The National Ski Areas Association (NSAA) and RRC Associates (NSAA's market research agency) were served with a Civil Investigative Demand (CID) requesting data collected from the ski industry in association with an investigation of Alterra Mountain Company's pending acquisition of Arapahoe Basin.

CIDs are an investigative tool of the Department of Justice (DOJ) similar to a subpoena. They are issued by the Attorney General when they wish to obtain information relevant to an active investigation. The full scope and details of the investigation are unknown at this time, however NSAA stated that this was specifically in relation to the sale of Arapahoe Basin to Alterra Mountain Company announced earlier this year on February 5th. Yesterday, on the deadline for complying with the CID, NSAA alerted some member resorts in the Rocky Mountain Region who provided sensitive business information and data that NSAA collects through RRC Associates for their three annual business surveys. A copy of that letter follows:

As part of the Federal Government's inquiry relating to the acquisition of Arapahoe Basin by Alterra Mountain Company, the Department of Justice has served NSAA and RRC Associates with a Civil Investigative Demand, which is akin to a civil subpoena. This is a routine investigative tool used by the DOJ to collect information from various sources in order to study the proposed acquisition and to assess prospective impacts to competition in the region that may result.

The data that the DOJ has commanded from NSAA and RRC consists of content from each of the three annual surveys (Kottke, Demographic, and Economic Analysis) for the 2018/2019 to 2023/2024 seasons. We have been successful in working with the DOJ to narrow their request to a scope that meets their needs but does not overreach. The DOJ has agreed to reduce the scope of NSAA and RRC's combined productions to about half of the content from each of the three surveys, and to reduce the geographic scope to just the Rocky Mountain Region.

We are writing to let you know that the data you supplied to NSAA and RRC in one or more of these studies will be included in our production submittal to the DOJ. The data will not be presented in aggregate. The raw data files have been requested. At present, the production due date is June 26, 2024.

NSAA is determined to maintain the strictest confidentiality in assembling all of the data for these studies and to ensure that the information is used for the good of all the membership. We are assured that the Department of Justice is bound by statute to maintain the confidentiality of this data as well, and they have further represented to us that none of it should ever be disclosed in any public document or forum.

-- NSAA Letter to Select Members
6/26/2024

The DOJ Has Taken Action Against the Ski Industry Before

While NSAA characterized the request as being "routine", the DOJ does not issue CIDs for every larger merger and acquisition, and there is precedent for state and federal governments stepping in when there is concern that such activities may negatively impact consumers.

In 1996 when American Skiing Company sought to acquire the assets of S-K-I Limited which included Killington, Pico, Mount Snow, Haystack, Sugarloaf, and Waterville Valley, the Antitrust Division of the DOJ filed a civil antitrust complaint and subsequently reached an agreement with American Skiing Company requiring them to sell Waterville Valley and Cranmore in order to preserve a competitive landscape in New England.

Also in 1996 the Colorado and Federal governments filed a complaint and reached an agreement with Vail Resorts requiring them to divest of Arapahoe Basin when they sought to purchase it along with Breckenridge and Keystone from Ralston Resorts. The DOJ indicated in their filings that the acquisition would have resulted in 38 percent of Colorado's Front Range market being under the control of one operator. In 1997 Vail Resorts sold Arapahoe Basin to its current owners, Dream Unlimited Corp., in order to comply with the agreement. Just one year later in 1998 Arapahoe Basin was added to Vail Resorts' Colorado Pass (the precursor to the Epic Pass) as an unlimited pass partner where they remained until 2019. Since 2019 Arapahoe Basin has been an Ikon Pass partner offering 5 or 7 days of access along with their own full season pass.

Due to the size of both Arapahoe Basin and Alterra, the transaction requires a premerger notification to be submitted to the Federal Trade Commission (FTC) and then wait for government review, and in that sense a review is not just simply routine, it's a requirement. These rules were created in 1976 under the HSR Act and the FTC has 30 days (15 days in the case of a cash tender offer or a bankruptcy) to review the transaction. At the end of that period the FTC can issue a Request for Additional Information which allows another 30 days for review and possible action (10 days for cash offers or bankruptcy) and this period begins after the purchaser has complied with the request. This period can also be extended by agreement between the parties. Presently 146 days have passed since the acquisition was announced back on February 5, 2024 which suggests this review and investigation are in fact somewhat out of the ordinary.

It is not clear where in the process this pending acquisition is at this time, but the CID filed by the DOJ is seperate from the HSR Act process and involves third parties, and indicates a deeper degree of scrutiny of the potential impacts to consumers emanating from this acquisition. When we contacted the FTC to request documentation related to the CID we were advised to contact the DOJ instead as they are issued by their Antitrust Division, and we were also advised that they have a policy of neither confirming, denying, nor providing details involving investigations. We also reached out to both Alterra and NSAA Wednesday afternoon for comment and neither has yet to respond to our request at this time.

The Colorado Ski Market Is Already Solidly a Duopoly

Vail Resorts first introduced the Epic Pass in 2008, providing access to all 4 of their resorts in addition to Arapahoe Basin in Colorado as well as Heavenly in Nevada. Beginning in 2018 following the birth of Alterra Mountain Company the Ikon Pass was launched with 26 ski areas from Alterra and their pass partners, and in Colorado the pass essentially replaced the Rocky Mountain Super Pass which was the competition's answer to the growing dominance of the Epic Pass.

Today in Colorado, 16 of the state's 29 chairlift-serviced ski areas can be accessed with either the Ikon Pass or the Epic Pass including 8 of the 12 ski areas within 2 hours of driving from Denver.

Since not every ski area is equally sized, in order to conservatively approximate the percentage of business each ski area does we have broken down Epic Pass, Ikon Pass, and Independent resorts based on their uphill lift capacity. Vail Resorts' 5 owned ski areas in addition to Telluride feature an impressive Colorado-leading uphill capacity of 262,756 skiers per hour which accounts for 43.7% of the state's total capacity. Alterra and Ikon Pass with its 2 owned resorts and 7 partner resorts have a total uphill capacity of 218,162 skiers per hour which accounts for 36.3% of the state's total capacity. The 14 chairlift-serviced independent ski areas in the state who are not on either pass have a combined uphill capacity of 120,652 skier visits per hour, accounting for just 20.1% of the state's total capacity.

Ikon and Epic passes provide access to resorts that account for 79.9% of Colorado's uphill capacity, however due to the remoteness and other factors affecting non-mega-pass-aligned independents in the state, these resorts likely account for approximately 90% of the state's total skier visits. While only 7 of the state's 29 chairlift-serviced ski areas are owned by either Alterra or Vail Resorts, the passes these companies offer have effectively created a ski pass duopoly in the most frequently skied state in the country where there were 14 million skier visits in the prior season. Nationally Alterra and Vail Resorts will sell over 2 million passes in 2024 (not counting frequency products like the Epic Day Pass and Ikon Session Pass) and resorts that participate on these passes account for approximately 50% of all skier visits in the US and participating resorts dominate the highly coveted destination skiing market (based on our own extrapolation of public and non-public information and data).

Alterra seeking to acquire Arapahoe Basin as their third owned resort in Colorado doesn't seem to suggest anti-competitive concerns on its own. The issue therefore appears to be the collective pass landscape itself, though there is no indication from Vail Resorts' latest quarterly filing with the SEC or elsewhere indicating that they are the target of investigation despite accounting for approximately 50% of the state's total skier visits. Focusing an investigation on the #2 player in the state who sells more expensive passes and is acquiring a ski area that already participates on their pass seems a bit odd on its face. Duopolies can benefit consumers when competition is healthy, and stepping in to regulate the smaller member of the duopoly after virtually the entire Colorado ski industry is already under the control or influence of the duopoly seems unlikely to produce a change that benefits consumers.

Regardless of the outcome of this investigation both Alterra and Vail Resorts may have to reevaluate their own expansion plans and how their acquisitions in some markets could trigger further investigations and potential action, and the scrutiny from state and federal governments could be restrictive to further growth.

-- Matthew Scott