## Facts

- Vail Resorts, Inc. owned two major Colorado ski areas (including Vail and Beaver Creek), and Ralston Resorts, Inc. owned three Colorado ski areas (Keystone, Breckenridge, and Arapahoe Basin (A-Basin)).
- All five ski areas were within driving distance of Colorado’s “Front Range,” a densely populated region along the eastern foothills of the Rocky Mountains that includes metropolitan areas such as Fort Collins, Boulder, Denver, Colorado Springs, and Pueblo.
- Vail and Ralston planned a transaction that would combine ownership of all five ski areas under Vail.
- The United States and the State of Colorado filed suit under § 7 of the Clayton Act to stop the transaction, alleging it would likely lead to higher lift-ticket prices or fewer discounts for Front Range skiers.
- The government’s Competitive Impact Statement (CIS) described a distinct group of customers: Front Range residents who take day trips or short overnight trips and generally will not drive much farther (about two-and-a-half hours) in response to a modest price increase.
- The CIS distinguished these local skiers from “destination” skiers, who travel longer distances, often stay multiple nights, and respond differently to pricing, packaging, and marketing.
- According to the CIS, Vail and Ralston competed for Front Range skiers through Front Range-focused pricing and marketing, including discount and pass programs offered through channels aimed at local residents.
- The CIS applied a unilateral-effects framework, relying on evidence such as demand responsiveness, margins, and recapture (diversion) among the merging parties’ ski areas to explain why combining the resorts could make it profitable to raise effective prices (including by reducing discounts) for Front Range skiers.
- At the same time it filed the case, the government also lodged a proposed settlement (consent decree) that would allow the acquisition to proceed if a structural remedy restored an independent competitive constraint.
- The proposed remedy required divestiture of A-Basin to a buyer able to operate it as an independent competitor, along with interim requirements intended to keep A-Basin viable and separate pending sale.

## Issues

1. Whether downhill skiing sold to Colorado Front Range residents taking day or weekend trips constitutes a relevant antitrust market for purposes of analyzing the acquisition under Clayton Act § 7.
2. Whether the proposed acquisition would likely substantially lessen competition by enabling the merged firm to raise lift-ticket prices or reduce discounting to Front Range skiers through unilateral effects.
3. Whether a consent decree requiring divestiture of A-Basin, together with interim separation and preservation measures, would remedy the alleged harm and satisfy the public-interest review required by the Antitrust Procedures and Penalties Act (APPA).

## Decision

- The United States filed a Competitive Impact Statement explaining why the proposed acquisition raised a substantial risk of higher effective prices or reduced discounts for Front Range skiers absent relief.
- The CIS supported entry of a proposed Final Judgment under the APPA rather than litigating to a merits judgment, describing the settlement as sufficient to address the competitive concern identified in the complaint.
- The proposed Final Judgment permitted the acquisition to go forward only if defendants divested A-Basin to an independent purchaser capable of competing for Front Range skiers.
- The settlement included interim obligations aimed at keeping A-Basin separate and in condition to compete until the divestiture was completed.
- The matter proceeded through the APPA notice-and-comment process, with the CIS serving as the government’s explanation of the transaction, the claimed competitive effects, and the basis for the divestiture remedy.

## Legal Principles

- Clayton Act § 7 prohibits acquisitions where the effect “may be substantially to lessen competition, or to tend to create a monopoly” in any line of commerce in any section of the country.
- A relevant market may be limited to a subset of consumers whose practical alternatives are constrained by real-world behavior (here, local day- and weekend-trip skiers with limited willingness to travel farther in response to price changes).
- Product and geographic market definition can account for differences in customer type and sales conditions; where firms use different pricing and marketing for locals versus destination travelers, that separation can support a narrower market focused on local consumers.
- Merger analysis may rely on unilateral-effects theory, asking whether the combined firm could profitably raise effective prices because customers leaving one product due to a price increase would shift in meaningful numbers to another product owned by the same firm (recapture/diversion), reducing the penalty from lost sales.
- Evidence such as demand responsiveness, margins, and substitution patterns among the merging firms’ offerings can be used to evaluate whether elimination of head-to-head competition makes post-merger price increases or reduced discounting likely.
- Under the APPA, a court reviews whether a proposed antitrust consent judgment is in the public interest; the inquiry focuses on the connection between the remedy and the harms alleged, not on selecting the most aggressive possible remedy.
- Divestiture is a standard structural remedy in horizontal mergers, intended to maintain an independent competitor and restore competitive pressure that would otherwise be lost.
- Interim separation and asset-preservation measures are common in divestiture settlements to prevent degradation of the business to be sold and to keep it competitively viable for the eventual buyer.

## Conclusion

In the Competitive Impact Statement, the United States and Colorado described how Vail’s acquisition of Ralston’s Colorado ski resorts could allow unilateral increases in effective prices (including reduced discounts) for Front Range skiers in a market shaped by limited travel willingness and close substitution among nearby resorts. The CIS supported a consent decree that would allow the transaction only with divestiture of A-Basin and interim measures to keep that resort independent and competitive, aiming to maintain meaningful competition for local day- and weekend-trip skiers.


United States and State of Colorado v. Vail Resorts, Inc., et al., Competitive Impact Statement, 1:11-cv-00106 (2011)