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Travel law: Domestic US airline travel antitrust litigation – round one

Travel law: Domestic US airline travel antitrust litigation – round one

In this week’s article, we discuss the case of In re Domestic Airline Travel Antitrust Litigation, 2016 WL 6426366 (D.C.D.C. 2016) which involves charges of a price fixing conspiracy by four major U.S. airlines. We previously discussed the complaint in this case in Travel Law: Domestic US airline price fixing litigation, eturbonews.com (4/7/2016). In this article, we examine the decision of United States District Judge Colleen Kollar-Kotelly denying the defendant airline’s motion seeking to dismiss the plaintiffs’ Consolidated Amended Complaint.

Terror Targets Update

Istanbul, Turkey

In Nordland, Suspect in Istanbul Rampage on New Year’s Is Captured, Turkey Says, nytimes.com (1/16/2017) it was noted that “The police in Turkey have arrested the man accused of carrying out a deadly attack on an Istanbul nightclub early on New Year’s Day, killing 39 people, including a police officer and 25 foreigners…whom the authorities described as an Islamic State militant of Uzbeck nationality, along with four other people (one of which was a man of) Krygyz nationality”.

Dakar, Senegal

In Searcey, Nigerian Jet Mistakenly Bombs Refugee Camp, Killing Scores, nytimes.com (1/17/2017) it was noted that a Nigerian fighter jet searching for Boko Haram members on Tuesday accidentally bombed a camp for displaced people who fled the militants, killing dozens of camp residents and at least six humanitarian workers and wounding numerous others”.

Jerusalem, Israel

In Kershner, 4 Die in Jerusalem Attack as Palestinian Rams Truck Into Soldiers, nytimes.com (1/8/2017) it was noted that “A Palestinian driver plowed a truck into a group of Israeli soldiers as they were getting off a bus in Jerusalem on Sunday morning, killing four and injuring 17 others…The police called the episode an act of terrorism…the attacker had been shot and the police released images showing the truck’s windshield riddled with bullet holes”.

Duterte’s List

In Symmes, President Duterte’s List, nytimes.com (1/10/2017) it was noted that “President Rodrigo Duterte of the Philippines waved a thick sheaf of papers on live television, fanning the pages for the public and the national press corp to see…‘This is the drug industry in the Philippines’…The list took many shapes in Duterte’s various tellings, containing anywhere from 600,000 to more than a million suspects. He also once claimed that some three million Filipinos-3 percent of the population-were drug addicts and that he would be happy to kill them”.

Casablanca, Morocco

In Alami, Morocco Said to Ban Sale of Burqua, Citing Security Concerns, nytimes.com (1/11/2017) it was noted that “Morocco has banned the burqua, the full-body veil worn by some conservative Muslim women, according to local media reports. Although the government did not confirm the ban, the reports said vendors and merchants had been notified on Monday by representatives of the Interior Ministry they would no longer be allowed to sell or manufacture the religious garment because of security concerns”.

Buried In Italian Hotel

In Cut off and up to 30 dead: Rigopiano di Farindola Hotel in Italy, etn.travel (1/18/2017), it was noted that “Up to 30 people (may have) been killed after an Italian ski resort was buried by an avalanche during a series of earthquakes. The disaster happened at the base of the Gran Sasso mountain range near the Rigopiano di Farindola hotel. Rescue teams are still battling to access Hotel Rigopiano, in Pescara, a province in the Abruzzo region, which has been hit by heavy snowfall in the last week”.

Turkish Airlines Crash In Kyrgyzstan

In Turkish Airlines Boeing 747 crashed in Kyrgyzstan, etn.travel (1/15/2017) it was noted that “A scene of horror is developing in Kyrgyzstan, where a Turkish Airlines Boeing 747 crashed into a residential neighborhood close to Manas International Airport on Monday morning (located) 25 kilometers north-northwest of the capital Bishkek”.

Criminals Go Home To Cuba, Please

In Robles, ‘Marielitos’ Face Long-Delayed Reckoning: Expulsion to Cuba, nytimes.com (1/14/2017) it was noted “They were some of the most feared people in South Florida, men who became cinematic fodder…For almost 40 years, they were also pawns in the cold war between the United States government and Fidel Castro: once and future criminals who joined a mass flotilla of refugees that left Mariel Harbor and landed on Florida’s shores, they bedeviled Miami and other America cities that had taken them in. The Unites States did not want them. Nor did Cuba, which refused to take them back. On Thursday, President Obama announced the immediate end of the so-called wet-foot, dry-foot policy, which allowed Cuban migrants to stay in the United States if they reached the shore…(and) Cuba agreed to take back up to 500 criminal Mariel refugees”. Bravo.

Avia Flu In Uganda

In Avia Flu outbreak in Uganda is bad news for travel, tourism and safaris, etn.travel (1/14/2017) it was noted that “Tests carried out on dead birds found on the shores of Lake Victoria between the capital Kampala and Entebbe, the location of the international airport, but also in Masaka District, have proved positive for avian flu, government officials confirmed late yesterday”.

Gloomy, Gray Smog In Warsaw

In Berendt, Warsaw Grapples With Gloomy, Gray Smog, nytimes.com (1/14/2017) it was noted that “An eerie gray mist with a pervasive odor of fumes wreathed Warsaw and dozens of other Polish cities, bringing a global problem more associated with Beijing and New Delhi into the heart of Europe. It took less than half a day, on Jan.8, for the smog levels to break all records set in the 10 years since Poland, following a directive from the European Union, put in place an air pollution monitoring system”.

Airline Bathrooms: Think Smaller

In Eng, Smaller Bathrooms on Planes Pose Challenges for Passengers, nytimes.com (12/23/2016) it was noted that “Smaller lavatories are helping airlines to add seats to new and existing aircraft for more profit, but some passengers-if they can get into the bathrooms-say they are being shortchanged. The continuing installation of smaller and reconfigured bathrooms, which began in late 2003, has led to complaints about safety issues, say travelers and flight crew, who are concerned about restricted access for the physically disabled, as well as ease of use for other passengers. Barry Brandes, a retired singer from Somers, N.Y., travels several times a year (and he said) that getting into the new lavatories on the Boeing 737-900, a single-aisle airplane, is not easy. ’If I don’t duck, I hit my head on the door…’I can’t stand up completely, so I have to twist myself into a pretzel to use the facility’”.

Railroad Penalties Highest-Ever

In US Federal Railroad Administration hits highest-ever penalty rate, etn.travel (12/23/2016) it was noted that “For Fiscal Year (FY) 2016, the (Federal Railroad Administration (FRA)) expects to collect 79 percent of the civil penalties it issued to railroads, hazardous materials shippers and others for violating federal safety regulations, a 4-percent increase over FY2015, and the largest percentage rate ever closed by the agency. The total amount of civil penalties of FY2016 hit $15.75 million, more than a half-million more than the previous year”.

Airbnb In Canada

In Majority of Canadians support home sharing, etn.travel (11/21/2016) it was noted that “A large majority of Canadians support home sharing and easy-to-follow regulations for hosts. An overwhelming percentage of Canadian travelers also say they had a positive experience with Airbnb. A national survey conducted by CICIC Research and Communications on behalf of Airbnb found that 67 percent of Canadians support allowing local residents to home share with travelers”.

Air Rage Is All The Rage

In Bad News, Conde Nast Traveler (12/2016) it was noted that “It seems ‘air rage’ is, well, all the rage these days. According to (IATA) incidents involving badly behaved airplane passenger-like the guy who head-butted other fliers when he was told he couldn’t do yoga on a flight from Honolulu to Tokyo-were up 15 percent in 2016. Eleven percent of those cases turned physical”.

AK-47 Souvenirs?

In Unbelievable News, Conde Nast Traveler (12/2016) it was noted that “We’d love to know who approved this idea. Kalashnikov-you know, the maker of the AK-47-has opened a souvenir shop in Moscow’s Sheremetyevo Airport. That’s right: inside the airport. Sure, it’s located after security and it sells fakes, but who wants to see an assault rifle of any kind mid-flight over the North Atlantic? And yes, they’re also selling I LOVE AK T-shirts as last minute souvenirs”.

H.I.V. In Russia

In MacFarquhar, H.I.V. Cases Surpass a Million in Russia, but Little Is Done, nytimes.com (12/28/2016) it was noted that “Quietly, the number of Russians who have received a positive H.I.V. diagnosis passed the one million mark this year. There is, however, little indication that the government will commit resources to stem the acceleration of the virus from high-risk groups into the general population. About 850,000 Russians carry H.I.V. and an additional 220,000 have died since the late 1980s, said Vadim Pokrovsky, the longtime head of the Moscow-based Federal AIDS Center, who estimated that at least another 500,000 cases of H.I.V. have gone undiagnosed. Although the label ‘epidemic’ prompts denials from some senior officials, experts on the front lines like Mr. Pokrovsky are calling it just that”.

Merry Christmas And Sixteen Tons Of Trash

In Cole, Christmas Revelers Leave 16 Tons of Trash on Australian Beach, nytimes.com (12/28/2016) it was noted that “Christmas and New Year in Australia typically involved barbecues, beaches and beer. But a Christmas Day celebration that drew more than 10,000 people has led to a suspension of that tradition on Coogee Beach in the Sydney suburb of Randwick, where officials estimate that revelers left behind more than 16 tons of garbage. The City Council banned alcohol on the beach for the rest of the Australian summer”.

Chicago: Murder City USA

In Bosman & Smith, As Chicago Murder Rate Spikes, Many Fear Violence Has Become Normalized, nytimes.com (12/28/2016) it was noted that “The nation’s third-largest city will end 2016 with a surging murder rate, a demoralized and distrusted police force and a weary populace that has become inured to daily reports of shootings. More than 750 people have been murdered in Chicago in 2016, the police said, a 58 percent increase over last year and the highest total since 1997. There have been more than 3,500 shootings in the city this year. Over Christmas weekend, at least 60 people were shot, 11 fatally, according to The Chicago Tribune. Two teenage girls were among those shot”.

Unfriendly Skies In China

In Feng, China Builds Out the Air as Frustration Mount Below, nytimes.com (12/29/2016) it was noted that “An angry mob ransacks a terminal. A frustrated passenger tries to leave the plane while it taxis. A pilot, who has had it up to here, advises fliers to leave the plane and mill about the tarmac-and they do. Welcome to China’s unfriendly skies. The world second-largest economy boasts some of the world’s worst flight delays and missed connections. Angry passengers have become such a fixture of flying in China that the government has developed a blacklist for the dangerously unruly. Chinese leaders are aware of the problem. Spurred by the strain of the air traffic system as well as a slowing economy, China has begun a huge airport building project that could give the country 60 more airports beyond the current total of about 200 by 2020″.

Ride-Sharing Legislation In New York

Stashenko, Uber, Lyft Say They Are Undeterred by Failure of NY Legislature to Act on Legalization This Year, New York Law Journal (12/29/2016) it was noted that “The state Legislature’s failure to meet this month to expand ride-sharing services outside of New York City, where they are legal, will not deter (Uber and Lyft) from renewing their campaigns in January…’It is clearer than ever that, after years of debate, the governor and legislators have heard the demand of New Yorkers and are committed to making ride sharing a realty across the state’, Uber spokeswoman…said Tuesday. The legislature balked at returning to Albany for a special session for political reasons unrelated to the ridesharing issue”.

Travel Law Article: The Domestic Airline Price Fixing Case 

“There are presently a total of 105 cases consolidated in this action…For the purposes of this motion (to dismiss)…the Court accepts as true the allegations in the Complaint…(The) [d]efendants, American Airlines, Inc. (American), Delta Air Lines, Inc. (Delta), Southwest Airlines Co. (Southwest) and United Airlines, Inc. (United) are the four largest commercial air passenger carriers in the United States…In addition to the four named Defendants, Plaintiffs allege that U.S. Airways prior to its merger with American, Air Canada and the International Air Transport Association (IATA) willingly conspired with Defendants to unlawfully restrain trade”.

The Plaintiffs’ Charges

“Plaintiffs are purchasers of air passenger transportation for domestic travel directly from Defendants or their predecessors and/or through websites including Travelocity.com, Orbitz.com, Priceline.com, Expedia.com and Flyfar.ca…Plaintiffs believe that the number of Class members is in the millions… Here, Plaintiffs allege that Defendants violated (Section 1) of the Sherman Act by participating in a conspiracy affecting air passenger transportation services within the United States… Plaintiffs allege that Defendants conspired ‘to fix, raise, maintain and/or stabilize prices for air transportation services… by, inter alia, colluding to limit capacity on their respective airlines’. Plaintiffs further allege that during the conspiracy that spans from the first quarter of 2009 to the recent time, ‘Defendants’ airfares rose substantially compared to those of other domestic air carriers, despite stagnant or decreasing demand and declines in the cost of fuel’”.

The Alleged Conspiracy

“Generally, Plaintiffs assert: The alleged conspiracy was carried out, inter alia, by repeated assurances by the executives of Defendants to each other than: (a) each of their companies is engaging in ‘capacity discipline’ (i.e., reduction or relative stabilization of airline capacity); (b)this is a practice that has to be utilized by the industry as a whole; © it is good for the industry as a whole and (d) it reflects the collective commitment of the Defendants’ airline managers. Plaintiffs cite to statements made during earning calls with analysts, at airline industry conferences as well as other conferences, and at meetings of (IATA) that plaintiffs claim were made in furtherance of the conspiracy. Plaintiffs further allege that Defendants limited consumers’ ability to compare fares and deterred potential competitive entry of foreign air passenger carriers in order to advance the conspiracy. Plaintiffs assert that as a result of the conspiracy, airline capacity deviated from historical patterns, remaining largely stagnant or decreasing on an annual basis, and passengers were injured by paying higher airfares and facing a reduction in flight choices. The Court shall further expound below on the factual allegations in the Complaint that support these contentions”.

The Nature Of The Airline Industry

“Plaintiffs discuss certain aspects of the structure of the domestic airline industry that they assert render the industry conducive to collusion. Plaintiffs allege that the domestic airline industry is an oligopoly with high barriers to entry due to government regulations of airports and gates, capital requirements for technology and equipment, and the nature of ticketing and reservation system”.

High Concentration Of Ownership

Moreover, Plaintiffs point to the concentrated nature of the industry and the shareholders. Specifically, the Delta-Northwest, United-Continental, Southwest-AirTran and American-U.S. Airways mergers altered the nature of the industry by reducing the number of major domestic air passenger carriers from ten to four within a decade…the four Defendant airlines control, approximately 80% of the domestic air passenger seats…the industry is characterized by a concentration of common stock owners. Indeed, Defendant airlines’ four largest stockholders are BlackRock, Inc., State Street Corporation, J.P. Morgan Chase & Co., Primecvap and Capital Group Companies”.

Industry Facilitators

“Plaintiffs also note mechanisms within the industry that they contend facilitate the alleged conspiracy by allowing Defendants to coordinate their airfares, monitor the actions of their co-conspirators and punish any co-conspirator that steps out of line. The Airline Tariff Publishing Company (ATPCO) is owned by airlines including Defendants Delta, United and American. The ATPCO provides all airlines with complete, accurate and real-time access to every airline’s published fare structure on every route. Airlines provide that pricing data to ATPCO, including fare base code, dollar amount, fare rule or restrictions and first and last ticket date information. Any fare changes received by ATPCO are processed and disseminated to other airlines, including the Defendants and ATPCO subscribers can generate detailed reports to monitor fare changes that are not yet available for sale to the public”.

The Context Of The Alleged Conspiracy

“While Plaintiffs’ general allegations regarding the nature of the airline industry do not serve as conclusive proof of an antitrust conspiracy, the consolidation within the market, the concentration of common stock owners, Defendants’ ability to monitor other airlines’ fare structure and pricing and past industry practice of using CMIs are all factors that the Court considers at this stage of the proceeding in reaching its determination as to whether Plaintiffs sufficiently plead plausible antitrust conspiracy…As Twombly notes, this Court should consider the context in which the alleged conspiracy arises, and this information is pertinent to that inquiry”.

Economic Evidence

“Plaintiffs also provide information regarding capacity, airfares and profits that they contend support their assertion that defendants colluded to restrict capacity which resulted in higher airfares and increased profits…Plaintiffs argue that these economic trends are not otherwise explained by market forces absent an agreement among Defendants…Turning first to capacity, Plaintiffs provide information regarding load factors, a measurement of revenue passenger miles divided by available seat miles, typically used by airlines to track capacity utilization”

Record Profits

“Plaintiffs also present economic evidence that they contend supports the conclusion that Defendants priced airfares differently from other airlines in the industry during the relevant period, resulting in large profits…Plaintiffs argue that the result of these actions taken by Defendants is record profits in recent years. Indeed, Defendants earned a record $22 billion in net income in 2015…Plaintiffs assert that these profits can be attributed in part to the decrease in the cost of jet fuel. However, Plaintiffs argue that absent collusion, this trend would not otherwise occur”.

Conclusion

“In light of the factual allegations in the Complaint which this Court must accept as true for the purposes of the pending motion, Plaintiffs plead a plausible claim pursuant to (Section) 1 of the Sherman Act…Plaintiffs pled parallel conduct on the part of Defendants coupled with sufficient circumstantial evidence to raise a suggestion of a preceding agreement. Here, Plaintiffs allege that starting in the first quarter of 2009, Defendants colluded to limit capacity in their respective airlines, as a result, the airfares rose during that period. Plaintiffs provide economic data that demonstrates this trend and at least tends to support their claim that Defendants’ capacity decisions and the increase in airfares are not otherwise explained by other factors absent collusion… Plaintiffs further demonstrate that this trend in limiting capacity was a departure from prior practice within the industry…Plaintiffs also point to specific characteristics of the industry that render it conducive to collusion. The Court finds that the facts as alleged are sufficient to meet Plaintiffs’ pleading requirement…the Court denies Defendants’ Motion to Dismiss Plaintiffs’ Consolidated Amended Complaint”.

Thomas A. Dickerson is a retired Associate Justice of the Appellate Division, Second Department of the New York State Supreme Court and has been writing about Travel Law for 41 years including his annually updated law books, Travel Law, Law Journal Press (2016), Litigating International Torts in U.S. Courts, Thomson Reuters WestLaw (2016), Class Actions: The Law of 50 States, Law Journal Press (2016) and over 400 legal articles many of which are available at nycourts.gov/courts/9jd/taxcertatd.shtml. For additional travel law news and developments, especially, in the member states of the EU see IFTTA.org

This article may not be reproduced without the permission of Thomas A. Dickerson.

Read many of Justice Dickerson’s articles here. http://www.nycourts.gov/courts/9jd/taxcertatd.shtml/

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