In Stewart v. Gogo, Inc., 2013 U.S. Dist. LEXIS 51895 (N.D. Cal. Apr. 10, 2013) (Chen, J.), a putative class of airline passengers challenged Gogo’s long-term exclusive contracts to provide Internet access connectivity to various domestic airlines under, among other things, Sherman Act Section 2.
The complaint suggested that Gogo’s exclusive contracts with the airlines effectively operated as a wholesale bar preventing the contracting airline from using an Internet access provider other than Gogo on any of its planes. However, at oral argument, plaintiffs clarified that the typical Gogo contract binds an airline on an aircraft-by-aircraft basis. In other words, where an airline agreed to have an airplane equipped with Gogo for Internet access, that airplane would use only Gogo’s services (and no other company’s) for the ten years. Thus, conceivably, an airline could have some of its airplanes equipped for Gogo’s services but use a different Internet access provider for its other planes.
In dismissing the complaint (but granting leave to amend), the court found that the relevant market could not be limited to North American aircraft that actually provide Internet access, but must take into account the North American aircraft that could be equipped to provide such access, in which case Gogo has only a 16% market share (not 85% or higher as alleged by plaintiffs who focused only on the North American aircraft actually equipped).
The court noted that Plaintiffs had not made any allegations as to why airplanes that could be equipped should not be included in the full range of selling opportunities reasonably open to a competitor. Plaintiffs did not allege, for example, that there are substantial technological or design barriers to installing a competitor’s Internet connectivity services on such planes, nor did they allege that there are substantial financial barriers which prevent competition for these planes.
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