United States v. Airline Tariff Publishing Company, et al.; Public Comments and Response on Proposed Final Judgment

DEPARTMENT OF JUSTICE

[Civil Action No. 92-2854 (GHR), D.D.C.]

United States v. Airline Tariff Publishing Company, et al.;

Public Comments and Response on Proposed Final Judgment

Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.

16(b)-(h), the United States publishes below a comment received on the

proposed Final Judgment in United States v. Airline Tariff Publishing

Company, et al., Civil Action No. 92-2854 (SSH), United States District

Court for the District of Columbia, together with the response of the

United States to the comments.

Copies of the response and the public comments are available on

request for inspection and copying in room 3235 of the Antitrust

Division, U.S. Department of Justice, Tenth Street and Pennsylvania

Avenue, NW., Washington, DC 20530, and for inspection at the Office of

the Clerk of the United States District Court for the District of

Columbia, United States Courthouse, Third Street and Constitution

Avenue, NW., Washington, DC 20001.

Constance K. Robinson,

Director of Operations.

United States' Response To Public Comments

United States of America, Plaintiff, v. Airline Tariff

Publishing Company, et al., Defendants.

Pursuant to section 2(d) of the Antitrust Procedures and Penalties

Act, 15 U.S.C. 16(d) (the `APPA'' or ``Tunney Act''), the United States

responds to public comments on the proposed Final Judgement submitted

for entry in this civil antitrust proceeding.

This action began on December 21, 1992, when the United States

filed a Complaint charging eight major domestic airlines\1\ and the

Airline Tariff Publishing Company (``ATP'') with violations of the

antitrust laws. The first count of the Complaint alleges that each of

the airline defendants engaged in various combinations and conspiracies

with other of the airline defendants and co-conspirators, consisting of

agreements to fix prices by increasing fares, eliminating discounted

fares, and setting fare restrictions. The Complaint alleges that these

agreements were reached using the computerized fare dissemination

services of ATP to exchange proposals, negotiate fare changes, and

trade fare increases in one or more markets for fare increases in other

markets (or to other fare types). As a result of these agreements,

consumers paid higher fares for airline tickets.

---------------------------------------------------------------------------

\1\American Airlines, Inc., Alaska Airlines, Inc., Continental

Airlines, Inc., Delta Air Lines, Inc., Northwest Airlines, Inc.,

Trans World Airlines, Inc., United Air Lines, Inc., and USAir, Inc.

---------------------------------------------------------------------------

The second count of the Complaint alleges that the airline

defendants, ATP, and co-conspirators engaged in a combination and

conspiracy consisting of an agreement to create, maintain, operate, and

participate in the ATP fare dissemination system in a manner that

unnecessarily facilitates the ability of the airline defendants and

their co-conspirators to coordinate changes to their fares. As a result

of this agreement, consumers have paid higher prices for airline

tickets.

The Complaint seeks an injunction barring the defendants from

entering into agreements with one another with respect to fares, and

from disseminating the information concerning proposed changes to fares

that has enabled them to increase prices collusively and illegally.

Simultaneously with the filing of the Complaint, the United States

filed a proposed Final Judgment, a Competitive Impact Statement

(``CIS''), and a stipulation signed by two of the defendants, United

and USAir, for entry of a proposed Final Judgement. After reviewing the

proposed Final Judgment pursuant to 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, American,

Continental, Delta, Northwest, and TWA filed with the Court a

Stipulation consenting to the entry of a new proposed Final Judgment

with respect to the remaining defendants. This proposed Final Judgment

is substantially identical to the Final Judgment entered against United

and USAir 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) have been changed to reflect the changes to Section V(C).

Finally, Section IV(B) provides the relief the United States is seeking

against defendant ATP.

As required by the Antitrust Procedures and Penalties Act, on March

25, 1994, American, Alaska, Delta, and ATP filed with this Court a

description of written and oral communications on their behalf within

the reporting requirements of section 15(g) of the APPA. Continental,

Northwest and Trans World filed their notifications of written and oral

communications with the Court on March 28, 1994. A summary of the terms

of the proposed Final Judgment and CIS, and directions for the

submission of written comments relating to the proposed decree were

published in the Washington Post for seven days over a period beginning

March 27, 1994. The proposed Final Judgment and CIS were published in

the Federal Register on March 31, 1994. 59 FR 15225.

The 60-day period for public comments commenced on April 1, 1994

and expired on May 30, 1994. The United States received only one

comment on the proposed Final Judgment, a letter from Michael London.

As required by 15 U.S.C. 16(b), this comment is being filed with this

response. (Exhibit A).

In his comments, Mr. London expressed concern that the proposed

Final Judgment's prohibition on advance price announcements would

deprive consumers of valuable information for making travel plans. Mr.

London also expressed concern that the United States may have filed its

lawsuit without sufficient evidence to substantiate its claims against

the airlines. The United States sent Mr. London a letter individually

responding to his inquiries regarding the proposed Final Judgment. The

United State's correspondence with Mr. London is also being filed with

this response. (Exhibit B).

The Department has carefully considered Mr. London's comments.

Nothing in these comments has altered the United States' conclusion

that the proposed Final Judgment is in the public interest.

The proposed Final Judgment provides all of the relief requested in

the Complaint against American, Alaska, Continental, Delta, Northwest,

Trans World, the ATP, without the substantial expense of a trial. The

relief provided by the proposed decree will leave these airlines and

ATP without the ability to resume the actions that constituted the

antitrust violations. Entry of the proposed Final Judgment is in the

public interest.

Respectfully submitted,

Dated: June 17, 1994.

Mary Jean Moltenbrey,

Attorney, Antitrust Division.

Exhibit A--Civil Action No. 92-2854 (SSH)

April 5, 1994.

Assistant Attorney General, Anne K. Bingaman,

United States Department of Justice, Washington, D.C.

Dear Ms. Bingaman: I am writing to you concerning an article

that appeared in our local newspaper about a settlement of price

fixing allegations.

There are 2 points about this matter that concern me as both an

air traveller and as a citizen.

(1) I have found in the past, the prenotification of fare

adjustments very useful in planning airline travel. My travel agent

would scan the computer system for reduced fares to be effective at

some future date. I could then plan travel for a date when that fare

would be available.

This would enable me to save money instead of paying a higher

current fare. Therefore, instead of injuring the public, this

practice could result in savings over existing fares.

(2) The part that really concerns me and that seems unbelievable

is the section of the article that states ``The government believes

that history would make proving guilt beyond a reasonable doubt

difficult''.

If this paraphrase of your department's statement is correct, it

seems a terrible thing that our government would take action under

these circumstances. I always thought that there were Constitutional

safeguards that protected individuals and companies against

arbitrary prosecution. If the Justice Department had these doubts,

how dare they waste our tax money and impinge the reputation of

companies on such an unsubstantiated charge.

I am a stockholder of one of the airline companies named as a

party to the settlement. I believe that unfair and arbitrary actions

of the Justice Department have injured the reputation of the company

and therefore my investment. If I believe that the actions of the

Justice Department constitute False Prosecution or the attempt at

False Prosecution, what remedies are available to me?

Very Truly yours,

Michael London.

June 7, 1994.

Michael London,

P.O. Box 2106, McAllen, Texas 78505-2106.

Dear Mr. London: I am responding to your letter to Assistant

Attorney General Anne Bingaman concerning the proposed consent

decree between the Department of Justice, a number of major airlines

and the Airline Tariff Publishing Company (``ATP''), a computerized

fare exchange system. The proposed decree settles a civil antitrust

suit in which the Department alleged that eight major airlines fixed

prices and used the ATP system in a way that unnecessarily

facilitated coordination of airline fares. You express concern that

the proposed decree's prohibitions on prenotification of fare

adjustments will deprive consumers of information regarding future

fare discounts. You also express concern that the Department may

have filed the lawsuit against the airlines without substantial

evidence to support its allegations.

In your letter, you state that pre-notification of fare changes

enabled you to schedule travel for dates when fares would be

reduced. The proposed decree will not prohibit the airlines from

publishing different fares applicable for travel on different dates,

provided the fares are currently available for sale. Thus, you will

still be able to plan your travel for days of the week or months of

the year when the airlines charge lower fares.

The decree will prohibit the airlines from disseminating fares

that can only be purchased at a later date. In the past, the

airlines used such fares to negotiate and agree upon fare increases

or the elimination of discounts. Because these fares changed

frequently during negotiations, and often never became available for

sale, they were extremely unreliable and therefore not useful for

consumers planning when to purchase their tickets.

You also suggest that the Department may have acted arbitrarily

in its prosecution of the airlines because the government did not

believe that it could prove guilt beyond a reasonable doubt. The

Department filed this action because it had compelling evidence that

the airlines used ATP to reach agreements to raise prices and

eliminate discounts, in violation of the Sherman Act, raising prices

in thousands of markets and for millions of travelers.

The government's decision whether to prosecute any particular

violation of the Sherman Act civilly or criminally is one that

depends on a number of factors. In this case, the government's

primary goal was to obtain injunctive relief that would prevent the

airlines from continuing their anticompetitive practices. We also

recognized that the airlines' collusive pricing practices evolved

from a system that developed when the airlines were heavily

regulated and not subject to the antitrust laws; indeed, at one time

the airlines were required to file fare changes in advance to allow

regulators time to review and disapprove them. That history would

have made it considerably more difficult to prove beyond a

reasonable doubt that the airlines intended to reach price fixing

agreements. For these and other reasons, the Department elected to

bring a civil case seeking injunctive rather than punitive relief

against the airlines. In a civil case, the government need only

prove that the defendants violated the Sherman Act by a

preponderance of the evidence. The government is confident that it

could easily have met that burden at trial.

I hope that this letter responds to your concerns. Thank you for

your interest in this matter and in the enforcement of the antitrust

laws.

Sincerely,

Roger W. Fones,

Chief, Transportation, Energy and Agriculture Section.

Certificate of Service

I hereby certify that I have caused a copy of the foregoing United

States' response to public comments to be served via first class mail

upon the following counsel in this matter:

Mark Leddy, Michael J. Byrnes, Cleary, Gottlieb, Steen & Hamilton, 1752

N Street, N.W., Washington, D.C. 20036

Jonathan B. Hill, Dow, Lohnes & Albertson, 1255 Twenty-third Street,

N.W., Washington, D.C. 20037

For defendant Airline Tariff Publishing Company

James V. Dick, Squire, Sanders & Dempsey, 1201 Pennsylvania Avenue,

N.W., Washington, D.C. 20044

For defendant Alaska Airlines, Inc.

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, N.Y.

10153

Peter D. Isakoff, Weil, Gotshal & Manges, 1615 L Street, N.W., Suite

700, Washington, D.C. 20036

For defendant American Airlines, Inc.

Donald L. Flexner, Crowell & Moring, 1001 Pennsylvania Avenue, N.W.,

Washington, D.C. 20004-2595

For defendants Continental Airlines, Inc., and Northwest Airlines,

Inc.

James R. Weiss, Preston Gates Ellis & Rouvelas Meeds, 1735 New York

Ave., N.W. Suite 500, Washington, D.C. 20006

Emmet J. Bondurant II, Bondurant, Mixson & Elmore, 1201 West Peachtree

Street, N.W., 39th Floor, Atlanta, Georgia 30309

For defendant Delta Air Lines, Inc.

James E. Anklam, Jones, Day, Reavis & Pogue, 1450 G Street, NW.,

Washington, D.C. 20005-3939

Thomas Demitrack, Jones, Day, Reavis & Pogue, North Point, 901 Lakeside

Avenue, Cleveland, Ohio 44114

For defendant Trans World Airlines, Inc.

Dated: June 17, 1994.

Mary Jean Moltenbrey,

Antitrust Division, U.S. Department of Justice.

[FR Doc. 94-15910 Filed 6-29-94; 8:45 am]

BILLING CODE 4410-01-M