Capping an intensive three-year investigation, the Justice Department filed a civil antitrust suit Monday charging eight of the nation’s largest airlines with using a computer system to fix prices in the $40-billion domestic air passenger business.
Two of the carriers, United and USAir, entered into a proposed consent decree to settle the charges, the department said, while the other carriers indicated that they would contest the suit. The other defendants named were American, Delta, Northwest, TWA, Continental and Alaska airlines.
The complaint, filed in federal district court in Washington, listed a computerized data exchange system as a co-defendant. Known as the Airline Tariff Publishing Co. of nearby Chantilly, Va., it is an airline fare data collection and dissemination service owned by a group of airlines that includes those named in the antitrust suit.
The lawsuit alleges that the eight airlines used this fare exchange system to signal each other about their fare-pricing intentions and to illegally restrain price competition between April, 1988, and May, 1990.
J. Mark Gidley, acting chief of the Justice Department’s antitrust division, said the airlines were able to use this system “to engage in an elaborate dialogue with one another about future fares.” He contended that “the airlines engaged in a process that involved repeated exchanges through Airline Tariff Publishing of price increase proposals and counterproposals, with the effect of raising fares to consumers.”
The complaint alleges that during the 1988-1990 period, the airlines agreed to increase particular fares and eliminate certain discounts for travel between specific cities, which are known as “city pairs.”
Gidley said that through the fare exchange system the defendants “communicated the details of proposed fare increases to competitors and obtained their reactions,” adding that “these coded discussions often continued until there was an agreement on a higher fare.”
Officials said airlines customarily used “first and last ticket date” provisions to signal each other about fares they planned to offer to the public, as well as the dates they intended to eliminate discounted fares and terminate fare wars. A part of the information system known as “footnote designators” allowed carriers to exchange such fare data on a confidential basis, officials said.
The antitrust division has spent three years gathering and reviewing a large number of documents and interviewing witnesses, officials said.
Under the proposed consent decree, United and USAir have agreed to stop using first and last ticket dates except to advertise the ending date of a new promotional fare. The proposed settlement also includes prohibitions that prevent the use of other methods to communicate future pricing intentions and to negotiate coordinated fare changes.
For the consent decree to become effective, the court must approve it after expiration of a 60-day comment period in compliance with federal antitrust laws, officials said.
American Airlines has previously called the charges absurd, and Delta has denied breaking any laws or regulations in the way it sets prices. Continental said Monday that it intends to fight the complaint and “defend its ability to notify travel agents and consumers about fare changes and to respond quickly to competitive pressures from other airlines.”
The suit involves the same computer system that was the subject of a class-action lawsuit earlier this year filed on behalf of thousands of airline passengers. In a settlement, six airlines agreed to distribute $458 million worth of discount coupons to travelers who could prove they were affected.