Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Five major airlines charged with price fixing conspiracy of airline tickets, (Jan 28, 2016)

By Linda O’Brien, J.D., LL.M.

Five major commercial airlines—United, American, Delta, Southwest, and Air Canada—engaged in a conspiracy to fix the prices for air passenger transportation services within the United States by colluding to limit seat capacity, eliminating flights, limiting seat availability, and using smaller aircraft, according to a complaint filed by a consumer in the federal district court in San Francisco (Stetzler v. United Airlines, Inc., January 26, 2016).

American Airlines, Delta Airlines, Southwest Airlines, and United Airlines are the four major airlines in the United States. Air Canada, the largest airline in Canada, conducts air passenger transportation services throughout the United States. Eric Stetzler purchased air transportation services from one or more of the major airlines.

The complaint alleges that the domestic airline industry is an oligopoly. As a result of a series of mergers beginning in 2008, American, Delta, Southwest, and United airlines control approximately 80 percent of the domestic airline market. From 2009 to 2014, the average domestic airfare rose 13 percent and the airlines began collecting new ancillary fees. During this time period, the price of crude oil deceased significantly. Therefore, the airlines earned record profits. In the past two years, U.S. airlines have earned a combined $19.7 billion.

In June 2015, the U.S. Department of Justice (DOJ) announced that it was investigating the airline industry for potential unlawful coordination to limit capacity increases. The DOJ had expressed concern that consolidation within the industry would lead to increased coordination among the remaining airline carriers. As part of its investigation, the DOJ sent civil investigative demands (CIDs) to each airline, regarding communications about their plans for passenger-carrying capacity, the complaint states.

The airlines’ primary mechanism for collusively raising prices for airline consumers allegedly was to enforce “capacity discipline,” in which the airlines limit the number of flights and seats available to consumers. In addition, the defendant airlines had and continue to have the opportunity to meet at trade association venues where they could exchange price and capacity information, and collude on price and capacity, the complaint charges.

As a result of the conspiracy, the defendant airlines allegedly have restrained competition in the market for domestic airline tickets. The plaintiff and other consumers have paid higher prices for domestic airline tickets than they would have absent the price fixing conspiracy, the lawsuit claims.

The plaintiff asserts claims for violations of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 3:16-cv-00446-EDL.

Attorneys: Joseph M. Alioto and Thomas Paul Pier (Law Offices of Joseph J. Alioto) for Eric Stetzler.

Companies: Delta Airlines, Inc.; American Airlines, Inc.; Southwest Airlines, Co.; United Airlines, Inc.; Air Canada

News: Antitrust CaliforniaNews