Antitrust Law Daily Passengers failed to allege ‘plus factors’ to support airline price fixing claim
Friday, August 24, 2018

Passengers failed to allege ‘plus factors’ to support airline price fixing claim

By Matt Pavich, J.D.

Facts consistent with a conspiracy that were also consistent with permissible competition did not constitute "plus factors" that would show that major airlines colluded through the Airline Tariff Publishing Company to increase prices for multi-city travel. Even viewed collectively, the complaining consumers’ plus factors suggested only conscious parallelism in an interdependent oligopoly (Prosterman v. American Airlines, Inc., August 23, 2018, per curiam).

The U.S. Court of Appeals in San Francisco affirmed an order granting the defendants’ motion to dismiss. In addition, the lower court did not err in rejecting the plaintiffs’ effort to obtain relief from judgment on the basis of newly discovered evidence.

The plaintiffs, air passengers and travel agents, contended that American Airlines, United Airlines, and Delta Air Lines and Airline Tariff Publishing Company (ATPCO), an entity owned by various airlines, conspired to change Category 10 airfare rules, using ATPCO as a coordination facilitating device, thereby preventing travelers from being able to use single ticket non-refundable one-way fares to multiple cities in order to reach their final destination less expensively than they would by traveling via direct flights. In the FAC, the plaintiffs alleged that the airlines, which controlled 80 percent of the market, used ATPCO’s fare information and their computer reservation systems to immediately analyze each other’s fare rules, restrictions, and price changes.

The district court dismissed the suit, finding that the allegations, while sufficiently arguing parallel conduct, were insufficient to state a claim under Section 1 of the Sherman Act, absent a showing that the parallel conduct resulted from an agreement between the defendants. The court also ruled that the "plus" factors were absent, as the allegations did not show that the defendants knew either of each other’s rule changes before those changes having been published, or that the fares for various routes were identical or substantially similar. The apparent anomaly of increased fares during a time of record-low fuel prices could be attributable to individual determinations by the airlines that they would benefit from higher prices, as opposed to an agreement not to compete.

Plus factors. The court noted that so-called "plus factors" are generally economic actions and outcomes that are consistent with and indicative of directly coordinated action. The appellate court previously ruled that proposed "plus factors" were merely activities typical of an interdependent market. The court ruled that the proposed "plus factors" in the instant case were similarly typical of an interdependent market. It noted that in an interdependent oligopoly, companies may choose to raise prices and hope that its competitors follow suit. Moreover, the simultaneity of the decisions to raise prices showed not a preceding agreement, but similar reactions to pressures brought by the market. Additionally, the FAC failed to allege that ATPCO coordinated collusion by the airlines. The court therefore ruled that the "plus factors" showed only "conscious parallelism" and affirmed the dismissal.

New evidence. The court also affirmed the district court’s denial of the plaintiffs’ motion to issue an indicative ruling that it would hear a motion for relief from judgment based on newly acquired evidence. The plaintiffs claimed that they discovered after appealing the dismissal that ATPCO hosted an online meetings that addressed the issues in the lawsuit. The appellate court found that the plaintiffs likely could have uncovered the information earlier, given that they found it merely by typing in a phrase from their own FAC into an online search engine. Moreover, the agenda for the meeting stated that it occurred in response to a business request from a non-party airline. The court found based on the stated purpose that the meeting did not make the existence of a conspiracy more likely and affirmed the denial of the motion.

The case is No. 17-15468.

Attorneys: Joseph M. Alioto (Alioto Law Firm) and Gil D. Messina (Messina Law Firm) for Cynthia Prosterman. Sadik Harry Huseny (Latham & Watkins LLP) for American Airlines, Inc. Jon F. Cieslak (Cooley LLP) for Airline Tariff Publishing Co. James Peter Denvir, III (Boies, Schiller & Flexner LLP) for Delta Air Lines, Inc. Peter K. Huston (Sidley Austin LLP) for United Airlines, Inc.

Companies: American Airlines, Inc.; Airline Tariff Publishing Co.; Delta Air Lines, Inc.; United Airlines, Inc.

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