Foremost International Tours, Inc. v. Qantas Airways, Ltd., Civ. No. 74-116.

• Citation: 379 F. Supp. 88
• Decision Date: 26 July 1974
• Docket Number: Civ. No. 74-116.
• Parties: FOREMOST INTERNATIONAL TOURS, INC., Plaintiff, v. QANTAS AIRWAYS LIMITED, Doe One through Doe Ten, Inclusive, Defendants.
• Court: United States District Courts. 9th Circuit. United States District Court (Hawaii)

379 F. Supp. 88

FOREMOST INTERNATIONAL TOURS, INC., Plaintiff, v. QANTAS AIRWAYS LIMITED, Doe One through Doe Ten, Inclusive, Defendants.

Civ. No. 74-116.

United States District Court, D. Hawaii.

July 26, 1974.

Melvin Y. Shinn, Honolulu, Hawaii, Kevin B. Hughes, Alexander Anolik, San Francisco, Cal., for plaintiff.

Allen W. Wooddell, Stuart E. Wolfe, Wooddell, Mukai & Ichiki, Honolulu, Hawaii, George N. Tompkins, Jr., Condon & Forsyth, New York City, for defendants.

DECISION

PENCE, District Judge.

Founding its complaint upon past and present business activities between itself and Qantas Airways Limited (Qantas), as more fully set out hereafter, Foremost International Tours, Inc. (Foremost) has brought this antitrust action against Qantas.

Foremost alleges that Qantas violated Sections 1 and 2 of the Sherman Act and seeks monetary and injunctive relief under Sections 4 and 16 of the Clayton Act. 15 U.S.C. §§ 1, 2, 15, 26. This court has jurisdiction under 28 U.S.C. §§ 1331, 1337. The matter is presently before the court on Foremost's motion for a preliminary injunction and Qantas' cross-motion for summary judgment. Evidence has been taken, and the preliminary issues have been argued and briefed.

Findings of Fact

1. Foremost is a corporation organized and existing under the laws of the State of Hawaii with its principal place of business in Honolulu, Hawaii.

2. Qantas is a public company incorporated in the State of Queensland, Australia, under the laws of the Commonwealth of Australia, with its principal place of business in Sydney, Australia.

3. Foremost is engaged in the business of packaging, producing and operating Royal Road Fly/Drive, Fly/Coach and Fly/Tour tour programs to Australia and New Zealand from the United States of America, Canada, and other areas. The relevant tour programs consist of (1) air transportation to Australia and New Zealand from the United States and Canada, and (2) a land portion of the tour consisting of hotel accommodations, sightseeing and land transportation in Australia and New Zealand.

4. Although no permit is on file with this court, it would appear that within the meaning of § 101(19) of the Federal Aviation Act of 1958, 49 U.S.C. § 1301(19), Qantas is the holder of a foreign air carrier permit issued by the Civil Aeronautics Board with the approval of the President of the United States pursuant to §§ 402 and 801 of the Federal Aviation Act of 1958, 49 U.S.C. §§ 1372, 1461, authorizing Qantas to engage in foreign air transportation between, inter alia, the United States and Australia and New Zealand.

5. Prior to March 31, 1974, Foremost as tour producer and wholesaler and Qantas as the sponsoring airline, pursuant to agreement, conjoinedly marketed tour programs to Australia and New Zealand from the United States and Canada known as Royal Road Tours and which included Fly/Drive, Fly/Coach and Fly/Tour tours. Qantas furnished the air transportation and paid for, in part or sometimes all, directly or indirectly, advertising and promotional tour brochures for such tours. The brochures used were of distinctive format and colors. They were not protected by copyright. Foremost arranged for and operated the land portion of such tours.

6. The agreement pursuant to which Foremost and Qantas jointly marketed tour programs to Australia and New Zealand from the United States and Canada, known as Royal Road Tours and which included Fly/Drive, Fly/Coach and Fly/Tour tours, on its face appeared to be renewable annually at the sole option of Qantas. The annual term of the agreement was from April 1 to March 31. On November 7, 1973, Qantas verbally advised Foremost that the agreement would not be renewed beyond March 31, 1974 and subsequent written confirmation was given to Foremost by Qantas by letter dated December 13, 1973.

7. Foremost is a wholesaler of tour programs. Foremost does not sell its tour programs to the public directly but sells through retail outlets consisting of retail travel agents and ticket offices of those airlines who are sponsoring or participating airlines in the tour programs produced by Foremost as a wholesaler.

8. Commencing April 1, 1974, Qantas commenced to market Fly/Drive, Fly/Coach, Fly/Tour and Fly/Rail tours to Australia and New Zealand from the United States and Canada through the in-house tour department of Qantas known as Qantas Holidays. The effect of this was to place Qantas, as an air carrier, in direct competition with Foremost in the marketing of such tour programs.

9. Foremost, as a wholesaler, after Qantas terminated their agreement, entered into an agreement with Air New Zealand effective April 1, 1974, whereby Air New Zealand became the sponsoring carrier of the Royal Road Tour programs packaged, produced, sold and operated by Foremost. Air New Zealand designated British Airways as a participating carrier in this tour program.

10. Qantas, commencing April 1, 1974, commenced selling its Fly/Drive, Fly/Coach, Fly/Tour, Fly/Rail tours from the United States and Canada to Australia and New Zealand directly through retail travel agent outlets and airline ticket office outlets, as well as sub-wholesalers. Its promotional brochures were almost identical in format and color to the 1973 brochures used by Foremost.

11. In 1967 the International Air Transport Association (IATA) filed Resolution 810D with the Civil Aeronautics Board pursuant to § 412 of the Federal Aviation Act of 1958, 49 U.S.C. § 1382. Resolution 810D defines principles under which inclusive tours may be operated by IATA members, such as is Qantas. IATA Resolution 810E contains rules applicable to tour operators such as Foremost who develop, organize and promote inclusive tours for sale by individual IATA travel agents via the scheduled services of IATA members such as Qantas. IATA Resolutions 810D and 810E were approved by the Civil Aeronautics Board pursuant to § 412 of the Federal Aviation Act of 1958, 49 U.S.C. § 1382, on March 23, 1967 in Order No. E-24886 in Docket 17828.

12. As required by § 403 of the Federal Aviation Act of 1958, 49 U.S.C. § 1373, Qantas International Passenger Fares Tariff No. 3 was filed with and approved by the Civil Aeronautics Board, effective March 20, 1974. This tariff provides in pertinent part, with respect to South Pacific group inclusive tour fares, in Rule 82-A of said tariff, the following:

A. The tour must include in the published price and tour literature:

(1) Sleeping accommodation for the total duration of the tour in hotels, motels or commercially operated pensions;

(2) A program of sightseeing and/or entertainment features on at least half the number of days in the total trip.

B. The minimum selling price of the tour per passenger shall not be less than the applicable group inclusive tour fare plus U. S. $130 for the minimum stay plus $10 for each day of the tour in excess of the minimum stay for which tour features are provided.

The "minimum selling price" does but mean that when all properly allocable per-passenger costs of the tour are added up, that figure shall not fall below the $130 + $10 per excess day minimum of B, supra.

13. The group inclusive tour fare contained in Qantas' International Passenger Fares Tariff No. 3 is $674.10 between Sydney, Australia and West Coast points of the United States or Vancouver, Canada. Thus under Qantas' Tariff No. 3, Qantas cannot sell a South Pacific group inclusive 10-day tour for less than $ U.S. 674.10 + $130.00, viz., $804.10, even if the land portion should not "cost" Qantas $130.00.

14. Commencing April 1, 1974, Qantas has been selling a 10-day group inclusive tour to Australia at a price of $805. Although Qantas broke down the tour as "costing":

A. Air fare — $674.10

B. Land transportation in the form of car rental — $40.84

C. Hotel Accommodations — $59.40

D. Ten percent commission on the gross land cost to the retail agent — $13.90

E. Gross profit for Qantas on the gross land cost — $17.57,

items C and E are "as phony as a $3 bill." The "hotel" price was deliberately solicited and secured by Qantas for the sole purpose of fictitiously complying with the truth in advertising requirements of the Federal Trade Commission of the United States. By the terms of the hotel's letter to Qantas (Ex. D2), the room rate purportedly was limited by the hotel to one tour of 15 persons on a once only basis, but in fact it was never intended to be used or sold by either Qantas or the hotel, and Qantas never sold any such tour. The "profit" was nonexistent and fictitious. Qantas used it only to pro forma comply with the Federal Trade Commission requirements and as a "bait and switch" sales technique.

15. On all its tours, Qantas bases its cost figures on what it refers to as its "in-house" exchange rate: $A 1.00=$US 1.485. The actual rate of exchange, as quoted by the Bank of America in San Francisco on April 1, 1974, when the Qantas tours went on the market, was $A 1.00 = $US 1.4925. It has remained virtually unchanged since that date.

16. Commencing April 1, 1974, Qantas has been selling a 14-day group inclusive tour to Australia at a price of $US 899.00. This encompasses the following (at Qantas' "in-house exchange rate"):

A. Air fare — $674.10

B. Land transportation in the form of car rental — $40.84

C. Hotel accommodations — $161.13

D. Ten percent commission on the gross land cost to the retail agent — $22.49

E. "Gross profit" on land portion of tour — 44 cents.

If Bank of America exchange rates were used, a "loss" of 57 cents results.

17. Qantas does not allocate any of its overhead expenses, office administration, advertising or brochure expenses as "costs" in its representations to this court as to the "cost" of the land portion of any of its tours.

18. In April 1973 Foremost sold 310 (passenger) tours; in April 1974, 102. In May 1973 Foremost sold 581 tours; in May 1974, 65. In June 1973 Foremost sold 539 tours; as of June 20, 1974, 29.

19. Foremost as a tour...