Proposed Final Judgment and Competitive Impact Statement; United States v. Association of Retail Travel Agents

DEPARTMENT OF JUSTICE

Antitrust Division

Proposed Final Judgment and Competitive Impact Statement; United

States v. Association of Retail Travel Agents

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that a proposed Final

Judgment, Stipulation, and Competitive Impact Statement have been filed

with the United States District Court for the District of Columbia in

United States v. Association of Retail Travel Agents, Civil No. 94-2305

as to the association of Retail Travel Agents.

The Complaint alleges that the defendant and its members agreed on

commission levels and other terms of trade on which to transact

business with providers of travel services, and encouraged and

participated in a group boycott with the intent to induce certain

providers of travel services to agree to certain commission levels and

practices.

The proposed Final Judgment enjoins the defendant from inviting or

encouraging travel agents to engage in concerted refusals to deal with

travel services providers, and also requires defendant to establish an

antitrust compliance program.

Public comment on the proposed Final Judgment is invited within the

statutory 60-day comment period. Such comments and responses thereto

will be published in the Federal Register and filed with the Court.

Comments should be directed to Roger Fones, Chief, Transportation,

Energy and Agriculture Section, Room 9104, U.S. Department of Justice,

Antitrust Division, 555 4th Street, N.W., Washington, D.C. 20001

(telephone: 202-307-6351).

Mark C. Schechter,

Deputy Director of Operations, Antitrust Division.

In the United States District Court for the District of Columbia

Case Number 1:94CV02305.

Judge: Paul L. Friedman.

Deck Type: Antitrust.

Date Stamp: 10/25/94.

The United States of America, plaintiff, by its attorneys, acting

under the direction of the Attorney General of the United States,

brings this civil action to obtain equitable relief against the above-

named defendant, and complains and alleges as follows:

I

Jurisdiction and Venue

1. This complaint is filed under Section 4 of the Sherman Act, 15

U.S.C. Sec. 4, in order to prevent and restrain violations by defendant

of Section 1 of the Sherman Act, 15 U.S.C. Sec. 1, and this Court has

jurisdiction over this matter pursuant to 28 U.S.C. Secs. 1331 and

1337.

2. Defendant transacts business and is found in the District of

Columbia, within the meaning of 15 U.S.C. Sec. 22 and 28 U.S.C.

Sec. 1391(c).

II

Defendant

3. Association of Retail Travel Agents, Ltd. (``ARTA''), is a

District of Columbia nonprofit corporation with its principal place of

business in Arlington, Virginia. ARTA is a trade association with over

two thousand members who act as retail travel agents selling

transportation and accommodations (``travel services'') to the public

as agents for airlines, hotels, cruise lines, rental car companies and

other providers of travel services (``travel providers''). ARTA's

members compete with one another both to sell travel services to the

public and to act as selling agents for travel providers.

III

Trade and Commerce

4. Airlines, hotels, rental car companies, cruise lines, and other

travel providers sell a significant portion of their travel services to

the public through travel agents, including the members of defendant.

Travel agents inform consumers about the price, availability and other

details of various travel options and make reservations and sell

tickets to the travellers for the travel services they choose. Roughly

80% of airline sales, 30% of hotel sales, 50% of rental car sales and

95% of cruise line sales in the United States are made through travel

agents. In 1993, the amount of such sales by travel agents was in

excess of $90 billion.

5. Travel agents sells travel services to the public as agents of

the travel providers. Travel agents normally do not charge travellers

directly for their services; instead, travel providers pay commissions

to the travel agents for the sales the agents make on behalf of the

travel providers. These commissions vary and are established between

individual travel agents and travel providers. These commissions

generally are included in the price the consumer pays for airline

tickets, hotel accommodations, rental cars, cruises and other travel

services. The lower the sales commissions established between

individual travel agents and travel providers, the lower the total cost

of travel services to the consumer.

6. A substantial proportion of the commissions earned by travel

agents, including members of defendant, are derived from the sale of

travel services that are within the flow of and substantially affect

interstate and foreign trade and commerce.

7. The sale of travel services by travel agents constitutes a line

of commerce and a relevant product market within the meaning of Section

1 of the Sherman Act.

8. The United States constitutes a relevant geographic market

within the meaning of Section 1 of the Sherman Act.

IV

Alleged Violation

9. On or about October 16, 1993, the members of defendant, through

its Board of Directors, adopted a statement of objectives for defendant

and its members. That statement, entitled ``ARTA Objectives for the

Travel Agency Community,'' constitutes an agreement among the members

of defendant's Board of Directors and among defendant's members as to

the matters contained therein.

10. Included among the ARTA Objectives described in Paragraph 9 are

agreements concerning the amount of commissions that certain travel

providers should pay to travel agents, including members of defendant,

and agreements as to the terms under which travel providers should

transact business with travel agents, including members of defendant.

11. On or about October 19, 1993, defendant held a press

conference, attended by defendant's president and two members of its

Board of Directors, where it announced and disseminated the contents of

the ARTA Objectives. The contents of the ARTA Objectives were

subsequently disseminated to travel providers, its own members and

other travel agents through publications that are widely circulated

among travel agents and travel providers.

12. Shortly after defendant's public announcement of the ARTA

Objectives, a member of defendant's Board of Directors made a public

statement, through a press release, that he and his travel agency would

refuse to deal with certain travel providers who did not comply with

the ARTA Objectives. In making that announcement, the defendant's

director stated that he ``encourage[d] owners and managers [of travel

agencies] nationwide to join this effort.''

13. Thereafter, at least one other member of defendant's Board of

Directors made a public announcement that she and her travel agency

would also refuse to deal with the travel providers who did not comply

with the ARTA Objectives.

14. As a result of the actions of its president and directors

described above, defendant and its members agreed on commission levels

and other terms of trade on which ARTA members and other travel agents

should transact business with travel providers, and invited, encouraged

and participated in a group boycott of certain travel providers to

induce them to agree to those commission levels and other terms of

trade.

15. The group boycott and agreement on commissions and other terms

of trade described above had the effect of unreasonably restraining

trade in the sale of travel services by travel agents.

16. The group boycott and agreement on commissions and other terms

of trade described above constitutes a contract, combination or

conspiracy in unreasonable restraint of trade and commerce in violation

of Section 1 of the Sherman Act, 15 U.S.C. Sec. 1. There is a

significant likelihood that the offense will recur unless the relief

hereinafter prayed for is granted.

Prayer

Wherefore, plaintiff prays:

1. That defendant be enjoined from inviting or encouraging

concerted action by travel agents that has the purpose or effect of

specifying the commission levels paid by travel providers to travel

agents, or of specifying the terms of trade between travel agents and

travel providers;

2. That plaintiff have such other or further relief as the Court

may deem just and proper; and

3. That plaintiff recover the costs of this action.

Dated: October 25, 1994.

Anne K. Bingaman,

Assistant Attorney General.

Robert E. Litan,

Deputy Asst. Atty. General.

Mark C. Schechter,

Roger W. Fones,

Mary Jean Moltenbrey,

Robert D. Young,

D.C. Bar #.

Nina B. Hale,

Transportation, Energy, and Agriculture Section, Antitrust Division,

Attorneys, U.S. Department of Justice.

Civil Action No.: 94 2305.

Stipulation

It is stipulated by and between the undersigned parties, by their

respective attorneys, that:

1. The Court has jurisdiction over the subject matter of this

action and over each of the parties thereto, and venue of this action

is proper in the District of Columbia;

2. The parties consent that a Final Judgment in the form hereto

attached may be filed and entered by the Court, upon the motion of any

party or upon the Court's own motion, at any time after compliance with

the requirements of the Antitrust Procedures and Penalties Act (15

U.S.C. Sec. 16), and without further notice to any party or other

proceedings, provided that plaintiff has not withdrawn consent, which

it may do at any time before the entry of the proposed Final Judgment

by serving notice thereof on defendant and by filing that notice with

the Court;

3. Defendant shall abide by and comply with the provisions of the

Final Judgment pending entry of the Final Judgment;

4. This Stipulation and the Final Judgment to which it relates are

for settlement purposes only and do not constitute an admission by

defendant in this or any other proceeding that Section 1 of the Sherman

Act, 15 U.S.C. Sec. 1, or any other provision of law has been violated;

5. In the event plaintiff withdraws its consent or if the proposed

Final Judgment is not entered pursuant to this Stipulation; this

Stipulation shall be of no effect whatever, and the making of this

Stipulation shall be without prejudice to any party in this or any

other proceeding.

Dated: October 25, 1994.

For Plaintiff United States of America:

Anne K. Bingaman,

Assistant Attorney General.

Robert E. Litan,

Deputy Asst. Attorney General.

Mark C. Schechter,

Deputy Director of Operations.

Roger W. Fones,

Mary Jean Moltenbrey,

Robert D. Young,

DC Bar #248260,

Nina B. Hale,

Attorneys, Transportation, Energy, and Agriculture Section, Antitrust

Division, U.S. Department of Justice.

For Defendant Association of Retail Travel Agents:

Alexander Anolik,

A Professional Law Corporation,

By: Mitchell Blumenthal.

Civil Action No.: 94 2305

Final Judgment

Plaintiff, United States of America, filed its complaint on October

25, 1994. Plaintiff and defendant, by their respective attorneys, have

consented to the entry of the Final Judgment without trial or

adjudication of any issue of fact or law. This Final Judgment shall not

be evidence against or an admission by any party with respect to any

issue of fact or law. Therefore, before the taking of any testimony and

without trial or adjudication of any issue of fact or law herein, and

upon consent of the parties, it is hereby ordered, adjudged, and

decreed, as follows:

I

This Court has jurisdiction over the subject matter of and parties

to this action. The complaint states a claim upon which relief may be

granted against defendant under Section 1 of the Sherman Act, 15 U.S.C.

Sec. 1.

II

The provisions of this Final Judgment shall apply to defendant, to

the officers, directors, agents, employees, successors, and assigns of

defendant, and to all other persons in active concert or participation

with any of them who receive actual notice of this Final Judgment by

personal service or otherwise.

III

Defendant is enjoined from:

(A) Inviting or encouraging concerted action by travel agents or

travel agencies to refuse to do business with specified suppliers of

travel services or to do business with specified suppliers only on

specified terms; and

(B) Directly or indirectly adopting, disseminating, publishing, or

seeking adherence to any rule, bylaw, resolution, policy, guideline,

standard, objective, or statement made or ratified by an officer,

director or other official of defendant that has the purpose or effect

of advocating or encouraging any of the practices identified in Section

III(A) above.

IV

(A) Nothing in this Final Judgment shall prohibit any individual

travel agent or travel agency, acting alone and not on behalf of

defendant, from negotiating commission rates and policies with

suppliers of travel services, or from choosing the suppliers whose

services they wish to sell.

(B) Nothing in this Final Judgment shall prohibit defendant from

advocating or discussing, in accordance with the doctrine established

in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc.,

365 U.S. 127 (1961), and its progeny, legislative, judicial or

regulatory actions, or governmental policies or actions.

V

Defendant is ordered:

(A) To cause the annual publication of a summary of this Final

Judgment, in a form acceptable to the Assistant Attorney General in

charge of the Antitrust Division, in ARTAFacts or any equivalent

newsletter provided to its members;

(B) To provide a copy of this Final Judgment to each director,

officer, and chapter president at the time they take office and

annually, and to obtain a written certification from those persons that

they received, read, understand to the best of their ability, and agree

to abide by this Final Judgment and that they have been advised and

understand that noncompliance with the Final Judgment may result in

conviction of the person for criminal contempt of court.

VI

Defendant is ordered to maintain an antitrust compliance program

which shall include an annual briefing of the defendant's Board of

Directors, officers, chapter presidents, and non-clerical employees on

this Final Judgment and the antitrust laws.

VII

(A) To determine or secure compliance with this Final Judgment and

for no other purpose, duly authorized representatives of the plaintiff

shall, upon written request of the Assistant Attorney General in charge

of the Antitrust Division, and on reasonable notice to defendant made

to its principal office, be permitted, subject to any legally

recognized privilege:

(1) Access during defendant's office hours to inspect and copy all

documents in the possession or under the control of defendant, who may

have counsel present, relating to any matters contained in this Final

Judgment; and

(2) Subject to the reasonable convenience of defendant and without

restraint or interference from it, to interview officers, employees, or

agents of defendant, who may have counsel present, regarding such

matters.

(B) Upon the written request of the Assistant Attorney General in

charge of the Antitrust Division made to defendant's principal office,

defendant shall submit such written reports, under oath if requested,

relating to any matters contained in this Final Judgment as may be

reasonably requested, subject to any legally recognized privilege.

(C) No information or documents obtained by the means provided in

Section VII shall be divulged by the plaintiff to any person other than

a duly authorized representative of the Executive Branch of the United

States, except in the course of legal proceedings to which the United

States is a party, or for the purpose of securing compliance with this

Final Judgment, or as otherwise required by law.

(D) If at the time information or documents are furnished by

defendant to plaintiff, defendant represents and identifies in writing

the material in any such information or documents to which a claim of

protection may be asserted under Rule 26(c)(7) of the Federal Rules of

Civil Procedure, and defendant marks each pertinent page of such

material, ``Subject to claim of protection under Rule 26(c)(7) of the

Federal Rules of Civil Procedure,'' then 10 days notice shall be given

by plaintiff to defendant prior to divulging such material in any legal

proceeding (other than a grand jury proceeding) to which defendant is

not a party.

VIII

This Final Judgment shall expire ten (10) years from the date of

entry.

IX

Jurisdiction is retained by this Court for the purpose of enabling

any of the parties to this Final Judgment to apply to this Court at any

time for further orders and directions as may be necessary or

appropriate to carry out or construe this Final Judgment, to modify or

terminate any of its provisions, to enforce compliance, and to punish

violations of its provisions.

X

Entry of this Final Judgment is in the public interest.

Competitive Impact Statement

Pursuant to Section 2(b) of the Antitrust Procedures and Penalties

Act (``APPA''), 15 U.S.C. Sec. 16(b)-(h), the United States files this

Competitive Impact Statement relating to the proposed Final Judgment

submitted for entry with the consent of the Association of Retail

Travel Agents in this antitrust proceeding.

I

Nature and Purpose of the Proceeding

On October 25, 1994, the United States filed a Complaint alleging

that the Association of Retail Travel Agents (hereinafter ``ARTA'') had

entered into a contract, combination or conspiracy in restraint of

trade in violation of Section 1 of the Sherman Act (15 U.S.C. Sec. 1).

The Complaint alleges that ARTA, a trade association all of whose

members are travel agents, and its members agreed on commission levels

and other terms of trade on which to transact business with providers

of travel services, and encouraged and participated in a group boycott

with the intent to induce certain providers of travel services to agree

to certain commission levels and practices.

On October 25, 1994, the United States and ARTA filed a Stipulation

by which they consented to the entry of a proposed Final Judgment

designed to prevent any recurrence of such activity in the future.

Under the proposed Final Judgment, ARTA will be enjoined from inviting

or encouraging travel agents to deal with travel providers only on

agreed terms. This prohibition includes any agreements on specified

commission levels. The proposed Final Judgment also prohibits ARTA from

adopting or disseminating any rules, policies, or statements that have

the purpose or effect of advocating or encouraging such a concerted

refusal to deal.

The United States and ARTA have agreed that the proposed Final

Judgment may be entered after compliance with the APPA. Entry of the

proposed Final Judgment will terminate the action, except that the

Court will retain jurisdiction to construe, modify, and enforce the

Final Judgment, and to punish violations of the Final Judgment.

II

Events Giving Rise to the Alleged Violation

Airlines, hotels, rental car companies, cruise lines and other

providers of transportation and accommodations (hereinafter ``travel

providers'') sell a significant proportion of their services to the

public through travel agents. Travel agents inform travellers about the

price, availability and other details of various travel options and

make reservations and sell tickets to the travellers for the travel

services they choose. Travel agents are agents of the travel providers,

receiving commissions from the travel providers for sales they make.

These commissions vary and are established between individual travel

agents and travel providers. These commissions generally are included

in the price the consumer pays for airline tickets, hotel

accommodations, rental cars, cruises and other travel services. The

lower the sales commissions established between individual travel

agents and travel providers, the lower the total cost of travel

services to the consumer.

ARTA is an association of travel agents. Among its goals are

achieving improved commission levels for travel agents and persuading

travel services providers to adopt commission policies and practices

that are beneficial to travel agents. ARTA members compete with each

other and with other travel agents both to sell travel services to the

public and to act as selling agents for travel services providers.

On October 16, 1993, ARTA's Board of Directors adopted a document

entitled ``ARTA Objectives for the Travel Agency Community.'' Among its

Objectives, ARTA stated that it sought a ``minimum'' ten percent

commission on all hotel and car rental sales by travel agents, the

elimination of all distribution outlets for airline tickets other than

travel agents, and the payment of commissions based on full fares

rather than the discounted prices actually paid by travellers.

A few days after adopting the ARTA Objectives, ARTA hosted a press

conference attended by its president and two members of its Board of

Directors, in addition to members of the press. Several days after the

press conference, one of ARTA's board members announced that his travel

agency would cease doing business with certain travel providers whose

commission and sales practices did not comport with the ARTA

Objectives, and invited other travel agents to join his boycott in

support of the ARTA Objectives. Shortly thereafter, at least one other

ARTA board member made a similar public announcement.

The Complaint alleges that through those activities, defendant and

its members agreed on commission levels and other terms of trade on

which ARTA members and other travel agents should transact business

with travel providers, and invited, encouraged and participated in a

group boycott designed to induce travel providers to agree to those

commission levels and terms of trade. The Complaint further alleges

that those activities constitute a contract, combination or conspiracy

in unreasonable restraint of trade in violation of Section 1 of the

Sherman Act (15 U.S.C. Sec. 1).

III

Explanation of the Proposed Final Judgment

The proposed Final Judgment is designed to prevent defendant and

its officers, directors and agents from inviting, encouraging or

advocating concerted refusals to deal. In addition to enjoining

defendant and its officers, directors and agents from engaging in such

activities (Section III), it requires defendant to provide an annual

summary of the Final Judgment to its members (Section IV), and requires

that its officials provide an annual certification that they have read

and understand the Final Judgment (Section IV). The proposed Final

Judgment also requires that defendant provide an annual briefing on the

requirements of the Final Judgment and on the antitrust laws to its

officials (Section V).

The United States is satisfied that the proposed Final Judgment

sufficiently resolves the antitrust violations alleged in the

Complaint. Compliance with the proposed Final Judgment would prevent

any recurrence of the violations alleged in the Complaint, and thus

provides complete relief.

IV

Remedies Available to Potential Private Litigations

Section 4 of the Clayton Act (15 U.S.C. Sec. 15) provides that any

person who has been injured in his business or property as a result of

conduct forbidden by the antitrust laws may bring suit in federal court

to recover three times the damages suffered, as well as costs and

reasonable attorneys fees. Entry of the proposed Final Judgment will

neither impair nor assist the bringing of any private antitrust damage

action. Under the provisions of Section 5(a) of the Clayton Act (15

U.S.C. Sec. 16(a)), the proposed Final Judgment has no prima facie

effect in any subsequent private lawsuit that may be brought.

V

Procedure Available for Modification of the Proposed Final Judgment

The United States and defendant have stipulated that the proposed

Final Judgment may be entered by the Court after compliance with the

provisions of the APPA, provided that the United States has not

withdrawn its consent. The APPA conditions entry upon the Court's

determination that the proposed Final Judgment is in the public

interest.

The APPA provides a period of at least 60 days preceding the

effective date of the proposed Final Judgment within which any person

may submit to the United States written comments regarding the proposed

Final Judgment. Any person who wishes to comment should do so within 60

days of the date of publication of this Competitive Impact Statement in

the Federal Register. The United States will evaluate the comments,

determine whether it should withdraw its consent, and respond to

comments. The comments and the response of the United States will be

filed with the Court and published in the Federal Register.

Written comments should be submitted to: Roger W. Fones, Chief,

Transportation, Energy, and Agriculture Section, Antitrust Division,

Judiciary Center Building, 555 4th Street, N.W., Rm 9104, Washington,

D.C. 20001.

VI

Alternative to the Proposed Final Judgment

The alternative to the proposed Final Judgment would be a full

trial of the case against ARTA. In the view of the Department of

Justice, such a trial would involve substantial cost to the United

States and is not warranted because the Proposed Final Judgment

provides relief that will remedy the violations of the Sherman Act

alleged in the United States' Complaint.

VII

Determination Materials and Documents

There are no materials or documents that the United States

considered to be determinative in formulating this proposed Final

Judgment. Accordingly, none are being filed with this Competitive

Impact Statement.

Dated: October 25, 1994.

Respectfully submitted,

Robert D. Young,

Attorney, Antitrust Division, U.S. Department of Justice.

[FR Doc. 94-28440 Filed 11-16-94; 8:45 am]

BILLING CODE 4410-01-M