United States v. Airline Tariff Publishing Company, et al., Proposed Final Judgment and Competitive Impact Statement

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