In the annals of antitrust cases it will fall somewhere below Standard Oil and Microsoft, but a decision by a federal transportation agency last week may at least please the city’s sightseers.
On Feb. 8, the Surface Transportation Board, a regulatory agency that resolves transportation disputes, denied a proposed joint venture between the city’s two major double-decker sightseeing bus tour services. The board claims the resulting company would be a monopoly capable of raising prices and operating outside the public’s best interest. DNAInfo.com first reported the ruling.
Like most corporate double-decker bus tour transactions, this one is complicated. International Business Service, an interstate bus carrier and subsidiary of Coach USA that operates under the trade name Gray Line New York, tried to enter a joint business operation with City Sights Twin, which recently took over City Sights LLC, a city bus tour service. (In non-legalese: the big red buses you see everywhere wanted to team up with the big blue ones you see everywhere.)
In fact, they are technically joined. In March 2009, without seeking approval from the Surface Transportation Board, the companies merged to create Twin America LLC, according to Surface Transportation Board documents. Both Gray Line and City Sights also continued their separate operations. At that point, the state attorney general’s office stepped in to question the deal. In response, Twin America sought approval from the federal board — as it should have all along, the documents say, because Gray Line is an interstate business.
“Often, bus merger transactions subject to Board authority are routine transactions with little or no competitive impact,” the Surface Transportation Board’s documents read. “However,” the document continued, “the facts that this case presents are not routine.”
The Surface Transportation Board says that in this case, it has actual evidence that the merger would harm consumers because Twin America had formed before the review. Over the past two years, Twin America “raised its rates significantly,” the board noted.
Customers saw prices rise 10 to 17 percent after the merger, the documents say, with evidence that City Sights raised prices to match Gray Line.
Ronn Torossian, a spokesman for Gray Line, said in a statement: “We note the findings of the Surface Transportation Board. We will take time to study the report in detail before deciding on the appropriate course of action.”
Gray Line, which operates 59 buses, and City Sights, owner of 70 buses, make up 89 percent of the city’s so-called “double-decker, hop on, hop off” market, according to the attorney general’s office. Both offer a wide variety of tours with a wide range of prices. But most tour costs are roughly the same for each service. For example, the “All Around Town” tour at City Sights and the “All Loops” tour on Gray Line are both $49 for adults; the tours are both valid for 48 hours and include stretches through upper Manhattan, downtown Manhattan and Brooklyn.
Twin America claims it hasn’t cornered the market because it has to compete against various other kinds of tours that it doesn’t operate — like pedi-cab trips, horse-and-carriage rides and Segway tours. Additionally, the joint venture would save between $7 and $10 million through efficiencies, Twin America claims in the documents.
The Surface Transportation Board was unmoved. “After the transaction,” the board’s documents read, “Twin America was free to decide to raise its prices — a hallmark of unrestrained market power.”
To comply with the ruling, Twin America must disband the joint venture or stop its interstate services.