STAGECOACH IS preparing for a lengthy legal battle in America after federal and state officials filed a major lawsuit accusing its New York sightseeing joint venture of operating as a monopoly and inflating fares.
The civil suit against Twin America which runs the Big Apple’s popular hop-on, hop-off bus tours which tour sites including the Empire State Building and Times Square is being jointly pursued by the US Department of Justice (DoJ) and New York Attorney General (NYAG).
The company is a joint venture (JV) between Stagecoach North America which holds 60% of the economic rights and City Sights and it began operating in March 2009.
The stated purpose of the lawsuit is to “dissolve the joint venture and impose other relief to restore competition and redress the anti-competitive effects of the parties’ conduct.”
In addition to Twin America, the complaint names Coach and City Sights and two subsidiaries as defendants.
“The formation of Twin America eliminated intense head-to-head competition between Coach and City Sights and gave the parties an effective monopoly that enabled them to raise prices to consumers,” said acting assistant attorney general Renata Hesse of the DOJ’s antitrust division.
“This lawsuit seeks to restore the competition eliminated by the joint venture and to ensure that the millions of visitors to New York City who take hop-on, hop-off bus tours each year enjoy the benefits of a competitive marketplace.”
New York attorney general Eric Schneiderman said: “This lawsuit is an important step toward restoring competition and protecting tourists in New York City.
“The iconic double-decker Gray Line and City Sights buses are seen all over New York City but few people know they are run as a monopoly.
“The formation of Twin America has meant higher prices and less competition. Tourists who come to the Big Apple deserve better.”
Open-top bus tours around New York are enjoyed by more than two million tourists every year and produce revenues of more than $100 million.
The DoJ said that prior to the JV the market was 99% accounted for by Coach which operated Gray Line and City Sights, which started services in 2005.
The complaint alleges that by late 2008, Coach was concerned City Sights was challenging its dominant position and set out to eliminate competition by approaching its rival with a JV proposal which, if implemented, would allow both parties to raise fares by approximately 10%.
The JV went ahead in early 2009 and both companies increased base fares by $5 a move DoJ alleges put an end to fierce competition between the two firms that had benefited customers. It added that no other serious rival had entered the market since.
Stagecoach yesterday said it was “disappointed” over the decision to initiate legal proceedings and said it fundamentally disagreed with the allegations and the authorities’ assessment of the joint venture.
A statement issued yesterday said: “Contrary to the suggestion by the DoJ and NYAG, price increases in 2009 reflected increased labour, fuel and other costs.
“Notwithstanding continued increases in such costs, the efficiencies achieved by the joint venture have enabled Twin America to respond with better value and service to its customers.
“Twin America and the joint venture parties have continued to work with the regulatory authorities with a view to reaching a resolution to the process in the interests of all parties.
“However, we do not believe all opportunities for a mutually satisfactory resolution have been fully exhausted.
“As a result, we are disappointed at the view taken by the authorities.
“We believe our proactive and constructive approach could have resulted in a proportionate and workable solution.
“It would have ensured the DoJ achieved its regulatory objectives and would also have supported continued healthy competition among New York sightseeing firms.
“However, in view of the announcement by the DoJ and NYAG, the outcome is uncertain. The DoJ and the NYAG are seeking dissolution of the joint venture or, alternatively, divestiture of assets approximating the City Sights business that existed prior to the formation of the venture, including the City Sights brand, as well as an injunction against re-combining, equitable monetary relief, fees, costs and other relief as the court might order.
“Nevertheless, Twin America and the joint venture parties intend to robustly defend their position and will take all actions to protect their interests.”
Shares in Stagecoach closed at 300.00 down 2.40 yesterday.
business@thecourier.co.uk