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In-Flight Gogo Monopoly Claims Find Jet Stream

(CN) - Gogo must face class claims that it monopolized the in-flight Internet services market on domestic flights, a federal judge ruled, refusing to dismiss an amended complaint.

James Stewart, Joel Milne and Joseph Strazullo lead the 2012 complaint against Gogo, of Illinois and Colorado, claiming that passengers on many major U.S. airlines were stuck with the company's services whether they liked it or not.

U.S. District Judge Edward Chen grounded the initial lawsuit in northern California last year, however, ruling the class failed to show "why airplanes that could be equipped" with Internet service - not just those that actually did have Internet capability - "should not be included in the full range of selling opportunities reasonably open to a competitor."

Gogo allegedly charges users up to $17.95 for in-flight Internet service under exclusive 10-year contracts with major airlines, the first of which is slated to expire in 2018.

The $17.95 charge applied to fights longer than three hours, and passengers with mobile devices were charged $9.95 for similar service, according to the complaint.

Gogo locked into the contracts with AirTran, Alaska Airlines, American Airlines, Delta, Frontier Airlines, United Airlines, US Airways and Virgin America, the class said.

Meanwhile the in-flight Internet provider for Southwest Airlines, Row 44, allegedly offered its unlimited satellite-based service for $5.

Gogo responded that its market share of potential North American aircrafts capable of being fitted for Internet access was only 16 percent - not 85 percent or higher as alleged by the class.

For that reason, Chen found in April that the passengers failed to show how the contracts demonstrated a "substantial foreclosure of competition in the relevant market."

That opinion dismissed the class's claims under the Sherman Act and Cartwright Act and ordering an amended complaint be filed.

"In the absence of such allegations, the court agrees with Gogo that plaintiffs cannot focus solely on planes that are actually equipped with internet access, and, as a result, plaintiffs' allegation that Gogo dominates the market with respect to North American aircraft that are actually equipped to provide internet connectivity to passengers (85 percent) shows little," he wrote. (Parentheses in original.)

After reviewing a second amended complaint, Chen ruled Wednesday that the class raised a plausible antitrust claim.

"Gogo argues that the alleged facts are erroneous and incomplete: that because plaintiffs fail to explain the 85 percent figure (given there is only incomplete information about the numerator and no information about the denominator in reaching the 85 percent ratio), they have failed to allege a plausible claim for relief," Chen wrote. "However, the level of justification and factual detail Gogo demands exceeds that required in the context of a Rule 12(b)(6) motion."

Gogo could move for dismissal under Rule 11, but it did not, Chen said, adding "there are other case management tools to address Gogo's concerns besides Rule 12."

"Even plaintiffs allege with specificity other major airlines, plaintiffs allege with specificity other major airlines - including American, Delta, and US Air - whose fleets in their entirety or near entirety are or were locked up by Gogo's contract," the four-page ruling states. "Thus, it is plausible that even if not a 85 percemnt market share, Gogo has a substantial enough market share such that, together with the allegations in plaintiffs' complaint that there are high barriers to entry, a substantial share of the market has been foreclosed."

Gogo must respond to the operative complaint within 30 days.

"Plaintiffs have done more than assert conclusory allegations of law or ultimate facts," she wrote. "Hence, the issue is not specificity, but plausibility of plaintiffs' claims."

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