[Federal Register Volume 59, Number 62 (Thursday, March 31, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-7672]
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[Federal Register: March 31, 1994]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Airline Tariff Publishing Company, et al.,
Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Section 16 (b) through (h), that a proposed
Final Judgment, Stipulation and Competitive Impact Statement have been
filed with the United States District Court for the District of
Columbia, in United States v. Airline Tariff Publishing Company, et
al., Civil Action No. 92-2854.
The Complaint in this case alleged that eight airline defendants,
Alaska Airlines, Inc., American Airlines, Inc., Continental Airlines,
Inc., Delta Air Lines, Inc., Northwest Airlines, Inc., Trans World
Airlines, Inc., United Air Lines, Inc., and USAir, Inc., engaged in
various combinations and conspiracies with other of the airline
defendants and co-conspirators to increase fares, eliminate discounted
fares and set far restrictions for tickets purchased for travel between
cities in the United States. These combinations and conspiracies were
reached and effectuated through the airline defendants' use of the
computerized fare dissemination services of the defendant Airline
Tariff Publishing Company (``ATP'').
The Complaint also alleged that the airline defendants, ATP, and
co-conspirators engaged in a combination and conspiracy to create,
maintain, operate and participate in the ATP fare dissemination system.
This fare dissemination system has been formulated and operated in a
manner that unnecessarily facilitates coordinated interaction among the
airline defendants and co-conspirators. On December 21, 1992, the
United States, United and USAir filed a Stipulation in which they
consented to the entry of a proposed Final Judgment providing the
relief the United States seeks in the Complaint, and that Final
Judgment (the ``United/USAir Decree'') was entered on November 1, 1993.
The proposed Final Judgment enjoins the remaining airline
defendants, for a period of ten years, from entering into any
agreements with any other airline to fix, establish, raise, stabilize,
or maintain any fare or fare restriction. Further, the proposed Final
Judgment enjoins the remaining airline defendants from engaging in
certain practices, including those related to the dissemination of
information regarding contemplated changes to fares and fare
restrictions, and would prevent them from continuing or renewing the
alleged conspiracies. The portions of the proposed Final Judgment that
apply to the airline defendants are substantially similar to the Final
Judgment entered in this case against United States and USAir on
November 1, 1993. Other provisions of the proposed Final Judgment would
prohibit ATP from disseminating certain information, such as first
ticket dates, and would rectrict the manner in which ATP may
disseminate certain other types of information, such as footnotes and
tags.
Public comment is invited within the statutory 60-day comment
period. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to Roger W. Fones, Chief, Transportation, Energy and Agriculture
Section, Antitrust Division, Department of Justice, Room 9104, 555
Fourth Street NW., Washington, DC 20001, (telephone: 202-307-6351).
Constance K. Robinson,
Director of Operations Antitrust Division.
In the United States District Court for the District of Columbia
United States of America, Plaintiff, v. Airline Tariff
Publishing Company, et al., Defendants. Civil Action No.: 92-2854
(SSH)
Stipulation
It is stipulated by and between the undersigned parties, by their
respective attorneys that:
1. The Court has jurisdiction over the subject matter of this
action and over each of the parties thereto, and venue of this action
is proper in the District of Columbia;
2. The parties consent that a Final Judgment in the form hereto
attached may be filed and entered by the Court, upon the motion of any
party or upon the Court's own motion, at any time after compliance with
the requirements of the Antitrust Procedures and Penalties Act (15
U.S.C. 16), and without further notice to any party or other
proceedings, provided that Plaintiff has not withdrawn its consent,
which it may do at any time before the entry of the proposed Final
Judgment by serving notice thereof on Defendants and by filing that
notice with the Court;
3. In consenting to entry of this Final Judgment each Defendant has
relied upon, as a material factor, plaintiff's representations and
interpretations of the proposed Final Judgment set forth in a letter
dated January 21, 1994 by Michael A. Doyle, counsel for American
Airlines, and confirmed by Roger Fones, Antitrust Division, U.S.
Department of Justice, and Plaintiff agrees that those representations
and interpretations apply equally to each Defendant as if it were named
in and a signatory to the letter;
4. In the event Plaintiff withdraws its consent or if the proposed
Final Judgment is not entered pursuant to this Stipulation, this
Stipulation shall be no effect whatsoever, and the making of this
Stipulation shall be without prejudice to any party in this or in any
other proceeding; and
5. The parties to this Stipulation, by Consent Motion of this date,
are moving the Court to enter an Order staying all further proceedings
in this action as to the undersigned parties, except for those matters
necessary to comply with the requirements of the Antitrust Procedures
and Penalties Act described in paragraph 2 above.
This 17th day of March, 1994.
For plaintiff United States of America.
Mary Jean Moltenbrey,
Donna N. Kooperstein,
Michael D. Billiel,
Susan L. Edelheit,
Jill A. Ptacek,
Bradley S. Lui,
Attorneys, U.S. Department of Justice, Antitrust Division, 555 4th
Street NW., Room 9104, Washington, DC 20001, (202) 307-6349.
For Defendant Airline Tariff Publishing Company.
Dow, Lohnes & Albertson,
By: Jonathan B. Hill, A Member of the Firm.
Jonathan B. Hill,
1225 Twenty-third Street NW., Washington, DC 20037, (202) 857-2725.
Mark Leddy,
Cleary, Gottlieb, Steen & Hamilton,
Rue de la Loi 23, Bte 5, 1040 Brussels, Belgium, 011-32-2-287-2000.
For Defendant American Airlines, Inc.
Alston & Bird,
By: Michael A. Doyle, A Member of the Firm.
Michael A. Doyle,
Michael P. Kenny,
1201 West Peachtree Street, Atlanta, Georgia 30309-3424, (404) 881-
7000.
Irving Scher,
Weil, Gotshal & Manges,
767 Fifth Avenue, New York, New York 10153, (212) 310-8000.
Peter D. Isakoff,
Weil, Gotshal & Manges,
1615 L Street NW., Suite 700, Washington, DC 20036, (202) 682-7000.
For Defendant Delta Air Lines, Inc.
Bondurant, Mixson & Elmore
By: Emmet J. Bondurant, A Member of the Firm.
Emmet J. Bondurant, II,
Edward B. Krugman,
1201 W. Peachtree Street NW., Atlanta, Georgia 30309, (404) 881-
4100.
James R. Weiss,
Preston Gates Ellis & Rouvelas Meeds,
Suite 500, 1735 New York Avenue NW., Washington, DC 20006-4759,
(202) 628-1700.
For Defendant Northwest Airlines, Inc.
Crowell & Moring,
By: Wm. Randolph Smith, A Member of the Firm.
Donald L. Flexner,
Wm. Randolph Smith,
Megan R. Poldy,
1001 Pennsylvania Avenue NW., Washington, DC 20004, (202) 624-2500.
For Defendant Continental Airlines, Inc.
Crowell & Moring,
By: Wm. Randolph Smith, A Member of the Firm.
Donald L. Flexner,
Wm. Randolph Smith,
Megan R. Poldy,
1001 Pennsylvania Avenue NW., Washington, DC 20004, (202) 624-2500.
For Defendant Alaska Airlines, Inc.
Squire, Sanders & Dempsey,
By: James V. Dick, A Member of the Firm.
James V. Dick,
Marshall S. Sinick,
1201 Pennsylvania Avenue NW., Suite 500, Washington, DC 20004, (202)
626-6600.
For Defendant Trans World Airlines, Inc.
Jones day, Reavis & Pogue,
By: Thomas Demitrack, A Member of the Firm.
Thomas Demitrack,
North Point, 901 Lakeside Avenue, Cleveland, Ohio 44114, (216) 586-
7141.
United States of America, Plaintiff, v. Airline Tariff
Publishing Company, et al. Defendants. Civil Action: No. 92-2854
(SSH); Filed: March 17, 1994.
Final Judgment
Plaintiff, United States of America, filed its Complaint on
December 21, 1992. Plaintiff and defendants, by their respective
attorneys, have consented to the entry of the Final Judgment without
trial or adjudication of any issue of fact or law. This Final Judgment
shall not be evidence against or an admission by any party with respect
to any issue of fact or law. Therefore, before the taking of any
testimony and without trial or adjudication of any issue of fact or law
herein, and upon consent of the parties, it is hereby
Ordered, Adjudged, and Decreed, as follows:
I
Jurisdiction
This Court has jurisdiction of the subject matter of this action
and of each of the parties consenting hereto. The Complaint states a
claim upon which relief may be granted against the defendants under
Section 1 of the Sherman Act, 15 U.S.C. Sec. 1.
II
Definitions
As used herein, the term:
(A) Airline means any scheduled air passenger carrier as defined in
49 U.S.C. Sec. 1301(3), its officers, directors, employees, agents, and
any other persons acting on its behalf;
(B) ATP means the Airline Tariff Publishing Company;
(C) Change means abandon, add, alter, modify, discontinue, drip,
exchange, replace, substitute, switch, or transform;
(D) Coupon means a coupon or similar voucher offering either a
discount off existing fares or a special fare not otherwise available;
(E) CRS means computer reservation system;
(F) Defendant airlines means Alaska Airlines, Inc., American
Airlines, Inc., Continental Airlines, Inc., Delta Air Lines, Inc.,
Northwest Airlines, Inc., and Trans World Airlines, Inc.;
(G) Defendants means ATP, Alaska Airlines, Inc., American Airlines,
Inc., Continental Airlines, Inc., Delta Air Lines, Inc., Northwest
Airlines, Inc., and Trans World Airlines, Inc.;
(H) Document means all ``writings and recordings'' as that phrase
is defined in Rule 1001(1) of the Federal Rules of Evidence;
(I) Fare means the price charged for domestic U.S. passenger
transportation by any airline, and any ticket dates, restrictions,
rules, terms or conditions governing the availability or use of any
such price, but does not include any contract or other negotiated price
or any coupon;
(J) Fare class means a group of fares treated similarly for seat
allocation purposes;
(K) First ticket date means the first date that a fare is available
for sale;
(L) Footnote means the mechanism used by ATP to store and transmit
first ticket dates, last ticket dates, and other limitations on the use
of a fare;
(M) Footnote designator means an alphanumeric designator used to
identify a footnote;
(N) Including means including but not limited to;
(O) Last ticket date means the last date that a fare is available
for sale;
(P) Matching city or airport pair means a city or airport pair
whose origin and destination points, respectively, are the same or
within 100 miles of the origin and destination points, respectively, of
the city or airport pair as to which the other airline's fare is
applicable;
(Q) New fare means a fare that is different from an airline's
existing fares in regard to price or any restrictions, rules, terms or
conditions;
(R) Person means any natural person, corporation, firm, company,
sole proprietorship, partnership, association, institution,
governmental unit, or other legal entity;
(S) Promotional fare means a new fare that, in conjunction with its
first being offered for sale, is advertised as being available for
purchase for a specified and limited period of time;
(T) Relate to means discuss, refer to, reflect, evidence, concern,
or pertain to, in whole or in part;
(U) Sale fare means a new fare that has a last ticket date at the
time it is first offered for sale;
(V) Tag means a code used by an airline solely to identify a group
of fares for similar processing by ATP; and
(W) Travel date means a date that limits when a passenger may
travel on a fare.
III
Applicability
(A) This Final Judgment applies to the defendants and to each of
their successors, assigns, and to all other persons in active concert
or participation with any of them who shall have received actual notice
of the Final Judgment by personal service or otherwise.
(B) Nothing herein contained shall suggest that any portion of this
Final Judgment is or has been created for the benefit of any third
party and nothing herein shall be construed to provide any rights to
any third party.
IV
Prohibited Conduct
(A) Each of the defendant airlines is enjoined and restrained from:
(1) Agreeing with any other airline to fix, establish, raise,
stabilize, or maintain any fare;
(2) Disseminating any first ticket dates, last ticket dates, or any
other information concerning the defendant's planned or contemplated
fares or changes to fares;
(3) Making visible or disseminating its own tags or any other
similar designating mechanism to any other airline;
(4) Making visible or disseminating to any other airline any fare
that is intended solely to communicate a defendant's planned or
contemplated fares or changes to fares;
(5) Making visible or disseminating two or more footnote
designators that identify footnotes that contain identical information,
or making visible or disseminating any footnote designator that
identifies a footnote that contains no information; and
(6) Using fare codes that convey information other than fare class
or terms and conditions of sale or travel. (B) ATP is enjoined and
restrained from:
(1) Disseminating or conveying any fare with a first ticket date;
(2) Making visible or disseminating an airline's tags or any other
similar designating mechanism to any person other than that airline;
(3) Making visible or disseminating two or more footnote
designators for any airline that identify footnotes that contain
identical information, or making visible or disseminating any footnote
designator that identifies a footnote that contains no information;
(4) Making visible or disseminating to any airline changes to any
other airline's fares prior to disseminating or conveying such changes
to the domestic CRSs; and
(5) After reasonable inquiry, knowingly making visible or
disseminating any changes to fares more frequently than the number of
times a day that at least one domestic CRS updates its fare data base
with such changes to fares.
V
Limiting Conditions
(A) Nothing in this Final Judgment shall prohibit any defendant
airline from submitting its fare changes to ATP for processing, or
disseminating to CRSs or other reservations systems rules that do not
contain or describe any first ticket date, last ticket date, or planned
or contemplated fare level.
(B) Nothing in this Final Judgment shall prohibit any defendant
airline from engaging in communications with another airline when such
communications are reasonably necessary to establish, implement, or
modify: (i) a joint, code share, commuter, or other interline fare with
that airline; or (ii) an otherwise lawful transaction involving the
provision of management services which may include pricing and yield
management services.
(C) (1) Nothing in this Final Judgment shall prohibit any defendant
airline from advertising that a promotional fare shall cease to be
available for purchase on a specified date or after a specified period
of time, or that a last ticket date on a fare shall be extended to a
later date, and in conjunction therewith otherwise disseminating such
information, provided that such advertising occurs (i) in media of
general circulation or through mass mailings, and (ii) in a manner
designed to directly reach a meaningful number of potential consumers
likely to purchase such fare, provided further that, where a group of
fares is being so advertised, it shall be sufficient to provide a
general description of included city or airport pairs and fare levels
without specifically identifying each city or airport pair and fare
level.
(2) After any defendant airline, United Air Lines, Inc. of USAir,
Inc. has disseminated a fare with a last ticket date or extended a last
ticket date, or any non-defendant airline has disseminated a sale fare
or extended the last ticket date on a sale fare, in any city or airport
pair, nothing in Section IV(A) (1)-(3) and (5)-(6) of this Final
Judgment shall prohibit a defendant airline from promptly thereafter,
in matching city or airport pairs, (i) disseminating a new fare with
the same price, restrictions, and last ticket date as that airline's
fare, or (ii) extending to the same date, the last ticket date on a
fare with the same price and restrictions as that airline's fare,
provided that no defendant airline shall extend the last ticket date on
any fare more than one time pursuant to Section V(C)(2).
(3) The dissemination of a last ticket date in accordance with
Section V(C), in and of itself, does not constitute a violation of this
Final Judgment.
(D) Nothing in this Final Judgment shall prohibit any defendant
airline from disseminating public statements regarding contemplated
changes in fares, provided such statements describe neither effective
dates nor the particular amounts or rules relating to particular city
or airport pairs or sets of city or airport pairs.
(E) Nothing in this Final Judgment shall prohibit any defendant
from advocating or discussing, in accordance with the doctrine
established in Eastern Railroad Presidents Conference v. Noerr Motor
Freight, Inc., 365 U.S. 127 (1961), and its progeny, legislative,
judicial or regulatory actions, or governmental policies or actions.
(F) The dissemination of travel dates, in and of itself, does not
constitute a violation of this Final Judgment.
(G) Nothing in this Final Judgment shall be construed to prohibit
any defendant airline, in unilaterally determining its own fares, from
considering all publicly available information relating to the fares of
other airlines.
(H) Regardless of what fares any airline offers in any city or
airport pair, offering any fare in the same or any other city or
airport pair, in and of itself, does not constitute a violation of this
Final Judgment.
VI
Compliance Program
(A) Each defendant is ordered to maintain an antitrust compliance
program which shall include designating, within 30 days of entry of
this Final Judgment, an Antitrust Compliance Officer with
responsibility for accomplishing the antitrust compliance program and
with the purpose of achieving compliance with this Final Judgment. The
Antitrust Compliance Officer shall, on a continuing basis, supervise
the review of the current and proposed activities of his or her
defendant company to ensure that it complies with this Final Judgment.
(B) The Antitrust Compliance Officer for a defendant airline shall
be responsible for accomplishing the following activities:
(1) Distributing, within 60 days from the entry of this Final
Judgment, a copy of this Final Judgment to all officers and employees
who have any responsibility for approving, disapproving, analyzing,
monitoring, studying, recommending, or implementing any fares, or
disseminating any fares to ATP, CRSs or any airlines;
(2) Distributing in a timely manner a copy of this Final Judgment
to any officer or employee who succeeds to a position described in
Section VI(B)(1);
(3) Briefing annually those persons designated in Section VI(B)(1)
on the meaning and requirements of this Final Judgment and the
antitrust laws and advising them that the defendant's legal advisors
are available to confer with them regarding compliance with the Final
Judgment and the antitrust laws;
(4) Obtaining from each officer or employee designated in Section
VI(B)(1) an annual written certification that he or she: (1) Has read,
understands, and agrees to abide by the terms of this Final Judgment;
and (2) has been advised and understands that his or her failure to
comply with this Final Judgment may result in conviction for criminal
contempt of court; and
(5) Maintaining a record of recipients to whom the Final Judgment
has been distributed and from whom the certification in Section
VI(B)(4) has been obtained.
(C) The Antitrust Compliance Officer for ATP shall be responsible
for accomplishing the following activities:
(1) Distributing, within 60 days from the entry of this Final
Judgment, a copy of this Final Judgment to all officers of ATP;
(2) Distributing in a timely manner a copy of this Final Judgment
to any person who succeeds an officer;
(3) Briefing annually all officers on the meaning and requirements
of this Final Judgment and the antitrust laws and advising them that
the defendant's legal advisors are available to confer with them
regarding compliance with the Final Judgment and the antitrust laws;
(4) Obtaining from each officer an annual written certification
that he or she: (1) has read, understands, and agrees to abide by the
terms of this Final Judgment; and (2) has been advised and understands
that his or her failure to comply with this Final Judgment may result
in conviction for criminal contempt of court; and
(5) Maintaining a record of recipients to whom the Final Judgment
has been distributed and from whom the certification in Section
VI(C)(4) has been obtained.
(D) At any time, if a defendant's Antitrust Compliance Officer
learns of any past or future violations of Section IV of this Final
Judgment, that defendant shall, within 45 days after such knowledge is
obtained, take appropriate action to terminate or modify the activity
so as to comply with this Final Judgment.
(E) For each last ticket date a defendant airline disseminates
through ATP or a CRS pursuant to Section V(C), that defendant airline
(1) shall retain a record of the dates that such last ticket date was
disseminated in the system and the specific fares and city or airport
pairs to which the last ticket date was attached, and (2) shall retain
either (a) a representative copy or transcript of its advertisement
that was used in conjunction with any such last ticket date and a
record of the use of any such advertising or (b) a representative
record of the fare to which the defendant was responding. Such records
and representative copies or transcripts shall be maintained in a
manner that facilitates prompt retrieval and review of the
documentation required by this section. These documents shall be
retained for a period of three years from the first date any such
advertising appeared or the first date any such last ticket date
appeared in ATP or a CRS.
VII
Certification
(A) Within 75 days after the entry of this Final Judgment, each
defendant shall certify to the plaintiff whether it has designated an
Antitrust Compliance Officer and has distributed the Final Judgment in
accordance with Section VI above.
(B) For 10 years after the entry of this Final Judgment, on or
before its anniversary date, each defendant shall file with the
plaintiff a statement as to the fact and manner of its compliance with
the provisions of Section VI.
VIII
Plaintiff Access
(A) To determine or secure compliance with this Final Judgment and
for no other purpose, duly authorized representatives of the plaintiff
shall, upon written request of the Assistant Attorney General in charge
of the Antitrust Division, and on reasonable notice to any defendant
made to its principal office, be permitted, subject to any legally
recognized privilege:
(1) Access during such defendant's office hours to inspect and copy
all documents in the possession or under the control of such defendant,
who may have counsel present, relating to any matters contained in this
Final Judgment; and
(2) Subject to the reasonable convenience of such defendant and
without restraint or interference from it, to interview officers,
employees or agents of such defendant, who may have counsel present,
regarding such matters.
(B) Upon the written request of the Assistant Attorney General in
charge of the Antitrust Division made to any defendant's principal
office, such defendant shall submit such written reports, under oath if
requested, relating to any matters contained in this Final Judgment as
may be reasonably requested, subject to any legally recognized
privilege.
(C) No information or documents obtained by the means provided in
Section VIII shall be divulged by the plaintiff to any person other
than a duly authorized representative of the Executive Branch of the
United States, except in the course of legal proceedings to which the
United States is a party, or for the purpose of securing compliance
with this Final Judgment, or as otherwise required by law.
(D) If at the time information or documents are furnished by any
defendant to plaintiff, such defendant represents and identifies in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(7) of the Federal
Rules of Civil Procedure, and such defendant marks each pertinent page
of such material, ``Subject to claim of protection under Rule 26(c)(7)
of the Federal Rules of Civil Procedure,'' then 10 days notice shall be
given by plaintiff to such defendant prior to divulging such material
in any legal proceeding (other than a grand jury proceeding) to which
that defendant is not a party.
IX
Further Elements of the Final Judgment
(A) This Final Judgment shall expire ten years from the date of its
entry.
(B) Section IV(B) of this Final Judgment shall become effective
three months from the date of entry of this Final Judgment.
(C) If, subsequent to the entry of this Final Judgment, it or a
previously entered stipulated final judgment in this matter is modified
in any respect, any defendant, in its sole discretion, may move this
Court, and the Court shall grant such a motion, to substitute such
modified stipulated final judgment for this Final Judgment.
(D) Jurisdiction is retained by this Court for the purpose of
enabling any of the parties to this Final Judgment to apply to this
Court at any time for further orders and directions as may be necessary
or appropriate to carry out or construe this Final Judgment, to modify
or terminate any of its provisions, to enforce compliance, and to
punish violations of its provisions.
(E) Entry of this Final Judgment is in the public interest.
Dated:
----------------------------------------------------------------------
United States District Judge.
United States of America, Plaintiff, v. Airline Tariff
Publishing Company; et al., Defendants. Civil Action No. 92-2854
(SSH)
Competitive Impact Statement
Pursuant to Section 2(b) of the Antitrust Procedures and Penalties
Act, 15 U.S.C. 16 (b)-(h), the United States submits this Competitive
Impact Statement relating to the proposed Final Judgment submitted for
entry with the consent of Airline Tariff Publishing Company, Alaska
Airlines, Inc., American Airlines, Inc., Continental Airlines, Inc.,
Delta Air Lines, Inc., Northwest Airlines, Inc., and Trans World
Airlines Inc. in this civil antitrust proceeding.
I
Nature and Purpose of the Proceeding
On December 21, 1992, the United States filed a civil antitrust
complaint alleging that Alaska Airlines, American Airlines, Continental
Airlines, Delta Air Lines, Northwest Airlines, Trans World Airlines,
United Air Lines, and USAir (``airline defendants''), Airline Tariff
Publishing Company (``ATP'') and co-conspirators conspired unreasonably
to restrain competition among themselves in violation of Section 1 of
the Sherman Act, 15 U.S.C. 1. The Complaint alleges two causes of
action.
The first cause of action alleged in the Complaint is that, from at
least as early as April 1988 and continuing through at least May 1990,
each of the airline defendants and co-conspirators engaged in various
combinations and conspiracies with other airline defendants and co-
conspirators. These consisted of agreements, understandings, and
concerted actions to fix prices by increasing fares, eliminating
discount fares, and setting fare restrictions for tickets purchased for
travel between cities in the United States. These agreements,
understandings, and concerted actions were reached and effectuated
through the airline defendants' use of the computerized fare
dissemination services of ATP to: (1) Exchange proposals and negotiate
fare changes; (2) trade fare changes in certain markets in exchange for
fare changes in other markets; and (3) exchange mutual assurances
concerning the level, scope, and timing of fare changes. The Complaint
seeks relief that will prevent the airline defendants from continuing
or renewing the alleged conspiracies, or engaging in any other
conspiracy having a similar purpose or effect.
The second cause of action alleged in the Complaint is that from at
least as early as April 1988 and continuing through to the date of the
Complaint, the airline defendants, ATP, and co-conspirators engaged in
a combination and conspiracy, consisting of an agreement,
understanding, and concert of action to create, maintain, operate, and
participate in the ATP fare dissemination system. This fare
dissemination system has been formulated and operated in a manner that
unnecessarily facilitates coordinated interaction among the airline
defendants and co-conspirators, enabling them to: (1) Communicate more
effectively with each other to increase fares, change fare
restrictions, and eliminate discounts; (2) show links between proposed
fare changes in different city-pair markets; (3) monitor each other's
proposals on fare changes; and (4) lessen uncertainty concerning each
other's pricing intentions. As a result, coordinated interaction among
the airline defendants and co-conspirators has been more frequent,
successful, and complete, and consumers have been deprived of the
benefits of free and open competition in the sale of air passenger
transportation services. The Complaint seeks to enjoin the airline
defendants from using ATP to restrain competition by prohibiting the
dissemination of certain information.
On December 21, 1992, the United States, United and USAir filed a
Stipulation in which they consented to the entry of a proposed Final
Judgment providing, with respect to United and USAir, all of the relief
the United States seeks in the Complaint. After reviewing the proposed
Final Judgment pursuant to the Antitrust Procedures and Penalties Act
(the ``Tunney Act''), the Court concluded that the Judgment was in the
public interest within the meaning of the Tunney Act, and it became
final with respect to United and USAir on November 1, 1993.
On March 17, 1994, the United States, ATP, Alaska Airlines,
American Airlines, Continental Airlines, Delta Air Lines, Northwest
Airlines, and Trans World Airlines filed with the Court a Stipulation
consenting to the entry of a new proposed Final Judgment with respect
to the remaining defendants following compliance with the Antitrust
Procedures and Penalties Act, 15 U.S.C. 16(b)-(h), unless the United
States withdraws its consent. The proposed Final Judgment is
substantially identical to the Final Judgment entered against United
and USAir (the ``United/USAir decree'') with the following exceptions.
Section V(B) clarifies that the proposed Final Judgment does not
prohibit an airline defendant from selling management services to
another airline. Section V(C) permits the airline defendants to
disseminate last ticket dates through ATP in some specified
circumstances where the United/USAir decree prohibits the use of last
ticket dates. The record keeping provisions in Section VI(E) has been
changed to reflect the changes to Section V(C). Finally, the proposed
Final Judgment provides the relief the United States is seeking against
defendant ATP.
Entry of the proposed Final Judgment will terminate this action
against all remaining defendants, except that the Court will retain
jurisdiction over the matter for further proceedings that may be
required to interpret, enforce, or modify the Final Judgment, or to
punish violations of any of its provisions.
II
Description of the Practices Involved in the Alleged Violations
A. Industry Background
The domestic passenger airline industry generates annual sales in
the tens of billions of dollars. Each of the airline defendants is a
significant competitor, providing scheduled nonstop, one-stop, and
multi-stop domestic air passenger services between a large number of
origin and destination cities (city pairs).
Through hub and spoke route systems, the airlines are able to
consolidate passengers from many points at a single location (the hub)
and then transport them, along with passengers originating at the hub,
to a common destination. These competing hub and spoke networks overlap
one another but are not identical. All airlines do not serve all city
pairs, and the type of service offered by airlines on the same city
pair may vary (nonstop versus one or more stops). The times and
frequencies of service offered also may vary considerably among
airlines. These service variations, as well as differences in passenger
mixes and cost structures, often result in some airlines serving a
particular city-pair market preferring to charge lower prices than
others.
For each of the thousands of city pairs served by each airline,
numerous fares are offered to customers. Many of these fares carry
restrictions that are designed to segment the market for air travel
into groups with varying sensitivities to price and time of travel. For
example, lower fares designed to attract only leisure travelers may
require advance purchase and a Saturday night stay.
Airlines constantly alter fares in response to changes in costs,
both industrywide and airline-specific, and to changes in consumer
demand, both for travel generally and travel on particular city pairs.
Moreover, the availability to consumers of a seat on a particular
flight at a particular fare is controlled by each airline's continuous
adjustment, based upon projected and actual demand, of the inventory of
seats available at that fare.
ATP is the central source for the collection, organization, and
dissemination of fare information for virtually every domestic airline.
(ATP does not receive seat inventory or allocation information.) Each
of the airline defendants owns and participates in the ATP fare
dissemination system through which information is exchanged about
fares. ATP also provides this information to computer reservation
systems (``CRSs'') and other subscribers.
Each airline supplies ATP with basic information about its fares.
This information includes fare codes (which indicate the names of the
fares--e.g., ``F'' is first class; ``Y'' is full coach), fare amounts,
rules, and routings. Rules contain restrictions that limit or condition
the use of the fare, including advance purchase requirements and
penalties for itinerary changes. Routings are used to limit fares to
travelers using a particular itinerary, for example, connecting flights
over a particular hub.
An airline also can attach up to two footnotes to any fare in the
ATP data base. Footnotes are identified by alphanumeric codes
(``footnote designators''), such as ``A'' or ``32.'' Footnotes are used
by airlines to identify, among other things, first or last ticket dates
or travel dates.
A first ticket date indicates a future date at which a fare is
supposed to become available for purchase by consumers. A last ticket
date indicates a future date at which a current fare is supposed to
end. The airlines have no obligation to offer fares on their first
ticket dates or remove them on their last ticket dates. In fact, the
airlines often change first and last ticket dates to an earlier or
later date than originally announced, or increase or withdraw fares
without regard to their first or last ticket dates.
The travel dates contained in footnotes indicate when a consumer
can travel using a particular fare. A first travel date indicates the
first date upon which travel on a particular fare may commence. A last
travel date indicates the last date upon which travel may commence.
At least once every workday, the airlines submit their ``fare
changes'' to ATP. Some of these change the restrictions on, or level of
fares currently being sold to consumers; many others simply change the
footnotes--adding, postponing or withdrawing ticket dates or switching
designators.
ATP processes the fare changes and disseminates them to the airline
defendants and other ATP subscribers, including CRSs. The airline
defendants, either directly or by contract with third parties, massage
this data with sophisticated computer programs to produce detailed
daily reports. These reports sort and display information on all
markets in a variety of ways so that the airline defendants, using
ticket dates and footnote designators, can identify and track their
competitors' proposed changes to fares, discerning any
interrelationships the airlines establish among the proposed fare
changes and assessing their competitors' intentions to implement the
changes.
By contrast, the CRSs use the ATP fare changes to update their fare
data bases, and travel agents in turn use the CRSs to make reservations
and price tickets on fares currently available for sale. Travel agents
using the CRSs cannot sort and analyze the fare change data as the
airlines do. The CRSs display fare information only one market at a
time, most often for a specific flight on a given day and do not
display any airline's footnote designators. Thus, the travel agents
have neither the incentive nor ability to re-sort or otherwise piece
together the information to find patterns or interrelationships among
proposed changes to fares or to predict whether or when the airlines
will implement their proposed changes.
B. Illegal Agreements To Fix Prices by Increasing Fares, Eliminating
Discount Fares, and Setting Fare Restrictions in Various City-Pair
Markets
The first cause of action alleges that, beginning as early as April
1988 and continuing through at least May 1990, the airline defendants
used the ATP fare dissemination system to enter into a series of
agreements to fix prices by increasing fares, eliminating discount
fares, and increasing fare restrictions in various city pairs. Such
agreements are per se illegal under Section One of the Sherman Act.
The ATP fare dissemination system provided a forum for the airline
defendants to communicate about their prices. Using, among other
things, first and last ticket dates and footnote designators, they
exchanged clear and concise messages setting forth the fares each
wanted the others to charge, and identifying fares each wanted the
others to eliminate. Through this electronic dialogue, they conducted
negotiations, offered explanations, traded concessions with one
another, took actions against their independent self-interests,
punished recalcitrant airlines that discounted fares, and exchanged
commitments and assurances--all to the end of reaching agreements to
increase fares, eliminate discounts, and set fare restrictions.
The government identified over fifty agreements among the airline
defendants and their co-conspirators. These agreements increased fares
in hundreds of city pairs from heavily travelled business markets such
as New York--Chicago to smaller leisure travel markets such as Klamath
Falls, Oregon--Tampa, Florida.
There were two types of price fixing agreements. In the first type
of agreement, the airline defendants used ATP to reach agreements to
increase fares. Typically, one airline began the process by filing its
proposed higher fares in particular markets with a first ticket date in
the future. In this way, it told other airlines when, where and how
much it wanted fares to increase. Other airlines responded to such a
proposal in different ways. If an airline wanted that increase, it
conveyed its agreement by filing the same proposed increase in the same
city pairs with the same first ticket date. If an airline wanted a
different increase, it made a counterproposal, filing fares with first
ticket dates in the future to communicate which fares it wanted to
increase, by how much and in what city pairs. To facilitate
negotiations, an airline typically used a common footnote designator on
the fares included in its proposal, such as all leisure fares or all
fares in certain city pairs. This highlighted for the other airlines
which fares it wanted bundled together to receive common treatment.
Often, the airlines exchanged proposals over several weeks, with
the first ticket dates repeatedly postponed (``rolled'') in order to
allow more time for negotiation. At times they took steps to secure the
agreement of recalcitrant airlines. Where a dissenting airline wanted a
smaller or no increase, the others signaled their displeasure by filing
reduced fares in city-pair markets important to that airline and
offering to remove those fares if the dissenter agreed to the proposed
increase. Where a dissenting airline wanted to increase fewer fares or
fares in fewer city pairs, the others refused to increase any fares
unless the dissenter agreed to the broader proposed increase. The
negotiation process continued until all significant airlines were lined
up with the same proposed fare increase and the same first ticket date,
thus providing each other with commitments and assurances as to the
amount, scope, and timing of the proposed fare increase. On that first
ticket date, the fares for all the airlines increased. As a Continental
employee explained, ``When using ticketing dates to file an increase--
the actual new levels can be delayed again and again until we have the
full cooperation of all participating . . . carriers.''\1\
---------------------------------------------------------------------------
\1\H020641, attached as Exhibit 8 to the United States' Response
to Questions in Appendix A of the Court's Order dated May 24, 1993,
filed June 28, 1993.
---------------------------------------------------------------------------
These agreements have had a substantial effect on consumers.
Consider only one out of the many agreements identified by the
government and only 29 out of the 400 markets affected by that
agreement. An economic expert estimated that in those 29 markets alone,
because of that one agreement alone, consumers paid at least 11 million
dollars more for air transportation than they would have paid in the
absence of the agreement.\2\
---------------------------------------------------------------------------
\2\Declaration of Jonathan B. Baker, attached as Exhibit 1 to
the United States' Response to Questions in Appendix A of the
Court's Order dated May 24, 1993, filed June 28, 1993.
---------------------------------------------------------------------------
In the second type of agreement, the airline defendants used ATP to
reach agreements to eliminate discount fares offered to consumers. They
conveyed their proposals and commitments to end certain widely-
available discounts on a given date with last ticket dates and footnote
designators, much as they had used first ticket dates and footnote
designators to convey their increase proposals and commitments.
Additionally, they targeted particular discounts offered by one or a
few competitors and solicited agreements to eliminate these fares. In
these cases, the soliciting airline would punish the disruptive airline
by filing similar discounts in the city pairs where the disruptive
airline preferred higher fares. The soliciting airline would use fare
basis codes, last ticket dates and footnote designators to communicate
to the disruptive competitor, and other interested airlines, the
limited reason (punishment) for the soliciting airline's discount and
its willingness to eliminate the discount in exchange for the
competitor eliminating the original discount.
An agreement identified by the government illustrates this conduct.
In April 1989, American offered certain discount fares between its hubs
in Dallas and Chicago on a few select flights on that route each day.
Delta observed American's fares but decided to offer the discount fares
on all of its flights between Dallas and Chicago because demand for
tickets on all of those flights was low. American then took a number of
actions to convey its proposal to Delta that the discounts be limited
to only a few flights. First, American matched Delta's action by filing
the discount fares on all of its flights in Dallas-Chicago, but it
added a last ticket date to those fares of only a few days away,
communicating that it did not want the fares to continue on all
flights. American also refiled the discounts restricted to two flights,
with a first ticket date in the future, thereby telling Delta that
American wanted the availability of the discounts limited. At the same
time, American filed fares between Dallas and Atlanta, two of Delta's
hubs, using the same fare levels, footnote designator and last ticket
date that it used on the fares in Dallas-Chicago. American thus linked
the fares in the two city pairs, and communicated to Delta its offer to
withdraw the fares in Dallas-Atlanta if, and only if, Delta restricted
the availability of its fares in Dallas-Chicago.
A Delta pricing employee, observing the same dollar amounts and
footnotes on American's fares in the two city pairs, noted that
American's fares in Dallas-Atlanta were an ``obvious retaliation'' for
Delta's fares in Dallas-Chicago.\3\ Delta immediately accepted
American's offer by withdrawing its discount fares in Dallas-Chicago
and filing discount fares that were restricted to two specific flights.
American then withdrew the discounts from Dallas-Atlanta, even before
their last ticket date, demonstrating that the last ticket date
American had placed on the fares was intended to send a message to
Delta, not to consumers. The agreement between American and Delta
raised the price of a roundtrip ticket between Dallas and Chicago by as
much as $138 for many travellers.
---------------------------------------------------------------------------
\3\DL II 38405, attached as Exhibit 13 to the United States'
Response to Questions in Appendix A of the Court's Order dated May
24, 1993, filed June 28, 1993.
---------------------------------------------------------------------------
C. Illegal Agreement To Operate a Fare Dissemination System That
Unreasonably Facilitates Fare Coordination
The second cause of action is based on the airline defendants'
joint ownership and participation in ATP, beginning as early as April
1988 and continuing until the date of the Complaint. The core of the
second cause of action is that the airline defendants agreed to
exchange fare information with one another through ATP in a manner that
unnecessarily and unreasonably allowed them to coordinate fares. The
Complaint challenged these activities as illegal under a Sherman Act
Section 1 ``rule of reason'' analysis.
ATP provides the airlines with a number of communication devices
that allow them to coordinate better on fares. These communication
devices, primarily first ticket dates, last ticket dates, and footnote
designators, enabled the airline defendants on many occasions to reach
overt price-fixing agreements of the type described in the first cause
of action. These same devices also facilitate pervasive coordination of
airline fares short of price fixing--coordination that would not occur
simply by virtue of the structure of the airline industry.
1. ATP Communication Devices Facilitate Successful Coordination.
The likelihood of successful coordination among horizontal competitors
is substantially enhanced when firms are able to identify mutually
beneficial terms of coordination, detect deviations (or ``cheating'')
from the coordinated outcome, and punish or credibly threaten to punish
those deviations (that is, make the deviation less profitable than
adhering to the coordinated price). Because of the structure and nature
of the airline industry, some coordination among the airlines on fares
is inevitable. As currently operated, however, ATP enables the airlines
to coordinate more frequently and more successfully than they otherwise
would.
First, the ATP communication devices facilitate the identification
of mutually beneficial terms for coordination. While certain
characteristics of the airline industry make it easier for airlines to
identify mutually beneficial terms for coordination--the small number
of airlines in many city-pair markets and the necessarily wide
dissemination of current fares--other inherent characteristics make the
identification of mutually beneficial terms more difficult. There are a
vast number of city-pair markets, and frequent fare changes. In
addition, the airlines serving a city-pair market often have quite
different prices that they prefer to charge.
ATP helps the airlines to overcome these impediments. By filing
fares with first ticket dates in the future and linking the fares with
a common footnote designator, the airlines can float proposals to
increase fares, see how their competitors react to the proposals,
consider alternative proposals, and identify a mutually acceptable fare
increase--all without the risk of losing sales during the process to a
competitor with lower fares. Similarly, by placing a last ticket date
on discount fares and linking the fares with a common footnote
designator, airlines can communicate their desire to eliminate those
fares and determine their competitors' willingness to do likewise. The
airlines thus can develop at virtually no cost a consensus on whether
and when fares should increase or discounts should end, and they can
increase fares or remove discounts with greater certainty of their
competitors' likely actions.
ATP also enables the airlines to work out any differences they have
on what price to charge. By using first and last ticket dates and
footnote designators to link markets, the airlines can make complex
deals, trading price increases desired by some airlines for price
increases desired by others in different markets. Often such trades
reflect the different hubs involved. Each airline tends to prefer
higher fares on routes to or from its hub cities, where it tends to
have high market shares and generates the highest profits. An airline
thus may make a trade: it will charge higher fares than it would
otherwise charge on other airlines' hub routes in return for the other
airlines charging the higher fares that it desires on its own hub
routes.
Second, ATP makes coordination more likely by making it more
effective and less costly to punish deviations. When coordinated prices
are above the competitive level, an airline will have an incentive to
deviate from the coordinated price, that is, to lower its price. The
greater the incentive to deviate, the less likely it is that firms will
attempt to coordinate prices in the first place, and the less effective
will be any coordination. However, if deviations from coordinated fare
levels can be detected quickly and made unprofitable (``punished'') by
other airlines, effective coordination becomes more likely.
The necessarily broad dissemination of fares and fare availability
means that airlines can quickly detect any competitor's fare changes.
However, the number of markets and frequency of fare changes make it
difficult to determine whether a fare change is a punishing action--one
that is intended to discipline a competitor for cheating--or a fare
change that is itself a deviation from a coordinated fare level. ATP
enables an airline to use ticket dates and footnote designators to
label the fare changes that it intends as punishment. Through ATP, an
airline can communicate to a competitor that the reason it is cutting
fares in markets important to the competitor is to punish the
competitor for taking some fare action--for example, cutting fares in
another market or refusing to increase fares. By clearly identifying
the purpose of its actions, the airline decreases the risk that other
airlines will misinterpret the fare change as a deviation that itself
should be punished, and increases the likelihood that the ``cheating''
airline will receive the intended message and return to the coordinated
fare or agree to a proposed increase.
Thus, without the ATP communication devices (or some substitute),
each airline is more likely to act independently, charging low prices
in certain city pairs, such as those in which it is the low cost
carrier, or matching low prices in other markets where it would have
preferred a higher price. With the ATP communication devices, the
airlines can coordinate and achieve fare levels above those that
otherwise would have prevailed.
2. ATP Communication Devices Provide Little or No Benefit to
Consumers. While first and last ticket dates and footnote designators
are of immeasurable value to the airlines in facilitating pricing
coordination, they provide little benefit to consumers. Ticketing dates
have neither the purpose nor effect of protecting consumers from
unanticipated fare changes. None of the airline defendants has a policy
or consistent practice with respect to the number of days in advance of
a fare change it places a last ticket date (or corresponding first
ticket date) on fares. Whether an airline defendant places a last
ticket date on a fare two weeks in advance, one week in advance, one
day in advance, does not use a last ticket date at all before
increasing fares, or increases fares before the last ticket date
arrives, depends not on the amount of time necessary to ensure that
consumers are protected from unexpected increases, but on how much (or
how little) time is necessary to reach agreement or coordinate with its
competitors.
Because the airlines change the ticket dates frequently as they
react to each other's messages, ticket dates are extremely unreliable
and misleading. On average, ticketing dates are inaccurate 54 percent
of the time. Moreover, when ticket dates are inaccurate, they tend to
be very inaccurate: 28 percent of the time, a fare continues to be
available for fifteen or more days after its last ticket date, and 13
percent of the time, a fare is withdrawn prior to its last ticket date.
Thus, consumers cannot rely on the presence or absence of a last ticket
date on a fare as assurance that the fare will be available for a
certain period of time--the airlines are more likely either to continue
offering the fare or to withdraw the fare without prior notice than to
actually make the proposed fare change on the posted date. With little
reason to rely on the accuracy of ticket dates, consumers are harmed
far more by the coordinated pricing that ticket dates facilitate than
they are benefited by the information those dates contain.
III
Explanation of the Proposed Final Judgment
The proposed Final Judgment is intended to ensure that the airline
defendants do not continue to use the ATP fare dissemination system or
any similar mechanism in a manner that unnecessarily facilitates fare
coordination or that enables them to reach specific price-fixing
agreements. It prohibits the airline defendants from disseminating
first ticket dates or using designating mechanisms, and substantially
restricts their use of last ticket dates. The proposed Final Judgment
also prohibits other conduct that would allow the airline defendants to
communicate without market risk their pricing intentions or signal
competitors that fare actions in different markets are linked. The
proposed Final Judgment does not prevent the airline defendants from
disseminating their currently available fares through ATP to CRSs for
consumer booking and ticketing, from advertising current fare
information to consumers, or from offering for sale fares for which
travel can only begin in the future, for example, offering fares in the
summer that apply to winter travel to Florida. Neither does it regulate
the independent pricing decisions of an airline, whether or not those
prices are a response to or evoke a response from other airlines.
A. Prohibited Airline Defendants Conduct
Section IV(A) of the proposed Final Judgment contains six
categories of prohibited conduct. Certain exceptions to these
prohibitions are contained in the limiting conditions in Section V.
Section IV(A) is identical to Section IV of the United/USAir decree.
Section IV(A)(1) contains general prohibitions on agreement between
airlines ``to fix, establish, raise, stabilize, or maintain any fare.''
This provision prohibits the airline defendants from any further price
fixing whether by the means alleged in the Complaint or by other means
violative of the Sherman Act.
Section IV(A)(2) contains one of the key provisions of the proposed
Final Judgment. It prohibits the airline defendants from
``disseminating any first ticket dates, last ticket dates, or any other
information concerning the defendant airline's planned or contemplated
fares for changes to fares.'' This provision bars, with limited
exceptions discussed below, the airline defendants' use of first and
last ticket dates, as well as any alternative means of communicating
their future pricing intentions. For example, it prevents the airline
defendants from, with any precision, negotiating fare increases through
press releases. Similarly, it prevents the airline defendants from
beginning to use travel dates to coordinate fare changes rather than to
communicate meaningful information to consumers on the relevant travel
periods for particular fares. This provision will eliminate the
extensive and costless negotiation over the amount, scope and timing of
fare changes, thus making coordination or agreement on fares far more
difficult.
The ban on the airline defendants' use of first ticket dates is
absolute. All of the airline defendants' fares, whether in ATP, a CRS
or elsewhere, must be currently available for sale to consumers.
The airline defendants may continue to use last ticket dates, but
only in very limited circumstances. Section V(C) permits the airline
defendants, through advertising in media of general circulation or
through mass mailings, and in a manner designed to directly reach a
meaningful number of likely potential consumers, to state that a
promotional fare will end on a particular date or that a last ticket
date on a sale fare has been extended to a later date. Once an airline
defendant has informed consumers through the required advertising, it
may then disseminate the fare's last ticket date in a CRS and
elsewhere.
After an airline defendant has disseminated a fare with a last
ticket date, or a non-defendant airline has disseminated a sale fare
with a last ticket date or extended the last ticket date on a sale
fare, an airline defendant may, without advertising, disseminate a new
fare with the same price, restrictions and last ticket date as the
other airline's fare. Additionally, an airline defendant may extend one
time, without advertising, the last ticket date on that sale fare to
the same last ticket date as another airline's sale fare that has the
same price and restrictions. In either case, a defendant airline's fare
must be applicable in the same city or airport pair as the other
airline's fare or in a city or airport pair with origin and
destination, respectively, within 100 miles of the origin and
destination of the city or airport pair of the other airline's fare.
Section V(C) of the proposed Final Judgment allows the airline
defendants to use last ticket dates in a few narrow circumstances where
the United/USAir decree does not. For instance, if a non-defendant
introduces a sale fare, Section V(C) allows an airline defendant to
match that sale fare with the same last ticket date. However, Section
V(C) of the proposed Final Judgment contains an additional safeguard.
In disseminating any unadvertised fares with last ticket dates, whether
they match a defendant or non-defendant, the airline defendants remain
subject to the proposed Final Judgment's prohibition against using
fares solely to communicate pricing intentions.
The restrictions in Section IV(A)(2) and V(C) on the dissemination
of last ticket dates lessen the likelihood that last ticket dates will
be used by the airline defendants to coordinate fare changes. The
requirements that the fares be new fares and that the last ticket dates
be disseminated at the time the fares are first offered for sale,
together with the limitations on extensions of the ticket dates, will
make it difficult for the airline defendants to use last ticket dates
to negotiate the elimination of discounts or to facilitate trades
across markets. Also, the requirement that certain fares with last
ticket dates be advertised will help ensure that the airline defendants
use the dates to inform consumers of the ending dates of sales, rather
than to communicate with competitors.
The restrictions in Section V(C) apply only when an airline
defendant chooses to use a last ticket date. The airline defendants
remain free to advertise and market their services and fares in any
other manner they choose, including any marketing or advertising that a
fare will be available only for a short period of time.
Section V(D) provides another limited exception to the prohibition
on disseminating information relating to planned or contemplated fair
changes. It will allow the airline defendants to continue to give
consumers general information on impending fare changes. For example,
airlines may make general public statements that because of increases
in costs they expect fares to increase, or may advertise that certain
low fares are available for a limited time only. Because the
information is general, it is unlikely that the airline defendants
could use it to coordinate fares.
Section IV(A)(3) prohibits the airline defendants from ``making
visible or disseminating its own tags or any other similar designating
mechanism to any other airline.'' This provision prohibits the airline
defendants from using any other device to link markets and coordinate
fare changes in the way that they currently use footnote designators.
It would, for example, prevent the airline defendants from attaching
arbitrary but unique travel complete dates to fares in different
markets in order to communicate a connection or link between those
fares.
Section IV(A)(4) prohibits the airline defendants from ``making
visible or disseminating to any other airline any fair that is intended
solely to communicate a defendant airline's planned or contemplated
fare or contemplated changes to fares.'' This provision would proscribe
fares that, although technically currently available for sale, will
not, as a practical matter, be considered by consumers and that have no
other legitimate purpose. For example, Section IV(A)(4) would preclude
an airline defendant from communicating its intention to increase fares
by filing fares that are higher but otherwise identical to existing
fares, and they awaiting for other airlines to file identical higher
fares before withdrawing its lower fares. Because no rational consumer
would purchase the higher fares as long as the lower fares were
available, the higher fares would be ``intended solely to communicate''
an airline defendant's contemplated changes to fares.
Section IV(A)(5) prohibits the airline defendants from
``disseminating two or more footnote designators that identify
footnotes that contain identical information.'' This provision will
prevent the airline defendants from continuing to use multiple
footnotes, each with different designators, that contain the same
ticketing and travel date information. In addition, Section IV(A)(5)
prohibits the airline defendants from disseminating any footnote
designator that identifies an ``empty'' footnote, that is, one that has
no travel dates, last ticket date or other information. In both cases,
the footnote designator serves no purpose other than to communicate
connections between fares or to call competitors' attention to
particular fares.
Section IV(A)(6) prohibits the airline defendants from ``using fare
codes that convey information other than fare class or terms and
conditions of sale or travel.'' Certain standard fare codes are used
throughout the industry to identify the class as well as the
restrictions associated with a fare, such as advance purchase
requirements. This provision is intended to prevent the airline
defendants from using codes not related to either the fare class or the
terms and conditions of sale or travel to send messages and link
markets. For example, Section IV(A)(6) prevents an airline defendant
from sending a message to another airline by placing letters that
identify that airline in the airline defendant's fare code.
B. Prohibited ATP Conduct
Section IV(B)(1) prohibits ATP from disseminating or conveying
fares with first ticket dates. This provision parallels the prohibition
in Section IV(A)(2) against the airline defendants' dissemination of
first ticket dates. Section IV(B)(1) will ensure that ATP is not used
for extensive and costless negotiations of fare increases through fares
not available for actual sale. Section IV(B)(1) does not prohibit ATP
from disseminating last ticket dates because the airline defendants
will continue to be able to disseminate last ticket dates in certain
limited circumstances.
Section IV(B)(2) prohibits ATP from disseminating any airlines'
tags or similar designating mechanism to any other airline. This
provision, which parallels a prohibition on the airlines (Section
IV(A)(3)), prevents ATP from replacing footnote designators with any
new mechanism by which airlines can communicate links or ties between
fares. Section IV(B)(3), which also parallels a prohibition on the
airlines (Section IV(A)(5)), limits the type of footnote designator
information that ATP may disseminate. This provision is intended to
prevent ATP from disseminating footnote designators that have been
designed to facilitate fare coordination by the airline defendants.
Section IV(B)(4) prohibits ATP from ``making visible or
disseminating to any airline changes to any other airline's fares prior
to disseminating or conveying such changes to the domestic CRSs.'' This
provision will bar ATP from disseminating fare changes to airlines
before such fare changes can be made available to the general public
through CRSs. Section IV(B)(5) prohibits ATP from ``making visible or
disseminating any changes to fares more frequently than the number of
times a day that at least one domestic CRS updates its fare data base
with such changes to fares.'' This provision ensures that ATP does not
disseminate fare changes to the airlines more frequently than such
changes are actually made available to the general public through CRSs.
In tandem, Sections IV(B) (4) and (5) prevent ATP from facilitating a
completely private exchange of information among the airline defendants
and thereby enabling them to negotiate fare changes, as they do
currently, through the use of fares that are not available for sale to
the public through CRSs.
C. Compliance Program and Certification
In addition to the prohibitions contained in Sections IV and V,
each defendant would be obligated to implement an antitrust compliance
program. This program would require each defendant to designate an
Antitrust Compliance Officer within 30 days of entry of the Final
Judgment. The Antitrust Compliance Officer for each settling defendant
would be responsible for distributing copies of the Final Judgment to
all relevant officers or employees of that defendant. These persons
would be required annually to certify that they understand and agree to
abide by the terms of the Final Judgment. Each defendant must, within
45 days after the Antitrust Compliance Officer learns of any violations
of the Final Judgment, take appropriate action to terminate or modify
the activity so as to comply with the Final Judgment. Finally, the
airline defendants must maintain records relating to their use of last
ticket dates under the limited exception provided in Section V(C). The
record keeping requirements of the proposed Final Judgment differ
slightly from those in the United/USAir decree to reflect the changes
made to Section V(C).
D. Effect of the Proposed Final Judgment on Competition
The relief in the proposed Final Judgment is designed to remove the
artificial restraints that the defendants have imposed on competition
and create an environment in which more vigorous competition may take
place. The Department of Justice believes that the proposed Final
Judgment contains sufficient provisions to prevent further violations
of the type alleged in the Complaint and to remedy the effects of the
alleged conspiracies.
The Final Judgment entered against United and USAir gives them the
right to have this proposed Final Judgment substituted for theirs. Such
a substitution would not materially affect the ability of United and
USAir to coordinate or agree on prices.
IV
Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages suffered, as well as costs and reasonable attorney's fees.
Entry of the proposed Final Judgment will neither impair nor assist the
bringing of such actions. Under the provisions of Section 5(a) of the
Clayton Act, 15 U.S.C. Sec. 16(a), the Judgment has no prima facie
effect in any subsequent lawsuits that may be brought against any
defendant in this matter.
V
Procedures Available for Modification of the Proposed Final Judgment
As provided by the Antitrust Procedures and Penalties Act, any
person believing that the proposed Final Judgment should be modified
may submit written comments to Roger W. Fones, Chief, Transportation,
Energy and Agriculture Section, U.S. Department of Justice, Antitrust
Division, 555 Fourth Street, N.W., Room 9104, Washington, D.C. 20001,
within the 60-day period provided by the Act. These comments, and the
Department's responses, will be filed with the Court and published in
the Federal Register. All comments will be given due consideration by
the Department of Justice, which remains free to withdraw its consent
to the proposed Final Judgment at any time prior to entry.
VI
Alternative to the Proposed Final Judgment
Although the Department considered alternatives to the proposed
Final Judgment, such as the United/USAir decree, none of these were
substantially different from the proposed Final Judgment. The only real
alternative would be a full trial of the case. In the view of the
Department of Justice, such a trial would involve substantial cost to
the United States and is not warranted because the proposed Final
Judgment provides relief that will remedy the violations of the Sherman
Act alleged in the United States' Complaint.
VII
Determinative Materials and Documents
No materials and documents of the type described in Section 2(b) of
the Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16(b), were
used in formulating the proposed Final Judgment.
Dated: March 17, 1994.
Respectfully submitted,
Mary Jean Moltenbrey,
Assistant Chief, Transportation, Energy, and Agriculture Section,
Antitrust Division, U.S. Department of Justice, 555 Fourth Street NW.,
Room 9104, Washington, DC 20001, (202) 307-6349.
United States of America, Plantiff, v. Airline Tariff Publishing
Company, et al. Defendants. Civil Action No. 92-2854 SSH (DAR)
Motion and Supporting Memorandum of Points and Authorities on
Consent To Make Part of the Official Record the Attached Letter of
January 21, 1994, From Michael Doyle
The plaintiff United States of America and defendants today filed
with the Court a proposed Final Judgment and Stipulation of consent to
entry of the proposed Final Judgment. The attached letter dated January
21, 1994, by Michael A. Doyle, counsel for American Airlines, and
confirmed by Roger Fones, Antitrust Division, U.S. Department of
Justice, which sets forth plaintiff's interpretation of the proposed
Final Judgment, is a material factor in each of the defendants'
decisions to consent to entry of this proposed Final Judgment, and the
plaintiff acknowledges that defendants are relying upon that letter as
if each were named therein. Accordingly, the plaintiff, with consent of
counsel for the defendants, hereby moves the Court to make this letter
part of the official record in this case.
A proposed order is attached.
Dated: March 17, 1994.
Respectfully submitted,
Mary Jean Moltenbrey,
Attorney, Antitrust Division, U.S. Department of Justice, 555 Fourth
Street NW., room 9104, Washington, DC 20001, (202) 307-6349.
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax 404-881-7777 Telex 54-2996
Michael A. Doyle
Direct Dial (404) 881-7340
January 21, 1994
Roger W. Fones, Esq., Section Chief, Transportation, Energy and
Agriculture Section, U.S. Department of Justice, Antitrust Division,
555 4th Street, NW., room 9104, Washington, DC 20001.
Dear Mr. Fones: I write on behalf of American Airlines, Inc. in
connection with United States v. Airline Tariff Publishing Company,
et al., Civil Action No. 92-2854 (SSH), United States District Court
for the District of Columbia (the ``Civil Action'').
The Complaint in the Civil Action alleges that certain pricing
practices of the defendants (relating to the dissemination of fare
information through ATPCO and the use of first and last ticketing
dates) have violated Section One of the Sherman Act. Two of the
defendants, United Airlines and USAir, have earlier consented to a
Final Judgment (which the Court entered as to them on November 1,
1993) (the ``Decree''). American has vigorously denied the pertinent
allegations of the Complaint.
We have, as counsel to American, advised the Department of
Justice of the following:
1. American has been unwilling to consent to the entry of the
Decree for two reasons. First, American believes that its pricing
practices challenged by the Complaint are legal under the Sherman
Act. Second, American believes that the Decree, which clearly bans
the use of first ticketing dates (in all instances) and last
ticketing dates (except for certain advertised promotions), creates
great uncertainty with respect to a number of pricing practices
which are functionally similar to the use of ticketing dates.
2. American is uncertain as to whether these particular pricing
practices are intended by the Department of Justice to be prohibited
by the Decree.
3. American is thus uncertain whether, if it agrees to be bound
by the Decree, it will be exposed to enforcement actions, with the
attendant risk of treble damages, with respect to practices it
believes to be lawful but which American believes are not
specifically addressed by the Decree. American also fears the
competitive disadvantage it will inevitably suffer if other carriers
engage in pricing actions that American has foresworn because of
uncertainty about the Decree's meaning.
You have advised us that the Antitrust Division continues to
believe that the pricing practices challenged by the Complaint
violate the Sherman Act, and that the relief embodied in the Decree
is appropriate and adequate. You have also advised us that the
Division is interested in encouraging a satisfactory settlement, and
accordingly it is willing to respond to certain questions posed by
American concerning the applicability of the Decree to particular
kinds of conduct. We, therefore, have requested the Antitrust
Division to advise us whether in its view the pricing practices
described below are prohibited by the Decree.
Particular Pricing Actions and Practices
1. Weekend and Off-Hour Fare Increases.
A. Description Of Airline Pricing Action.
1. At noon on Friday an airline transmits fare increases on
certain city-pairs to the Airline Tariff Publishing Company
(``ATPCO''). The increased fares become available for sale through
computerized reservation systems (CRS) later that same day or early
the next morning.\1\ The airline withdraws the fare increases on the
following Sunday when it learns that some or all competitors have
failed to implement matching fares for all of the same city-pairs.
---------------------------------------------------------------------------
\1\We presume that all fares described in these Statements are
for city-pairs on which the airline offering the fares provides
service, are accompanied by fare basis codes that convey only the
fare class and terms or conditions of sale or travel, are fares
likely to be considered for purchase by reasonable, informed
consumers during the time they are available, or are fares having
some other legitimate use (e.g., prorate fares) and are disseminated
by the airline to ATPCO to be immediately effective, without first
or last ticket dates. However, ATPCO technical constraints currently
require that all fares have an effective date no sooner than the
next calendar day.
---------------------------------------------------------------------------
2. Same as paragraph 1.A.1., except that all competitors
implement matching fare increases on Saturday for all of the same
city-pairs, and the increased fares are left in place.
3. Same as paragraph 1.A.1., except that the fare increases with
immediate effective dates are initially transmitted to ATPCO
Saturday noon.
4. At noon on Friday Airline A transmits 10% fare increases on
certain city-pairs to ATPCO. The increased fares become available
for sale through CRS at 5 p.m. that same day. On Saturday, Airline B
transmits 5% fare increases to ATPCO on the same city-pairs. Airline
A withdraws its 10% fare increases on Sunday when it learns that
competing airlines have not offered matching fares for sale. Airline
B withdraws its 5% increased fares. The following week, on Friday,
Airline A raises its fares 5% on those city-pairs where Airline B
had raised its fares 5% the previous week. On Saturday, Airline B
matches Airline A's 5% fare increases, and both Airlines thereafter
offer those fares for sale.
5. On Friday Airline A transmits to ATPCO increases in two
categories of fares (for example, full Y and 14-day advance
purchase). On Saturday, Airline B matches only the full Y fare
increase, and then on Sunday, Airline A withdraws both fare
increases, and Airline B withdraws its increase. The following week,
on Friday, Airline A increases its full Y fare for travel in the
same city-pairs that it had raised that fare the prior week, Airline
B matches that full Y fare increase on Saturday, and both Airlines
thereafter continue to offer that full Y fare.
6. Over time, the practices described in paragraphs 1.A.1.,
1.A.2., 1.A.3., 1.A.4. and 1.A.5., above become a pattern for
airline pricing.
B. Antitrust Division's Statement of Decree Applicability.
The pricing actions described above are not prohibited by the
Decree.
The fares in all of the pricing actions described in 1.A. above
are bona fide fares--fares actually available when they are
published through ATPCO, and likely to be considered for purchase by
reasonable, informed consumers during the time they are available or
are fares that have some other legitimate use during that period
(for example, prorate fares). In each scenario, the airline that
publishes the increased fares is, for at least twenty-four hours, at
risk of losing sales as a result of its fare increase. Thus, the
increased fares are bona fide and not fares ``intended solely to
communicate a defendant's planned or contemplated fares or changes
to fares'' within the meaning of Section IV(D) of the Decree.
Moreover, although there may be an element of communication inherent
in fares that are actually available and intended to be sold, the
fares do not convey ``other information concerning the defendant's
planned or contemplated fares or changes to fares'' within the
meaning of Section IV(B) of the Decree. Indeed, the Decree
specifically provides that it does not prohibit a defendant, ``in
unilaterally determining its own fares, from considering all
publicly available information relating to the fares of other
airlines.'' Section V(G). Publicly available information encompasses
information concerning other airlines' current and prior bona fide
fares and fare changes, as well as any ``pattern'' that emerges from
changes in such fares. Because the fares described are bona fide
fares, the Antitrust Division has no present intention to challenge
the pricing actions described in 1.A. under the Decree, nor, given
the totality of the circumstances of the airline industry, the
antitrust laws.
2. Cross Market Initiatives.
A. Description of Airline Pricing Action.
1. Airline A offers for sale a low fare (e.g., $101) for travel
on a city-pair route that is important to Airline B. Airline B
matches the $101 fare for travel on the same city-pair and also
offers for sale a $101 fare for travel on a city-pair that is
important to Airline A. Airline B withdraws both $101 fares after
one day. Airline A then withdraws its initial $101 fare the next
day.
2. Same as 2.A.1., except that Airline A does not withdraw the
initial $101 fare, and Airline B then offers for sale $101 fares for
travel on several city-pair routes important to Airline A. After two
days, Airline A withdraws the initial $101 fare, and Airline B then
withdraws its $101 fare.
B. Antitrust Division's Statement Of Decree Applicability.
All of the fares described in 2.A. above are bona fide fares
that are actually available for purchase when they are published
through ATPCO, and are likely to be considered by reasonable,
informed consumers during the time they are available. Accordingly,
the fares are bona fide fares and not fares ``intended solely to
communicate a defendant's planned or contemplated fares or changes
to fares'' within the meaning of Section IV(D) of the Decree.
Moreover, although there may be some communication inherent in these
fares, the fares do not convey ``other information concerning the
defendant's planned or contemplated fares or changes to fares''
within the meaning of Section IV(B) of the Decree. Thus, the pricing
actions described above are not prohibited by the Decree. Indeed,
the Decree specifically states that ``[r]egardless of what fares any
airline offers in any city or airport pair, offering any fare in the
same or any other city pair, in and of itself, does not constitute a
violation of this judgment.'' Section V(H). Because the fares
described are bona fide fares, the Antitrust Division has no present
intention to challenge the pricing actions described in 2.A. under
the Decree, nor, given the totality of the circumstances of the
airline industry, the antitrust laws.
The foregoing statements represent the position of the Antitrust
Division concerning the applicability of the Decree to the specific
pricing practices described, and the Division will not urge a
contrary position in any adversarial, administrative, or regulatory
proceeding. If so requested by American, the Division will consider
in good faith a request to state the position of the United States,
and to argue its correctness, in any adversarial, administrative, or
regulatory proceeding, if the position of the United States is
germane to issues in such proceeding, even if the United States is
not a party to or otherwise directly involved in the proceeding.
I enclose a proposed Final Judgment attached to a Stipulation I
have executed on behalf of American, which makes the following
previously agreed upon changes to the Final Judgment entered on
November 1, 1993:
1. Adding otherwise lawful sales of airline management services
to other airlines to Section V(B);
2. Expanding the limitation of Section V(C); and
3. Modifying slightly the record keeping obligation in Section
VI(C).
Although American continues to deny that its past pricing
activities challenged in the Civil Action were unlawful, American
has agreed to consent to the entry of the Decree in order to avoid
the burden and expense of litigation and in consideration of the
Division's statements of its position concerning the applicability
of the Decree as set out above.
A stipulation executed by American through its counsel is
enclosed herewith and made a part of this letter of understanding.
Your signature below confirms that the foregoing Statements of
Decree Applicability accurately reflect the position of the
Antitrust Division.
Sincerely,
Michael A. Doyle,
Counsel for American Airlines, Inc.
Confirmed:
Roger W. Fones,
Section Chief, Transportation, Energy and Agriculture Section, U.S.
Department of Justice, Antitrust Division.
United States of America, Plaintiff, v. Airline Tariff
Publishing Company; et al., Defendants. Civil Action No. 92-2854 SSH
(DAR).
Order
Upon Consideration of the plaintiff's motion to make the letter
of January 21, 1994, from Michael A. Doyle, counsel for American
Airlines, to Roger Fones, Antitrust Division, U.S. Department of
Justice, part of the official record in this case, it is this ______
day of ______ , 1994, hereby
Ordered, that the plaintiff's motion is Granted; and it is,
Further ordered that the clerk will make the letter from Michael
A. Doyle part of the official record in this case.
Dated:-----------------------------------------------------------------
----------------------------------------------------------------------
Stanley S. Harris
United States District Judge
Upon entry copies to:
Mary Jean Moltenbrey, Antitrust Division, U.S. Department of
Justice, 555 Fourth Street, NW, Washington, DC 20001
for plaintiff United States
Mark Leddy, Michael J. Byrnes, Cleary, Gottlieb, Steen & Hamilton,
1752 N Street, NW, Washington, DC 20036
Jonathan B. Hill, Dow, Lohnes & Albertson, 1255 Twenty-third Street,
NW, Washington, DC 20037
for defendant Airline Tariff Publishing Company
James V. Dick, Squire, Sanders & Dempsey, 1201 Pennsylvania Avenue,
NW, Washington, DC 20044
for defendant Alaska Airlines, Inc.
Michael Doyle, Alston & Bird, 700 Thirteenth St., NW, suite 350,
Washington, DC 20005-3960
Irving Scher, Weil Gotshal & Manges, 767 Fifth Avenue, New York, NY
10153
Peter D. Isakoff, Weil, Gotshal & Manges, 1615 L Street, NW, suite
700, Washington, DC 20036
for defendant American Airlines, Inc.
Donald L. Flexner, Crowell & Moring, 1001 Pennsylvania Avenue, NW,
Washington, DC 20004-2595
for defendants Continental Airlines, Inc., and Northwest Airlines,
Inc.
Emmet J. Bondurant II, Bondurant, Mixson & Elmore, 1201 West
Peachtree Street, NW, 39th Floor, Atlanta, Georgia 30309
James R. Weiss, Preston Gates Ellis & Rouvelas Meeds, 1735 New York
Ave., NW, suite 500, Washington, DC 20006
for defendant Delta Air Lines, Inc.
Thomas Demitrack, Jones, Day, Reavis & Pogue, North Point, 901
Lakeside Avenue, Cleveland, Ohio 44114
James E. Anklam, Jones, Day, Reavis & Pogue, 1450 G Street, NW,
Washington, DC 20005-3939
for defendant Trans World Airlines, Inc.
Certificate of Service
I hereby certify that I have caused a copy of the foregoing
STIPULATION, proposed FINAL JUDGMENT, COMPETITIVE IMPACT STATEMENT,
and MOTION ON CONSENT TO MAKE PART OF THE OFFICIAL RECORD LETTER OF
JANUARY 21, 1994, FROM MICHAEL DOYLE to be served upon counsel in
this matter in the manner set forth below:
By hand:
Mark Leddy, Michael J. Byrnes, Cleary, Gottlieb, Steen & Hamilton,
1752 N Street, NW, Washington, DC 20036
Jonathan B. Hill, Dow, Lohnes & Albertson, 1255 Twenty-third Street,
NW, Washington, DC 20037
for defendant Airline Tariff Publishing Company
James V. Dick, Squire, Sanders & Dempsey, 1201 Pennsylvania Avenue,
NW, Washington, DC 20044
for defendant Alaska Airlines, Inc.
Peter D. Isakoff, Weil, Gotshal & Manges, 1615 L Street, NW, suite
700, Washington, DC 20036
for defendant American Airlines, Inc.
Donald L. Flexner, Crowell & Moring, 1001 Pennsylvania Avenue, NW,
Washington, DC 20004-2595
for defendants Continental Airlines, Inc., and Northwest Airlines,
Inc.
James R. Weiss, Preston Gates Ellis & Rouvelas Meeds, 1735 New York
Ave., NW, suite 500, Washington, DC 20006
for defendant Delta Air Lines, Inc.
James E. Anklam, Jones, Day, Reavis & Pogue, 1450 G Street, NW,
Washington, DC 20005-3939
for defendant Trans World Airlines, Inc.
By Federal Express:
Michael Doyle, Alston & Bird, One Atlantic Center, 1201 West
Peachtree Street, Atlanta, GA 30309-3960
Irving Scher, Weil Gotshal & Manges, 767 Fifth Avenue, New York, NY
10153
for defendant American Airlines, Inc.
Emmet J. Bondurant II, Bondurant, Mixson & Elmore, 1201 West
Peachtree Street, NW, 39th Floor, Atlanta, Georgia 30309
for defendant Delta Air Lines, Inc.
Thomas Demitrack, Jones, Day, Reavis & Pogue, North Point, 901
Lakeside Avenue, Cleveland, Ohio 44114
Dated: March 17, 1994.
for defendant Trans World Airlines Inc.
Mary Jean Moltenbrey,
Antitrust Division, U.S. Department of Justice, 555 Fourth St., NW,
Washington, DC 20001, (202) 307-6396.
[FR Doc. 94-7672 Filed 3-30-94; 8:45 am]
BILLING CODE 4410-01-M