The U.S. Department of Justice is suing to block Sabre’s $360 million acquisition of Farelogix. In a suit filed Wednesday, federal government attorneys said they have obtained text messages where Sabre executives acknowledged that acquiring Farelogix would eliminate a competitive threat and further entrench Sabre in booking services.
On the day Sabre announced its intention to buy Farelogix, Sabre’s chief sales officer allegedly texted a colleague to say that one major U.S. airline would “hate” it. The colleague allegedly replied, “Why, because it entrenches us more?”
In another conversation, a Farelogix executive allegedly said that buying the company would allow Sabre to “tak[e] out a strong competitor vs. continued competition and price pressure.”
“Sabre’s proposed acquisition of Farelogix is a dominant firm’s attempt to take out a disruptive competitor that has been an important source of competition and innovation,” said Makan Delrahim, assistant attorney general of the Justice Department’s antitrust division.
Sabre said it would challenge the suit.
“Over the past two years, Sabre has embarked upon a strategy with an entirely new executive management team focused on evolving the underlying technology of the travel ecosystem we support,” said Sean Menke, president and CEO of Sabre, in a statement on Wednesday.
“Together, Sabre and Farelogix will drive faster innovation in the dynamic, highly competitive airline technology space, helping airlines accelerate their growth and profitability while better serving travelers.”
Just last week before the Justice Department filed its lawsuit, Sabre boldly pronounced it was moving forward with the Farelogix deal, seemingly provoking regulators.
The lawsuit filed Wednesday alleges that Sabre and Farelogix compete head-to-head to provide booking services technology to airlines for selling tickets and upselling passengers on other products. It alleges that the acquisition “would likely result in higher prices, reduced quality, and less innovation for airlines and, ultimately, traveling American consumers.”
Sabre’s supporters claim that the suit misstates the competitive position of Farelogix, which merely generated $42 million in revenue last year in a $5 billion airline IT market.
Sabre has said it offers complementary services to Farelogix’s. The travel tech company can point to a variety of mergers and acquisitions that have been approved by the department because the integrations were complementary rather than concentrating.
Sabre said it plans to demonstrate in court that the airline technology sector is highly competitive, with many companies, even airlines themselves, offering services.
The Department of Justice alleges that “airlines have successfully leveraged their ability to turn to Farelogix to negotiate lower fees with Sabre and the other global distribution systems [GDSs] and to reduce their reliance on GDSs for booking services.”
The suit says that in 2013, Farelogix’s longtime CEO Jim Davidson alleged that “Sabre has wielded its monopoly power in an attempt to destroy Farelogix and prevent competition.”
The suit alleges that last year Davidson told European antitrust authorities that Sabre and the other two major global distribution systems, Amadeus and Travelport, “continue to leverage significant market power to preserve their market position and stifle innovation.”
Earlier this week, UK authorities said they were continuing to review the acquisition due to potential antitrust concerns.
The official filing is embedded below.