U.S. charges 8 airlines fixed prices via computer

December 22, 1992|By Robert L. Jackson | Robert L. Jackson,Los Angeles Times

WASHINGTON -- Capping a three-year investigation, the Department of Justice filed a civil antitrust suit yesterday 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 airlines, United and USAir, the largest carrier at Baltimore-Washington International Airport, entered into a proposed consent decree to settle the charges, the department said, while the others indicated they would contest the suit. The other defendants are American, Delta, Northwest, TWA, Continental and Alaska.

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 had been affected.

The government complaint, filed in federal district court in Washington, listed the 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 the ones named in the antitrust suit.

The lawsuit alleges that the eight airlines used the 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 Department of Justice's

antitrust division, said "the airlines engaged in a process that involved repeated exchanges . . . of price increase proposals and counterproposals, with the effect of raising fares to consumers."

The complaint alleges that during the 1988-1990 time period the airlines agreed to increase particular fares and eliminate certain discounts for travel between specific cities.

Mr. 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 so-called "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 confidentially, 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.

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