WASHINGTON (Reuters) – The U.S. Justice Department sued on Tuesday to block travel technology firm Sabre Corp’s (SABR.O) $360 million acquisition of Farelogix Inc, saying in court papers that it was a “dominant firm’s attempt to eliminate a disruptive competitor.”
Last week, Sabre said it planned to close the deal announced in November by Wednesday unless the Justice Department sued. The companies agreed last week to extend the termination date of their acquisition agreement to April 30 to allow time for any Justice Department challenge to be resolved.
The suit, filed in U.S. District Court in Delaware, said the firms compete head-to-head to provide booking services to airlines, including offering IT solutions that allow airlines to sell tickets and ancillary products through traditional brick-and-mortar and online travel agencies to the traveling public.
“If allowed to proceed, the acquisition would likely result in higher prices, reduced quality, and less innovation for airlines and, ultimately, traveling American consumers,” said Makan Delrahim, who heads the Justice Department’s Antitrust Division in a statement.
The government says Sabre, the dominant provider of booking services in the United States with over 50 percent of airline bookings through travel agencies, has for many years “operated outdated technology and resisted innovation” while Farelogix is “an innovative technology company that has stepped in to address the needs of airlines and their customers.”
The suit says Sabre was “so threatened” by Farelogix’s next-generation technology standard that in 2013 it urged the U.S. Transportation Department to block approval of the standard. It cites text messages between Sabre executives that the deal would “entrench us more.”
Nearly 50 percent of airline bookings in the United States are made through travel agencies, the government said.
The department added that airlines have successfully leveraged Farelogix’s market position to negotiate lower fees with Sabre.
Sabre said it would challenge the lawsuit as the Justice Department’s claims reflected a “fundamental misunderstanding of the industry” and that the two companies’ services were complementary rather than competitive.
Sabre, based in Southlake, Texas, had 2018 revenues of $3.9 billion, while Miami-based Farelogix had $42 million in revenues last year.
Reporting by David Shepardson; Additional reporting by Tamara Mathias; editing by Jonathan Oatis, Nick Zieminski and Anil D’Silva