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
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
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?
DOJ has known of alleged price gouging and 'capacity discipline' for
years - but has been unsuccessful in finding cut-and-dried evidence of
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.
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.
We are commited to solutions for promoting airline passenger policies that forward first and foremost the safety of all passengers while not imposing unrealistic economic burdens that adversely affect airline profitability or create exhorbitant ticket price increases.
All American air carriers shall abide by the following standards to ensure the safety, security and comfort of their passengers:
Establish procedures to respond to all passenger complaints within 24 hours and with appropriate resolution within 2 weeks.
Notify passengers within ten minutes of a delay of known diversions, delays and cancellations via airport overhead announcement, on aircraft announcement, and posting on airport television monitors.
Establish procedures for returning passengers to terminal gate when delays occur so that no plane sits on the tarmac for longer than three hours without connecting to a gate.
Provide for the essential needs of passengers during air- or ground-based delays of longer than 3 hours, including food, water, sanitary facilities, and access to medical attention.
Provide for the needs of disabled, elderly and special needs passengers by establishing procedures for assisting with the moving and retrieving of baggage, and the moving of passengers from one area of airport to another at all times by airline personnel.
Publish and update monthly on the company’s public web site a list of chronically delayed flights, meaning those flight delayed thirty minutes or more, at least forty percent of the time, during a single month.
Compensate “bumped” passengers or passengers delayed due to flight cancellations or postponements of over 12 hours by refund of 150% of ticket price.
The formal implementation of a Passenger Review Committee, made up of non-airline executives and employees but rather passengers and consumers – that would have the formal ability to review and investigate complaints.
Make lowest fare information, schedules and itineraries, cancellation policies and frequent flyer program requirements available in an easily accessed location and updated in real-time.
Ensure that baggage is handled without delay or injury; if baggage is lost or misplaced, the airline shall notify customer of baggage status within 12 hours and provide compensation equal to current market value of baggage and its contents.
Require that these rights apply equally to all airline code-share partners including international partners.