On March 17, 2015, two New York City-based tour bus operators agreed to settle allegations that they conspired to monopolize New York’s hop-on, hop-off sightseeing market between 2009 and 2015.1  Coach USA Inc. (“Coach”), City Sights LLC (“City Sights”), and their joint venture, Twin America LLC (“Twin America”) (jointly “Defendants”), reached a settlement agreement with the United States Department of Justice (“DOJ”) and the New York State Office of the Attorney General (“NYAG”).2  If the settlement agreement is approved, City Sights will be required to relinquish 47 Manhattan bus stops to the New York City Department of Transportation (“NYCDOT”), including bus stops near major tourist attractions.3  Additionally, the Defendants will be required pay $7.5 million in disgorged profits as restitution.4

In 2012, DOJ and NYAG brought suit in the United States District Court for the Southern District of New York, alleging that the Defendants’ 2009 formation of Twin America violated both Federal and New York State antitrust laws, including § 1 of the Sherman act and § 340 of the Donnelly Act.5  DOJ and NYAG alleged that the creation of the Twin America eliminated all competition between Coach and City Sights.6  They further alleged that prior to the creation of Twin America, Coach and City Sights had competed vigorously on price and product offerings, but that the Twin America joint venture gave the Defendants 99% of the double decker tour bus market, enabling them to allegedly raise prices by 10%.7

DOJ and NYAG alleged that the Defendants were successful in their conspiracy, in part, because there have been high barriers to entry from other tour bus operators.8  Nascent competitors have been unable to obtain the necessary authorizations from the NYCDOT to set up bus stops near top tourist destinations.9

At the time that the Defendants formed Twin America, they were not required to report the transaction pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR”).10  HSR requires notification to, and approval by, DOJ or the Federal Trade Commission before certain transactions can be finalized.11  Many transactions are exempt if the value falls beneath the statutory reporting threshold or the parties qualify for certain exemptions.12  However, the outcome of this matter is a reminder that non-reportable transactions are subject to the same underlying antitrust laws as reportable transactions.  Where a non-reportable transaction violates Federal or State antitrust laws, parties can be force to unwind the transaction and pay damages even years after it was finalized.13

Here, shortly after the Defendants formed Twin America, the NYAG sought to investigate; however, the Defendants temporarily blocked the NYAG’s review by applying for approval by the Surface Transportation Board (“STB”), an executive agency within the Federal Department of Transportation.14  The Defendants claimed that the STB’s review preempted the state investigation.15  Eventually, the STB rejected the Defendants’ application, finding the transaction would have anticompetitive effects, thereby permitting DOJ and NYAG’s investigation to move forward.16

The proposed penalties will be in addition to a prior $19 million civil settlement that Defendants reached with private litigants.17  DOJ and NYAG determined that the Defendants had retained “ill-gotten profits” in excess of the settlement amount.18  Additionally, if the settlement is approved, the Defendants would be required to establish antitrust compliance training programs, and Coach would be required to pay $250,000 to resolve claims that it spoliated evidence.19