New Antitrust Investigation of Airlines: Are They Speaking in Code or Just Stating the Facts?

The Associated Press and NBC news recently reported on a new civil antitrust investigation into possible collusion among major airlines to limit available seating capacity. Called “capacity discipline” or control, the news reports suggest that public statements by unnamed airline executives may be designed to keep fares high. The investigation seems to be based on alleged illegal signaling by airline executives about how quickly an airline would add new flights, routes, and extra seats.

The inquiry may be based on the public’s ongoing frustration with higher fares, added fees, and packed flights that predominate air travel today. While those frustrations are real, the question remains whether the conduct by the airlines reflects independent actions based on economic self interests or collusion either through an expressed or implied agreement to act in concert to stabilize or control air fares.

In recent criminal and related civil antitrust investigations into auto parts, flat panels, and computer chips to name a few, the government has been aided by cooperating insiders, both the entities themselves and individual executives, and by damning email and other electronic evidence that provided evidence of improper collusion. But not all information sharing among competitors is illegal. In fact, as the United States Supreme Court recently noted, there is no per se rule that prohibits information sharing. United States v. United States Gypsum Co., 438 U.S. 422, 441, n. 16:

“the exchange of price data and other information among competitors does not invariably have anti competitive effects. Indeed, such practices can in certain circumstances increase economic efficiency and render markets more, rather than less, competitive.”

In the 2012 trial of United States v. AUO Optronics, one of the pertinent jury instructions specifically stated that

“it is not unlawful for a person to obtain information about a competitors prices or even to exchange information about prices unless done, pursuant to an agreement or mutual understanding between two or more persons to fix prices . . .”

The conundrum for the airline industry and for its passengers is a very complex web that at least on the surface seems to suggest that market forces and not collusion are at play. The industry has consolidated significantly in the last decade, there have been a number of high profile bankruptcies, there are high costs (at least until recently) associated with labor and fuel, all of which have been blamed for a variety of economic woes faced by the industry. This has led airlines to fly more fuel-efficient, and in many cases, smaller, planes with higher passenger loads. Restrictions by air traffic control caused by crowded skies and crowded airport gates are also part of the mix. Nevertheless, if the inquiry demonstrates that the airlines’ executives were actually speaking in code, as part of a collusive agreement to control market forces by restraining capacity in the form of new routes, flights, or added seats, there could certainly be potential antitrust liability.