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VBR Tours, LLC v. National Railroad Passenger Corp.

United States District Court, N.D. Illinois, Eastern Division

January 15, 2015

VBR TOURS, LLC, Plaintiff,
v.
NATIONAL RAILROAD PASSENGER CORP., and YANKEE LEISURE GROUP, INC. Defendants.

MEMORANDUM OPINION AND ORDER

ROBERT M. DOW, Jr., District Judge.

Plaintiff VBR Tours, LLC filed its complaint against Defendants National Railroad Passenger Corp. ("Amtrak") and Yankee Leisure Group, Inc., alleging violations of the Sherman Act and Illinois Antitrust Act in the form of monopolization (Counts I and IV), conspiracy to attempt to monopolize (Counts II and V), and concerted action to restrain trade and price discrimination (Counts III and VI). Amtrak [13] and Yankee [17] move for dismissal under Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, the Court grants Defendants' motions to dismiss [13, 17].

I. Background[1]

The complaint alleges that Amtrak is a monopoly created by federal statute and America's only long-distance leisure passenger rail service. VBR and Yankee are tour operators that sell Amtrak leisure travel packages to vacation destinations nationwide. The alleged relevant geographic market is the United States, and the alleged relevant product market is the market for Amtrak leisure travel packages sold by tour operators to consumers.

According to the complaint, tour operators sell Amtrak leisure railway travel packages, which frequently include Amtrak rail tickets, hotels, meals, local transportation, tour guides, and admission to tourist attractions. Consumers have three means of booking a railway vacation package. They can purchase a package from a tour operator, purchase a package from a travel agent, or directly purchase all the elements of a trip separately. Tour operators sell packages to customers directly and through intermediary tour agents. Tour operators allegedly profit by marking up the total cost of the non-Amtrak ticket elements of a package and by receiving a commission from Amtrak on the rail portion of a package. Travel agents, meanwhile, profit by receiving a commission from tour operators.

Since 2006, Amtrak allegedly has appointed Yankee to be Amtrak's national tour operator. As Amtrak's preferred tour operator, Yankee allegedly receives marketing dollars and marketing support from Amtrak, direct access to Amtrak customers via advertising on the Amtrak.com website, and commissions on Amtrak rail tickets that might double the commission allotted to other travel agents and tour operators. More specifically, VBR alleges that this commission has been at least 19% as of early 2010.

Towards the end of 2007, Amtrak allegedly partnered with a travel agent consortium, Vacation.com, to launch an online booking tool called Rail Agent. Travel agents and tour operators that were members of Vacation.com could book directly with Amtrak through Rail Agent. By booking through Rail Agent, travel agents or tour operators could earn an 8% commission on commissionable trains from Amtrak or a 10% commission if the booking were for a party of 20 or more. They could receive up to 3% additional commission-a "commission override"-depending on the growth of their quarterly revenues from the sale of Amtrak tickets. VBR used these commissions to innovate by expanding its tour offerings, growing significantly since its founding in 2004.

In 2010, Yankee offered to pay VBR a 10% commission on Amtrak tickets if VBR agreed to purchase those tickets through Yankee instead of Amtrak's rail agent. VBR declined the offer because it could earn a higher total commission through Amtrak's rail agent given the commission overrides. In recognition of VBR's rapid growth, Amtrak authorized an increase in VBR's commission to 15% that same year. However, in 2012, Amtrak informed VBR that its commission would return to 8% so Amtrak could both cut costs and "give preferential treatment" to Yankee. Compl. at ¶¶ 63, 65.

In February 2013, Amtrak submitted a request for proposals for its national tour operator contract. VBR submitted a proposal under which Amtrak would provide an 8% commission to all travel agents or tour operators, including VBR as national tour operator. Amtrak rejected VBR's proposal, instead choosing Yankee, which it continued to give at least a 19% commission. Most importantly, in 2013, Amtrak announced that it would stop paying all other travel agents and tour operators direct commissions once its current contracts terminated. Amtrak subsequently announced at a webinar for travel agents, however, that travel agents could continue to receive a commission if they booked through Yankee. Yankee announced that travel agents who were members of Vacation.com would receive a 10% commission on the Amtrak ticket portion of an Amtrak Vacations package and 12% on the non-rail portion of the package. Travel agents without a Vacation.com membership could receive an 8% commission on the Amtrak ticket portion of a package by booking with Yankee. Yankee allegedly told VBR that "Yankee will enjoy a complete monopoly as all other travel agents and tour operators will be driven out of the Amtrak leisure travel package business." Id. at ¶ 100.

Counts I and IV allege that Yankee and Amtrak have violated the Sherman Act (15 U.S.C. § 2) and the Illinois Antitrust Act (740 ILCS 10/3(3)) through monopolization and a refusal to deal. The complaint specifically alleges that access to railway leisure tickets with payment of a commission is an essential facility for VBR as a tour operator. It alleges that by exclusively paying Yankee a direct commission, Amtrak has refused to deal with VBR. Counts II and V allege that in agreeing to the preferential 19% commission, Amtrak and Yankee entered into a conspiracy to attempt to monopolize in violation of the Sherman Act (15 U.S.C. § 2) and the Illinois Antitrust Act (740 ILCS 10/3(3)). Counts III and VI allege concerted action to restrain trade and price discrimination in violation of the Sherman Act (15 U.S.C. § 1) and the Illinois Antitrust Act (740 ILCS 10/3(3). Specifically, the complaint alleges that Amtrak is price discriminating by giving a Yankee at least a 19% commission while giving Yankee's competitors no direct commission.

The complaint alleges that these violations have caused various types of injuries. First,

[p]aying a 19% or better commission to Yankee while paying VBR, other tour operators and travel agents no direct commission will result in all of those entities other than Yankee departing the market of selling railway leisure tickets. While in the short term consumers might benefit from lower prices for railway leisure packages from Yankee (which will be able to undercut the competition on price to achieve a monopoly in the market), the long-term effect is to remove competition, resulting in higher prices and worse service for consumers.

Compl. at ¶¶ 107, 131.[2] They allege that the result will be to chill price competition, reduce innovation, and restrain competition. See id. at ¶¶ 115, 116, 123-125, 130, 132, 139, 140, 147-49. The complaint states, moreover, that the "barriers [to becoming a tour operator] have become insurmountable" because Yankee can use its exclusive 19% commission to "offer significant commissions to ...


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