and

Sprint Corporation.

The Clerk of Court is directed to terminate any

pending motions and to close this case.

SO ORDERED.

Dated: New York, New York 10 February 2020

170 162