Wednesday, January 18, 2017

And Justice For None. January 18, 2017

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And Justice For None.
Department of Justice Lets US Airlines Off the Hook

January 18, 2017

Like flying in-formation. When airlines collude as part of a price-fixing conspiracy it leads to millions of passengers being overcharged for flights.
For years the watchdogs at the US justice department have known of alleged price gouging and 'capacity discipline'. 

They knew what was behind the blight of modern air travel: "Major airlines, in tandem, have raised fares, imposed new and higher fees, and reduced service," they conceded.

Eighteen months ago the U.S. Department of Justice opened a probe whether the major US carriers colluded in expansion plans. We said it was time.

The government accused America's leading airline companies, American, Delta, United and Southwest, of a preference for "tacit coordination over full-throated competition"; and possible violation of US Anti-Trust laws.

Airline Collusion: Nothing New, But Very Difficult To Prove

But after over a year of worrying, US airlines can now relax because the US Justice Department is taking a step back from its investigation of collusion, reported Bloomberg last week.

A person familiar with the investigation told Bloomberg that the Department of Justice (DOJ) investigators did not find enough evidence to support a case, and that it is unlikely that the department will file formal action against the airlines.

Most Closely Guarded Secrets 

How is it that despite a protracted investigation into the commercial airline sector, the Justice Department could not find any smoking-gun evidence of collusion it needed?
The DOJ has known of alleged price gouging and 'capacity discipline' for years - but has been unsuccessful in finding cut-and-dried evidence of conspiracy.

Airline insiders and legal analysts said the government's case against the industry was near-impossible to prove - regardless that the feds have known about these airfare schemes for years, but they have not been able to fight back against the lobbyists.

"Airfare decisions normally are among the most closely guarded secrets at airlines," said a 2015 Bloomberg article. 

Looking For The Lie

That is the nature of the beast: collusion is difficult to prove, and the tricky thing about colluders is that they operate in secret. Suspicions and evidence of identical prices are not enough to prove a criminal offence. Securing a cartel conviction requires the Justice Department to submit evidence that proves, beyond a reasonable doubt, that there is an agreement between competitors to fix prices.

Another airline strategy involves 'conscious parallelism' - all doing the same thing even though they never explicitly communicate the intention, or communicate at all - like when all the gas stations in a trade area end up selling at the same price. The fact alone tempts the conclusion that conspiracy must exist, but also that there are non-conspiratorial explanations for the phenomenon.

We know the DOJ has no problems or issues successfully pursuing, proving and prosecuting anti-trust violators - such as the infamous lysine cartel (amino acid) from the US, Japan, the Republic of Korea and Europe, several years ago.
The question becomes: where is the competition? Where are Easyjet and Ryanair to disrupt air travel in America? Nowhere: the country's protectionist policy keeps out foreign airlines. THIS is what needs to change. The difference in airfares between Europe and North America is staggering. You can fly from one European country to another sometimes for the cost of a taxi ride. But every flight in North America costs a small fortune, particularly, short-haul flights.

Flyers Rights Education Fund is a 501(c)(3) charity to which contributions are tax deductible. 

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