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New York State Court Finds Violation Of Donnelly Act Stemming From Ski Area Acquisition
03/18/2025On February 26, 2025, the Supreme Court of the State of New York, County of Onondaga, rendered a decision involving an alleged anticompetitive acquisition under New York’s Donnelly Act. This decision demonstrates the importance of considering whether a contemplated acquisition may be scrutinized by state antitrust enforcers. People v. Intermountain Mgmt., Inc., Index No. 008588/2022 (Sup. Ct, Onondaga Cty. 2025). The case, brought by the New York State Office of the Attorney General (“OAG”), alleged that Intermountain Management, Inc.’s (“Intermountain”) acquisition and subsequent closure of the Toggenburg Mountain ski area (“Toggenburg”) violated the Donnelly Act by creating a monopoly in the Syracuse area ski market.
Intermountain owns and operates two ski areas near Toggenburg: Song Mountain and Labrador Mountain. Starting in at least 2015, Intermountain began expressing interest in acquiring Toggenburg from John Meier. Intermountain went as far orchestrating a “faux buy” through its agents where Intermountain learned that Meier would not sell to a competitor. Importantly, while Meier operated Toggenburg at a profit, it provided him a “foot in the Syracuse market,” and was a “marketing play” for other nearby ski properties that Meier owned. Meier recognized Toggenburg as a direct competitor to Song and Labrador and knew that selling Toggenburg to Intermountain would allow Intermountain to “capture 90% market share” in the Syracuse ski area market.
In 2021, following negotiations between the parties, Intermountain acquired Toggenburg for $2.25 million. The transaction documents noted that Intermountain was “willing to pay in excess of Fair Market Value” because Toggenburg “is more valuable to [Intermountain] than to any other unrelated parties,” and “tacitly acknowledged… that Toggenburg was being purchased by Intermountain in order to close it down.” Prior to the transaction, Intermountain considered options for reimbursing individuals who had purchased a season pass at Toggenburg for the coming season. As part of acquisition, Intermountain and Meier executed a separate non-compete agreement that prohibited Meier from competing within 30 miles of Toggenburg for five years. Intermountain closed Toggenburg for the 2021–2022 ski season and Toggenburg has not been open since.
In 2022, the OAG brought claims against Intermountain related to the acquisition under the Donnelly Act, New York’s state antitrust law. Following discovery, both parties moved for summary judgment. The court granted summary judgment for the OAG on the following bases.
First, the court held that the transaction was a “contract” within the meaning of the Donnelly Act because the OAG’s evidence established a “reciprocal relationship of commitment between two legal or economic entities.” The court found little merit in Intermountain’s argument that its decision to close Toggenburg was unilateral in nature because evidence showed that Meier obtained a purchase price above fair market value and Intermountain paid a premium to reduce the number of ski area options in the Syracuse market from three to two, both of which it already owned. Next, the court turned to the issue of liability. It found that the acquisition and closure of Toggenburg was a per se violation of the Donnelly Act that amounted to an “impermissible market allocation.” The court held that the acquisition “artificially reduc[ed] options for season pass skiers and stifl[ed] competition to Intermountain.” The court pointed to deposition testimony from Intermountain’s owner, which it said demonstrated a desire to “eliminate [Toggenburg] so that those skiers would be driven to Song and Labrador, creating an opportunity for significantly increased profits without the costs associated with keeping Toggenburg open.” In a similar vein, the court noted that Meier “recognized that this transaction compensated him for bringing an end to his concrete competitive presence near Intermountain’s ski areas.” Last, the court turned to the non-compete agreement associated with the transaction. It noted that non-compete agreements “lacking a connection to a legitimate collaboration are also reflective of per se anticompetitive activity.” The court identified evidence that the non-compete provision prevented Meier from recruiting employees from Intermountain to other ski areas he still owned and held that the “provisions did not create efficiencies in service of a productive joint venture such that it would qualify as a proper ancillary restraint, but rather furthered the competitive suppression for which Intermountain was explicitly paying.”
The court next, in the alternative, undertook a “quick look” analysis of the transaction. The court held that under the “quick look” standard, OAG alleged a logical market of ski areas within a 30-minute drive of downtown Syracuse because the majority of season pass holders for Song, Labrador, and Toggenburg came from this area, and the majority of Syracuse-area season pass purchasers skied at Song, Labrador, and Toggenburg. Because the “suspect nature” of the arrangement between Intermountain and Meier constituted a prima facie violation, and Intermountain provided no procompetitive justifications, the court concluded that the arrangement violated the Donnelly Act.
Given the passage of time and the fact that Toggenburg has sat unused for several years, the Court is now seeking additional briefing from the parties before entering remedies, including a money judgement and equitable relief against Intermountain. The court’s decision highlights the broad reach of the New York’s Donnelly Act and its applicability to transactions that substantially lessen competition.
