Flyers Sue the Big 4 Airlines for Collusive Pricing

Last week, the DOJ issued formal requests to four airlines—American, Delta, Southwest, United—for copies of all correspondence regarding their past and future plans to limit the number of seats available for sale. The request was in response to suspicions that the four carriers, which together control 80 percent of domestic air travel, were colluding to keep airfares high by keeping capacity growth in check.

American’s typified the responses of the carriers under scrutiny. The airline pledged to “cooperate fully with the investigation. We welcome the review as the data shows that the industry remains highly competitive with more people flying than ever before. Demand has been enabled by a robust and competitive marketplace in which capacity has been added and average fares have decreased.”

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That argument had better be a persuasive one, because the Big Four will have to make it not only to the DOJ, but in federal courts as well, to defend themselves against at least two related lawsuits filed so far this month.

In Bidgoli v. American Airlines Group Inc., 15-cv-5903, U.S. District Court, Northern District of Illinois, the complaint reads as follows:

This antitrust class action arises out of a conspiracy among the largest airlines in the United States, who collectively account for over 80% of all domestic travel, to unlawfully fix, raise, maintain, and/or stabilize the price of domestic airfare in the United States. Plaintiffs bring this action on behalf of themselves and all persons and entities who directly purchased domestic air travel in the United States from the named defendants, any subsidiaries or affiliates thereof, or any of their co-conspirators, between October 1, 2012 and the present (the “Class Period”).

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The complaint cites the DOJ investigation, accuses the defendants of entering “into an illegal agreement, combination, or conspiracy to raise and maintain the price of domestic airfare in the United States,” and requests “injunctive relief and treble damages, as well as reasonable attorneys’ fees and costs, arising from Defendants’ violations of Section 1 of the Sherman Act (15 U.S.C. * 1).”

The second case (Devivo v. Delta Airlines Inc., 15-cv-5162, U.S. District Court, Southern District of New York) takes much the same tack, alleging as follows:

This action arises from Defendants’ conspiracy to fix, raise, maintain, or stabilize prices of airline tickets through a number of mechanisms, including, inter alia, signaling one another how quickly they would add new flights, routes, and extra seats in order to limit the capacity, and limiting access to competitive fare information to keep the price of airfares artificially high.

Both lawsuits point to numerous specific instances where the four airlines’ CEOs publicly alluded to their own plans to limit capacity, charging that such references to “capacity discipline” were thinly veiled signals to competitors to follow suit.

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In the end, the two cases, and the DOJ investigation, may turn on just that question: Can the CEOs’ public statements reasonably be construed as invitations to competitors to collude? Common sense says yes; the law may say otherwise.

(The court documents for the two cases are available for review through the PACER electronic-document system, but charges may apply.)

Reader Reality Check

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This article originally appeared on FrequentFlier.com.