Alleged Airline Price Fixing Is Probed
The Justice Department said Thursday that it is investigating possible antitrust violations by major airlines involving alleged attempts to fix prices and subvert competition by covertly communicating through a vast, industry-owned computer network. A department spokesman confirmed a published report that the agency’s antitrust division has sent “civil investigative demands” to several airlines seeking information on Airline Tariff Publishing, which collects and disseminates up-to-date fares for hundreds of thousands of domestic flights.
“Once we get the information in hand, then we will take a look and decide whether to convene a grand jury,” the spokesman said. He declined to elaborate.
The airline industry’s trade association declined to comment on the Wall Street Journal report, as did most of its members. A top executive with Airline Tariff Publishing also declined to discuss the matter. “It would not really be appropriate to comment,” said Mike Ferrier, senior vice president of ATP.
The air fare clearinghouse, based at Dulles International Airport outside Washington, is owned by many of the major domestic and international carriers.
“It provides a computer service that used to be done on paper,” said George James, chairman of Airline Economics, Inc., an aviation consulting firm in Washington.
As the airline industry grew and price wars proliferated, the need for a rapid central clearinghouse became increasingly apparent, James said. ATP responded in the mid-1960s by creating a computer system to track the hundreds of thousands of changes in fares.
“The 30,000 travel agents have to know this kind of information,” he said. “There has to be a system like this . . . for the whole air transport system to move smoothly.”
Otherwise, travelers or their agents would have no choice but to call each airline separately to make various connections--”a terrible inconvenience,” James said.
“It’s a system that provides an outstanding service to passengers,” he said.
But the clearinghouse may have been used by some airlines for an altogether different purpose--to subvert the fare competition spawned by deregulation during the 1980s, according to the Journal.
The newspaper said that the Justice Department investigation is focusing on the way various carriers publicize fares and price changes through the ATP network.
It is suspected that certain, unnamed carriers used arcane codes, symbols and even risque acronyms to tip off other airlines about pricing and marketing strategies, reducing competition within the industry and minimizing potential revenue losses.
The Justice Department’s “civil investigative demands” seek detailed information on how the airlines use the clearinghouse to “implement fare changes, monitor fares (and) make decisions on fares.”
Specifically, the department is asking each of the carriers to provide details of its relationship with ATP dating back to Jan. 1, 1988--including documents, training manuals and other published materials.
In addition, the investigators want ATP to provide information dating to Jan. 1, 1986, on its role in how carriers keep track of, influence and react to fare changes.
Antitrust laws bar companies from conspiring to fix prices or attempting to do so.
The Justice Department also is investigating the dominance by certain airlines of particular airports or regions and their control of airport gates and takeoff and landing spots, the Journal said.
