Q: I have always understood that it is illegal under the antitrust laws for a group of travel agencies to agree to boycott a travel supplier that refuses to do what the agencies want. That is why, for example, my agency cannot try to enlist other agencies in a boycott of United following its announcement that some agencies will be required to use their own merchant agreement in credit card sales. That is also why ASTA cannot advocate a boycott of United. Have I correctly understood the law, or are there some exceptions to the anti-boycott law? Also, if a boycott is illegal, what about joint action short of a total boycott, such as an agreement to sell away from United where possible?
A: Until recently, the law was that all agreements among competitors to boycott any company were illegal, with no exceptions. However, a 2007 ruling by the Supreme Court relaxed this rule, opening the door to legal boycotts under circumstances that might apply to an agency boycott of United.
The Supreme Court case held that a manufacturer's dictation of minimum retail prices to retailers, another traditionally illegal practice, is not always to be considered illegal per se. Instead, the conservative court majority held that, to fall into the always-illegal category, "the restraint must have manifestly anti-competitive effects and lack any redeeming virtue."
Later in 2007, a U.S. Court of Appeals applied the Supreme Court case to a group boycott involving an alleged agreement among the hotels in Tunica, Miss., to refuse to do business with a new booking website. The court held that, to determine whether a boycott falls into the always-illegal category, a trial court must look at the following factors: whether the agreeing parties hold a dominant position in the relevant market, whether they control access to an element necessary to enable [the website] to compete and whether there exist plausible arguments concerning pro-competitive effects.
Applying this analysis to a hypothetical agency boycott of United, I believe that a court would find the opposite to be true: No group of agencies controls the air travel market; no group controls airlines' access to the public; and pressuring United to retract its policy will help ensure that air travel prices (including travel agencies' fees) do not rise as much as they would if agencies had to try to pass on their merchant fees.
So, lawyers can no longer advise agencies and agency groups that it will definitely be illegal to organize a boycott of United under all circumstances. Under antitrust law today, the boycott would be illegal only if the anti-competitive effects outweigh the competitive effects.
I realize that the "pro-competitive vs. anti-competitive" standard sounds terribly vague and dependent of what expert economists might think. Unfortunately, that is the state of antitrust law today, and taking an antitrust case to trial costs hundreds of thousands of dollars, win or lose -- which probably makes it too risky to organize a boycott and is the reason why I cannot advocate a boycott.
Finally, a partial boycott such as the one you describe would be equal to a full boycott under the law, so an agreement among agencies to sell away from United where possible (but not to boycott it completely) would involve the same risks.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email Pestronk at [email protected].