Last week, Sabre filed its principal brief on appeal to the Second Circuit Court of Appeals, seeking to overturn the jury’s verdict of $15 million and find for Sabre or, in the alternative, grant a new trial in US Airways Inc. v. Sabre Holdings Corp. Its primary argument on appeal is that its case should have been governed by United States v. American Express Co., in which the Second Circuit reversed the district court’s finding of anticompetitive harm in a one-sided market because the proper analysis was whether there was anticompetitive harm in a two-sided market.
In Amex, the court embraced the concept of a two-sided market in which a “platform can affect the volume of transactions by charging more to one side of the market and reducing the price paid by the other side by an equal amount; in other words, the price structure matters, and platforms must design it so as to bring both sides on board.” In particular, the court held that the relevant market is considered two-sided where “interdependency that causes price changes on one side can result in demand changes on the other side.”
There, the Second Circuit found a two-sided market because Amex needed to ensure that the price it charged to merchants did not exceed the benefit the merchant gained by accepting the card, otherwise the merchant would not accept the card, which in turn would make a cardholder less likely to want the card if too few merchants accepted it. (For some of our prior posts on the Amex case, see here and here.)
Sabre argues that its global distribution system (“GDS”)—which connects travel agents with airline schedules, fares, and booking information—should be analyzed in the same manner. In particular, Sabre contends that in order to attract travel agents to its platform it must be able to offer an incentive fee and access to all of an airline’s available flights and fares. Therefore, it negotiates booking fees with airlines so that it can fund the incentive fees and states that it is willing to negotiate a lower booking fee if the airline makes all its flights and fares available on Sabre’s platform. If booking fees increase, Sabre argues, then it would increase its incentive fees and thereby attract more travel agents and vice versa if booking fees decrease.
In the district court, US Airways was able to persuade both the jury and Judge Schofield that even though Sabre is a two-sided platform like Amex, the relevant market should still be considered one sided because the market for GDS is a “mature market” in which all travel agents use one of the three providers of GDS services and all airlines subscribe to all three of the GDS providers. Therefore, the market lacks the interdependence necessary to find a two-sided market because “changing the price on one side of the platform (increasing or decreasing the booking fee paid by airlines) does not change demand on the travel agent side” because all the travel agents already use at least one of the GDS services to which all airlines subscribe.
The Second Circuit will evaluate Sabre’s appeal under the same standard as the district court did in considering Sabre’s motion for judgment as a matter of law: whether, when viewing the evidence in the light most favorable to US Airways, it is insufficient to permit a reasonable juror to find in US Airways’s favor.