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DOJ, NY FILE ANTITRUST SUIT AGAINST NYC TOUR BUS JOINT VENTURE

(The following is a reformatted version of a press release
issued by The U.S. Justice Department and received via
electronic mail. The release was confirmed by the sender.) 
DECEMBER 11, 2012 
JUSTICE DEPARTMENT AND NEW YORK ATTORNEY GENERAL FILE ANTITRUST
LAWSUIT AGAINST NEW YORK CITY TOUR BUS JOINT VENTURE OF COACH
USA AND CITY SIGHTS 
Twin America Joint Venture of Coach USA and City Sights Has
Substantially Reduced Competition and Resulted in Higher Prices
for Hop-On, Hop-Off Bus Tours in New York City 
WASHINGTON - The Department of Justice and New York State
Attorney General filed a civil antitrust lawsuit today against a
tour bus joint venture formed by Coach USA Inc. and City Sights
LLC alleging that the joint venture, known as Twin America LLC,
has resulted in higher prices for hop-on, hop-off bus tours in
New York City.  The department said that the formation of Twin
America gave Coach and City Sights a monopoly over the more than
$100 million New York City hop-on, hop-off bus tour market and
enabled Coach and City Sights to increase prices to consumers by
approximately 10 percent for tourists visiting some of New York
City’s leading attractions, including the Empire State Building,
Times Square and Central Park. 
The lawsuit, filed in the U.S. District Court for the Southern
District of New York, seeks to dissolve the joint venture and
impose other relief to restore competition and redress the
anticompetitive effects of the parties’ conduct.   In addition
to the joint venture itself, the complaint names as defendants
Coach and City Sights, and the subsidiaries through which they
entered Twin America, International Bus Services Inc. and City
Sights Twin LLC. 
“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 B.
Hesse in charge of the Department of Justice’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.” 
“This lawsuit is an important step toward restoring competition
and protecting tourists in New York City,” said New York
Attorney General Eric T. Schneiderman. “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.” 
New York City is one of the world’s premier tourist
destinations, drawing approximately 50 million visitors
annually.  An estimated two million of these visitors spend more
than $100 million each year on hop-on, hop-off bus tours.  Hop-on, hop-off bus tours combine sightseeing and transportation by
providing tourists with a professionally-guided tour of New York
City’s leading attractions and neighborhoods, while giving them
the ability to “hop off” the tour bus at various locations to
further explore attractions of interest and later “hop on”
another bus to continue along the tour route using the same
ticket.  The tours are offered on open-top double-decker buses,
which enable passengers to view New York City’s attractions and
neighborhoods from a heightened vantage point. 
The department said that prior to the joint venture, two firms
accounted for approximately 99 percent of the hop-on, hop-off
bus tour market in New York City: Coach, the long-standing
market leader through its “Gray Line New York” brand, and City
Sights, a firm that commenced operations in 2005.  From 2005
until the 2009 creation of the joint venture, the parties
engaged in vigorous head-to-head competition on price and
product offerings that directly benefitted consumers. 
According to the complaint, by late 2008, Coach was concerned
that City Sights was challenging Gray Line’s dominant position
and set out to eliminate competition.  To this end, Coach
approached City Sights with a proposal to combine Coach’s
“existing Gray Line New York business with [its] main competitor
in the market, City Sights” by creating a joint venture that
would be the “sole player” in the market.  Coach anticipated
that one of the benefits of the combination would be that the
parties could implement a price increase of approximately 10
percent.  The complaint states that in a board presentation a
Coach executive advised that one of the key “benefits of
combining businesses” was “[i]mproved profitability,” which was
driven, in part, by “assum[ing] [a] 10% fare increase.”  The
presentation explained that without the transaction, there would
be no fare increase “due to competition.” 
The complaint states that during early 2009, Coach and City
Sights executed the agreement forming Twin America and each
implemented the price increase discussed during negotiations.
Specifically, both Coach and City Sights increased base fares
for their hop-on, hop-off bus tour products by $5, raising the
retail price of an adult ticket for each company’s popular “all
routes” tour from $49 to $54.  By merging their hop-on, hop-off
bus tour operations, the parties ended the fierce competition
between them that had benefitted consumers.  The department said
that no other operator of hop-on, hop-off bus tours in New York
City has entered or expanded their services to sufficiently
replace the competition lost through the parties’ combination in
the more than three years that Twin America has been operating. 
The transaction forming Twin America was not required to be
reported under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, which requires companies to notify and provide
information to the department and the Federal Trade Commission
before consummating certain acquisitions.  As a result, the
department did not learn about the joint venture until after it
had been consummated. 
As explained in the complaint, however, the New York State
Attorney General began investigating Twin America shortly after
its March 2009 formation and issued subpoenas seeking
information about the joint venture.  Shortly after the
subpoenas were issued, Coach and City Sights delayed the state’s
antitrust investigation by asserting that the Twin America
transaction was within the exclusive jurisdiction of the federal
Surface Transportation Board (STB), whose approval would exempt
the parties’ transaction from the antitrust laws.  In early
2012, after more than two years of proceedings, the STB denied
approval of the transaction as not in the “public interest” and
directed the parties to either dissolve Twin America or
terminate minimal interstate operations that provided the basis
for STB jurisdiction. Coach and City Sights chose the latter
option and continue to operate their illegal joint venture
today. 
Coach USA is a Delaware corporation with its principal place of
business in Paramus, N.J.  Coach owns more than 20 companies
that operate scheduled bus routes, motorcoach tours, charters
and city sightseeing tours in the United States and Canada.
Coach is a wholly-owned subsidiary of Stagecoach Group plc, a
leading international public transport company based in the
United Kingdom. 
City Sights is a New York limited liability company with its
principal place of business in New York, N.Y.  City Sights is
part of the New York Airport Service group of companies, one of
New York City’s largest operators of ground transportation, tour
and sightseeing services for leisure and corporate markets. 
Twin America is a Delaware limited liability company with its
principal place of business in New York, N.Y.  In addition to
offering hop-on, hop-off bus tours through the City Sights and
Gray Line brands, Twin America operates City Experts NY, a full-service concierge company. 
(bjh) NY 
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