IN
THE
UNITED STATES
DISTRICT
COURT
FOR
THE
DISTRICT
OF
COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
AIRLINE
TARIFF
PUBLISHING
COMPANY;
et al.,
Defendants.
Filed:
12/21/92
92-2854
Civil
Action
No.:
Judge
Revercomb
COMPETITIVE
IMPACT
STATEMENT
Pursuant
to
Section
2(b)
of
the
Antitrust
Procedures
and
Penalties
Act,
15
u.s.c.
§
16
(b)-(h),
the
United
States
submits
this
Competitive
Impact
Statement
relating
to
the
proposed
Final Judgement
submitted
for
entry
with
the
consent
of
United
Air
Lines,
Inc.,
and
USAir,
Inc.,
in
this
civil
antitrust
proceeding.
I.
NATURE
AND
PURPOSE
OF
THE
PROCEEDING
On
December
21,
1992,
the
United
States
filed
a
civil
antitrust
complaint
alleging
that
Alaska
Airlines,
American
Airlines,
Continental
Airlines,
Delta
Air
Lines,
Northwest
Airlines,
Trans
World
Airlines,
United
Air
Lines,
and
USAir
("airline
defendants"),
Airline
Tariff
Publishing
Company
("ATP"),
and
co-conspirators
conspired
unreasonably
to
restrain
competition
among
themselves
in
violation
of
Section
1
of
the
Sherman
Act,
15
U.S.C.
§
The
Complaint
alleges
two
causes
of
action.
The
first
cause
of
action
alleged
in
the
Complaint
is
that,
during
the
period
beginning
at
least
as
early
as
April
1988
and
continuing
through
at
least
May
1990,
each
of
the
airline
defendants
and
co-conspirators
engaged
in
various
combinations
and
conspiracies
with
other
of
the
airline
defendants
and
co-conspirators,
consisting
of
agreements,
understandings,
and
concerted
actions
to
fix
prices
by
increasing
fares,
eliminating
discounted
fares,
and setting
fare
restrictions
for
tickets
purchased
for
travel
between
cities
in
the
United
States.
These
agreements,
understandings,
and
concerted
actions
were
reached
and
effectuated
through
each
of
the
airline
defendant's
use
of
the
computerized
fare
dissemination
services
of
ATP
to
(1)
exchange
proposals
and
negotiate
fare
changes;
(2)
trade
fare
changes
in
certain
markets
in
exchange
for
fare
changes
in
other
markets;
and
(3)
exchange
mutual
assurances
concerning
the
level,
scope,
and
timing
of
fare
changes.
The
combinations
and
conspiracies
alleged
in
the
first
cause
of
action
had
the
effect
of
depriving
consumers
of
scheduled
air
passenger
transportation
services
of
the
benefits
of
free
and
open
competition
in
the
sale
of
such
services.
-2-
The
second
cause
of
action
alleged
in
the
Complaint
is
that,
during
the
period
beginning
at
least
as
early
as
April
1988
and
continuing
through
to
the
date
of
the
Complaint,
the
airline
defendants,
ATP,
and
co-conspirators
engaged
in
a
combination
and
conspiracy,
consisting
of
an
agreement,
understanding,
and
concert
of
action
to
create,
maintain,
operate,
and
participate
in
the
ATP
fare
dissemination
system.
This
fare
dissemination
system
has
been
formulated
and
operated
in
a
manner
that
unnecessarily
facilitates
coordinated
interaction
among
the
airline
defendants
and
co-conspirators,
enabling
them
to:
(1)
communicate
more
effectively
with
one
another
about
future
increases
to
fares,
future
changes
to
fare
restrictions,
and
future
elimination
of
discounted
fares;
(2)
establish
links
between
proposed
fare
changes
in
one
or
more
city-pair
markets
and
proposed
changes
in
other
city-pair
markets;
(3)
monitor
each
other's
changes,
including
changes
in
fares
that
are
not
available
for
sale;
and
(4)
lessen
uncertainty
concerning
each
other's
pricing
intentions.
The
combination
and
conspiracy
alleged
in
the
second
cause
of
action
has
made
coordinated
interaction
among
the
airline
defendants
and
co-conspirators
more
likely,
successful,
and
complete,
and
has
deprived
consumers
of
air
passenger
transportation
services
of
the
benefits
of
free
and
open
competition
in
the
sale
of
such
services.
The
Complaint
seeks
relief
that
will
prevent
the
defendants
from
continuing
or
renewing
the
alleged
conspiracies,
or
-3-
engaging
in
any
other
conspiracy
or
adopting
any
other
practice
having
a
similar
purpose
or
effect.
On
December
21,
1992,
the
United
States,
United
and
USAir
filed
a
Stipulation
in
which
they
consented
to
the
entry
of
the
proposed
Final
Judgment
containing
prohibitions
on
the
conduct
of
United
and
USAir
(the
settling
defendants)
that
provides
the
relief
the
United
States
seeks
in
the
Complaint.
Under
the
proposed
Final
Judgment,
the
settling
defendants
will
be
required
to
institute
a
compliance
program
to
ensure
that
they
do
not
continue
or
renew
the
alleged
conspiracies
or
engage
in
any
other
conspiracy
or
practice
having
a
similar
purpose
or
effect.
Additionally,
the
proposed
Final
Judgment
requires
that
United
and
USAir
file
annual
reports
with
the
Government
certifying
that
each
has
complied
with
Section
VI
of
the
Final
Judgment.
The
United
States
and
the
settling
defendants
have
stipulated
that
the
Court
may
enter
the
proposed
Final
Judgment
after
compliance
with
the
Antitrust
Procedures
and
Penalties
Act,
15
U.S.C.
§
16(b)-(h),
provided
the
United
States
has
not.
withdrawn
its
consent.
The
proposed
Final
Judgment
provides
that
its
entry
does
not
constitute
any
evidence
against
or
admission
by
any
party
with
respect
to
any
issue
of
fact
or
law.
Entry
of
the
proposed
Final
Judgment
will
terminate
the
action
against
United
and
USAir,
except
that
the
Court
will
retain
jurisdiction
over
the
matter
for
further
proceedings
-4-
that
may
be
required
to
interpret,
enforce,
or
modify
the
Final
Judgment,
or
to
punish
violations
of
any
of
its
provisions.
II.
DESCRIPTION OF
THE
PRACTICES
INVOLVED
IN
THE
ALLEGED
VIOLATIONS
A.
Industry
Background
The
domestic
passenger
airline
industry
generates
annual
sales
in
the
tens
of
billions
of
dollars.
Each
of
the
airline
defendants
is
a
significant
competitor,
providing
scheduled
nonstop,
one-stop,
and
multi-stop
domestic
air
passenger
services
between
a
large
number
of
origin
and
destination
cities
(city
pairs).
Through
hub
and
spoke
route
systems,
the
airlines
are
able
to
consolidate
passengers
from
many
points
at
a
single
location
(
the
hub)
and
then
transport
them,
along
with
passengers
originating
at
the
hub,
to
a common
destination.
The
hub
system
generally
permits
an
airline
to
serve
many
more
city
pairs
than
it
otherwise
would
be
able
to
serve
with
nonstop
service
alone.
Although
each
of
the
airline
defendants
operates
an
extensive
network
of
city-pair
routes,
the
networks
are
not
identical.
All
airlines
do
not
serve
all
city
pairs,
and
the
service
offered
by
airlines
on
the
same
city
pair
may
vary
as
to
the
type
of
service
offered
{nonstop
versus
one
or
more
stops).
In
addition,
the
times
and
frequencies
of
service
offered
may
vary
considerably
among
airlines.
As
a
consequence
-5-
of
service
variations
and
differences
in
passenger
mixes
and
cost
structures,
airlines
may
have
varying
preferences
as
to
the
prices
that
should
be
charged
passengers
for
travel
on
a
particular
city
pair.
For
each
of
the
thousands
of
city
pairs
served
by
each
airline,
numerous
fares
are
offered
to
customers.
Many
of
these
fares
carry
different
types
of
restrictions
that
are
designed
to
segment
the
market
for
air
travel
into
groups
with
varying
sensitivities
to
price
and
time
of
travel.
For
example,
fares
designed
to
appeal
to
leisure
travelers
may
carry
longer
advance
purchase
requirements
than
fares
designed
for
business
travelers.
Airlines
constantly
alter
fares
in
response
to
changes
in
costs,
both
industrywide
and
airline-specific,
and
to
changes
in
consumer
demand,
both
for
travel
generally
and
travel
on
particular
city
pairs.
Moreover,
the
availability
to
consumers
of
a
seat
on
a
particular
flight
at
a
particular
fare
is
controlled
by
each
airline's
continuous
adjustment,
based
upon
projected
and
actual
demand,
of
the
inventory
of
seats
available
at
that
fare.
ATP
is
the
central
source
for
the
collection,
organization,
and
dissemination
of
fare
information
for
virtually
every
domestic
airline.
(ATP
does
not
receive
seat
allocation
information.)
Each
of
the
airline
defendants
owns
and
participates
in
the
ATP
fare
dissemination
system
through
which
information
is
exchanged
about
fares.
ATP
also
provides
this
-6-
information
to
computer
reservation
systems
("CRSs")
and
other
subscribers.
Each
airline
supplies
ATP
with
basic
information
about
its
fares.
This
information
includes:
fare
codes
(which
indicate
the
names
of
the
fares
-- e.g., "
F"
is
first
class;
"Y"
is
full
coach),
fare
amounts,
rules,
and
routings.
Rules
contain
restrictions
that
limit
or
condition
the
use
of
the
fare,
including
advance
purchase
requirements
and
penalties
for
itinerary
changes.
Routings
are
used
to
limit
fares
to
travelers
using
a
particular
itinerary,
for
example,
connecting
flights
over
a
particular
hub.
An
airline
also
can
attach
up
to
two
footnotes
to
any
fare
in
the
ATP
data
base.
Footnotes
are
identified
by
alphanumeric
codes
("footnote
designators"),
such
as
"A"
or
"32."
Footnotes
are
used
by
airlines
to
identify,
among
other
things,
the
relevant
ticketing
and
travel
dates.
A
first
ticket
date
indicates
a
future
date
at
which
a
fare
is
currently
scheduled
to
become
available
for
purchase
by
consumers.
The
dissemination
of
a
fate
with
a
first
ticket
date
does
not
mean
that
the
fare
will
ever
be
offered
for
sale;
the
airlines
often
change
the
first
ticket
date
to
an
earlier
or
later
time
than
originally
announced,
or
withdraw
the
fare
altogether
before
the
first
ticket
date
arrives.
A
last
ticket
date
indicates
a
future
date
at
which
a
fare
currently
offered
for
sale
may
no
longer
be
available
for
sale.
Again,
no
obligation
is
implied
by
the
dissemination
of
-7-
a
last
ticket
date,
and
the
airlines
often
change
the
last
ticket
date
to
an
earlier
or
later
time
than
originally
announced,
or
withdraw
the
fare
before
its
last
ticket
date.
The
travel
dates
contained
in
footnotes
indicate
when
a
consumer
can
travel
using
a
particular
fare.
A
first
travel
date
indicates
the
first
date
upon
which
travel
on
a
particular
fare
may
commence.
A
last
travel
date
indicates
the
last
date
upon
which
travel
may
commence.
At
least
once
every
weekday,
each
airline
defendant
submits
its
fare
changes
to
ATP.
Fare
changes
include
changes
in
existing
fares,
both
those
available
and
unavailable
for
sale,
as
well
as
the
addition
of
new
fares,
which
may
be
either
available
or
unavailable
for
sale.
Many
of
the
airline
defendants'
changes
to
existing
fares
involve
changes
in
footnotes
that
add,
change
or
remove
the
first
or
last
ticket
dates.
To
indicate
that
fare
changes
in
different
markets
are
connected,
airlines
can
use
a common
footnote
designator
for
each
set
of
changes.
Once
ATP
receives
the
fare
changes,
it
processes
the
changes
and
then
disseminates
those
fare
changes
at
least
once
each
weekday
to
the
airline
defendants
and
other
ATP
subscribers,
including
CRSs.
The
information
disseminated
by
ATP
includes,
among
other
things,
the
fare
codes,
dollar
amounts,
and
rules
involved
in
each
airline
defendant's
pricing
actions.
ATP
also
disseminates
the
footnotes
used
by
each
airline
defendant
on
each
fare,
including
the
footnote
-8-
designators
and
the
ticketing
and
travel
dates
contained
in
the
footnotes.
The
information
disseminated
by
ATP
is
used
differently
by
the
CRSs
and
the
airline
defendants.
The
airline
defendants,
either
directly
or
by
contract
with
third
parties,
employ
sophisticated
computer
programs
that
process
and
sort
the
fare
and
fare
change
information
received
from
ATP
to
produce
detailed
daily
reports.
These
reports
display
the
fare
changes
in
a
variety
of
ways
that
allow
the
airline
defendants
to
monitor
and
analyze
all
of
each
other's
fares
and
contemplated
changes
to
fares
and
to
discern
patterns
or
links
among
fare
changes
in
various
markets.
In
contrast,
CRSs
load
the
information
into
their
data
bases,
which
travel
agents
use
to
make
reservations
and
price
tickets
on
fares
that
are
available
for
sale.
Travel
agents
using
a CRS
can
obtain
fare
information
for
only
one
market
at
a
time,
most
often
for
a
Specific
flight
on
a
given
day,
and
they
do
not
have
access
to
any
airline's
footnote
designators.
Thus,
travel
agents
cannot
readily
determine
all
of
the
airlines'
contemplated
changes
to
fares.
Nor
can
they
easily
determine
relationships
between
fares
(including.
proposed
fare
increases
and
proposed
elimination
of
discounted
fares)
in
one
or
more
city
pairs
and
fares
in
other
city
pairs.
B.
Illegal
Agreements
to
Fix
Prices
by
Increasing
Fares,
Eliminating
Discounted
Fares,
and
Setting
Fare
Restrictions
in
Various
City-Pair
Markets
The
first
cause
of
action
is
based
on
an
alleged
series
of
Sherman
Act
Section
1 per
se
illegal
price
fixing
agreements
-9-
that
were
reached
beginning
as
early
as
April
1988
and
continuing
through
at
least
May
1990.
Using
the
ATP
fare
dissemination
system,
the
airline
defendants
participated
in
a
complex,
iterative,
and
essentially
private
exchange
of
future
fare
information
with
the
purpose
and
effect
of
reaching
agreements
on
price.
Using,
among
other
things,
first
and
last
ticket
dates
and
footnote
designators,
they
exchanged
clear
and
concise
messages
setting
forth
the
fare
changes
that
each
preferred,
and
they
engaged
in
an
electronic
dialogue
to
work
out
their
differences.
The
airline
defendants
conducted
complex
negotiations,
.offered
explanations,
traded
concessions
with
one
another,
took
actions
against
their
independent
self-interests,
punished
recalcitrant
airlines
that
discounted
fares,
and
exchanged
commitments
and
assurances
--
all
to
the
end
of
reaching
agreements
to
increase
fares,
eliminate
discounts,
and
set
fare
restrictions.
There
is
evidence
of
two
types
of
price
fixing
agreements
and
each
of
the
airline
defendants.
was
a
party
to
such
agreements.
These
price
fixing
agreements
occurred
frequently,
were
of
significant
duration,
and
involved
many
FLW\SDLU
markets,
including
some
of
the
most
heavily
traveled
in
the
United
States.
In
the
first type
of
agreement,
the
airline
defendants
rely
primarily
on
fares
with
first
ticket
dates
in
the
future,
(that
is,
fares
that
are
not
available
for
purchase
by
consumers),
in
-10-
conjunction
with
footnote
designators
and
other
devices,
to
communicate
proposals,
counterproposals,
and
commitments
to
increase
fares.
For
example,
Carrier
A
initially
proposes
to
increase
a
set
of
fares
in
a
number
of
markets
by
filing
these
changes
in
ATP
with
a
first
ticket
date
two
weeks
in
the
future
(and
attaching
a
last
ticket
date
to
the
corresponding
existing
fares
that
are
to
be
replaced}.
The
increase
may
involve
raising
the
level of
a
particular
fare
or
making
the
rules
for
a
particular
fare
more
restrictive.
Other
airlines
then
respond
to
Carrier
A's
proposal
by
filing
similar
fares
with
future
first
ticket
dates,
filing
different
fares
with
future
first
ticket
dates,
or
expanding
the
set
of
fares
with
future
first
ticket
dates
to
include
different
markets
or
fare
types.
Fares
in
thousands
of
markets
may
be
involved.
Typically,
each
airline
links
the
markets
and
fare
types
involved
by
using
the
same
footnote
designator
on
all
of
the
fares
that
it
proposes
to
increase.
The
process
of
negotiation
through
fare
proposals
may
go
through
several
iterations
during
which
the
fare
level
originally
proposed
may
be
modified
and
different.
types
of
fares
or
sets
of
markets
may
be
added
or
subtracted
from
the
proposal,
as
the
airlines
bargain
and
make
trades
with
each
other.
(Airline
A,
for
instance,
may
go
along
with
increases
that
it
did
not
prefer
in
markets
X
and
Y
in
exchange
for
Airline
B
going
along
with
increases
that
it
did
not
prefer
in
markets
R
and
S.)
The
first
ticket
date
(and
corresponding
-11-
last
ticket
dates)
may
be
repeatedly
postponed
into
the
future
to
ensure
that
the
fares
do
not
go
into
effect
until
al l
significant
competitors
have
committed
to
them.
This
complex
negotiation
ends
when
all
airlines
have
LQGLFDWHG
their
commitment
to
the
fare
increases
by
filing
the
same
fares
in
the
same
markets
with
the
same
first
ticket
date.
The
increases
take
effect
on
that
future
date
and
then,
and
only
then,
are
the
lower
fares
withdrawn
and
the
new
and
higher
fares
sold
in
their
place.
In
the
second
type
of
agreement,
the
airlines
rely
primarily
on
last
ticket
dates,
in
conjunction
with
footnotes
designators
and
other
devices,
to
communicate
proposals,
counterproposals
and
commitments
to
eliminate
discounted
fares
which
are
currently
being
sold
to
consumers.
The
negotiation·
process
may
mirror
that
described
above
except
that.
the
airlines
communicate
by
placing
last
ticket
dates
on
the
particular
fares
that
each
proposes
to
.eliminate.
The
negotiation
ends
when
all
of
the
airlines
have
placed
the
same
last
ticket
date
on
the
same
fares.
On
that
date,
the
particular
discounted
fares
expire.
In
certain
instances,
an
airline
may
create
a
basis
for
an
agreement
to
eliminate
particular
discounted
fares
at
a
particular
time.
For
example,
Airline
A
independently
concludes
that
it
is
in
its
best
interest
to
file
a
discounted
fare
in
a
market
important
to
Airline
B.
Airline
B,
however,
finds
the
discounted
fare
objectionable.
Airline
B may
create
-12-
a
basis
for
a
trade
by
placing
a
low
fare
in
one
of
Airline
A's
more
profitable
markets.
It
then
attaches
to
that
fare
a
last
ticket
date
that
is
only
a
few
days
in
the
future.
Airline
B
may
use
a
unique
footnote
designator
for
the
fare,
that
is,
a
designator
that
is
different
from
that
used
for
any
other
fare
with
the
same
last
ticket
date,
thus
highlighting
its
action.
To
ensure
that
Airline
A
understands
the
link
between
the
new
"tradeable"
discount
fare
and
the
targeted
discount
fare,
Airline
B
may
also
use
a
fare
basis
code
and
dollar
amount
for
the
new
fare
similar
to
that
of
the
targeted
fare.
In
some
cases,
Airline
B may
also
file
in
its
own
market
a
fare
that
matches
Airline
A's
original
discount
fare
but
that
has
the
same
last
ticket
date
and
footnote
designator
as
its
new
tradeable
discount
fare
in
Airline
A's
market,
thus
linking
Airline
A's
original
discount
fare
and
Airline
B's
new
fare
even
more
clearly.
In
these
ways,
Airline
B conveys
an
offer
to
Airline
A:
"I'll
remove
my
discount
from
your
market
on
the
indicated
last
ticket
date
if
you
remove
your
discount
from
my
market
on
that
date."
Airline
A
then
accepts
the
offer
by
placing
a
short
last
ticket
date
on
its
original
discount
fare,
often
matching
Airline
B's
last
ticket
date.
Airlines
A
and
B
then
allow
the
original
discounted
fare
and
the
new
discounted
fare
to
expire
on
the
agreed
upon
last
ticket
date,
and
higher
prices
are
re-established
and
maintained
in
both
markets.
-13-
c.
Illegal
Agreement
to
Operate
A
Fare
Dissemination
System
that
Unreasonably
Facilitates
Fare
Coordination
The
second
cause
of
action
is
based
on
alleged
joint
activities
that
began
as
early
as
April
1988
and
continued
until
the
date
of
the
Complaint
and
that
are
illegal
under
a
Sherman
Act
Section
1
"rule
of
reason"
analysis.
The
core
of
the
second
cause
of
action
is
that
the
airline
defendants
agreed
to
exchange
fare
information
(including
information
on
fares
that
were
not
available
for
sale
to
consumers)
with
one
another
through
ATP
in
a
manner
that
unnecessarily
and
unreasonably
allowed
them
to
coordinate
fares.
ATP
is
a
joint
venture
in
which
all
of
the
airline
defendants
are
co-owners.
Airlines,
including
a
number
of
the
airline
defendants,
serve
on
its
board
of
directors.
ATP
maintains
its
fare
data
base
on
behalf
of
the
airline
defendants.
ATP
provides
the
airlines
with
a
number
of
communication
devices
that
allow
them
to
coordinate
better
across
markets
and
within
each
market
on
fares
and
fare
changes.
The
principal
ATP
communication
devices
are
first
ticket
dates,
last
ticket
dates,
and
footnote
designators.
They
enabled
the
defendants
on
many
occasions
to
reach
overt
price-fixing
agreements
of
the
type
described
in
the
first
cause
of
action.
These
same
devices
also
facilitate
pervasive
coordination
of
airline
fares
short
of price
fixing
--
coordination
that
would
not
occur
simply
by
virtue
of
the
structure
of
the
airline
industry.
-14-
The
likelihood
of
successful
coordination
among
horizontal
competitors
is
substantially
enhanced
when
firms
are
able
to
identify
mutually
beneficial
terms
of
coordination,
detect
deviations
(or
"cheating")
from
the
coordinated
outcome,
and
punish
or
credibly
threaten
to
punish
those
deviations
{that
is,
make
the
deviation
less
profitable
than
adhering
to
the
coordinated
price).
The
airline
industry
has
a
number of
characteristics
that
make
it
susceptible
to
successful
coordination
among
firms.
Many
airline
city-pair
markets
are
highly
concentrated.
All
current
fares
(those
available
for
sale
to
consumers)
and
fare
restrictions
are
necessarily
widely
distributed
and
easily
monitored
by
the
competing
airlines.
In
addition,
using
CRSs,
the
airlines
can
monitor
whether
a
competitor
is
making
seats
available
discount
at
a
fare
at
any
given
time.
(The
ability
to
cheat
by
increasing
the
amount
of
discount
seats
sold
is
also
limited
by
restrictions
that
make
discount
fares
unattractive
or
unavailable
to
large
numbers
of
customers.)
Each
of
these
factors
tends
to
make
coordination
among
competitors
easier
and
more
likely
to
occur,
even in
the
absence
of
communication
through
ATP.
On
the
other
hand,
other
inherent
characteristics
of
the
airline
industry
tend
to
make
anticompetitive
coordination
more
difficult.
Airlines'
costs
of
serving
particular
city-pair
markets
vary
widely,
as
do
consumers'
preferences
or
demand
for
different
airlines'
services
in
different
city-pair
markets.
-15-
This
is
particularly
true
when
one
airline
offers
nonstop
service
in
a
city
pair
where
it
has
a
hub
at
one
endpoint,
while
its
competitors
offer
one-stop
or
connecting
service.
These
differences
result
in
the
various
airlines
serving
a
city-pair
market
often
having
quite
different
preferred
prices,
making
it
difficult
for
them
to
identify
a
mutually
beneficial
coordinated
price.
The
large
number
of
city-pair
markets
and
fare
changes
also
makes
coordination
a
difficult
task.
Finally,
coordination
is
discouraged
by
the
difficulty
of
distinguishing
fare
changes
that
are
intended
to
punish
a
competitor
for
cheating
from
f
are c
hanges
that
are
themselves
deviations
from
the
coordinated
price;
misconstruing
a
competitor's
intentions
could
precipitate
additional
fare
cutting.
The
ATP
communication
devices
enable
the
airlines
to
substantially
overcome
many
of
these
impediments
to
better
coordination.
Without
these
tools
(or
some
RWKHU
substitute
mechanism),
each
airline
is
more
likely
to
act
independently,·
charging
low
prices
in
certain
city
pairs,
such
as
those
in
which
it
is
the
low
cost
carrier,
or
matching
low
prices
in
other
markets
where
it
would
have
preferred
a
higher
price.
With
these
devices,
the
airlines
can
coordinate
and
achieve
fare
levels
above
those
that
otherwise
would
have
prevailed.
1.
ATP
Facilitates
the
Identification
of
Mutually
Beneficial
Terms
for
Coordination
By
filing
fares
with
a
first
ticket
date
in
the
future,
or
extending
a
first
ticket
date
further
into
the
future
as
the
-16-
original
first
ticket
date
approaches,
the
airlines
are
able
to
exchange
information
about
fares
that
are
in
essence
mere
proposals
rather
than
offers
to
sell
tickets
to
consumers.
The
airlines
can
then
change
and
modify
these
unavailable
fares
through
an
iterative
process
of
multiple
proposals,
counterproposals,
and
other
messages.
The
airlines
can
also
use
footnote
designators
to
indicate
which
markets
are
involved
in
their
proposals.
The
use
of
such
fare
proposals
allows
airlines
to
see
how
competitors
will
react
to
a
proposed
increase,
consider
alternative
proposals,
and
identify
a
mutually
acceptable
fare
increase,
without
the
risk
of
losing
sales
during
the
process
to
a
competitor
with
lower
fares.
Ultimately,
each
airline
can
increase
its
fares
with
greater
certainty
of
its
competitors'
likely
fare
actions.
Similarly,
by
placing
a
last
ticket
date
RQ
discounted
fares,
airlines
can
communicate
their
desires
to
eliminate
those
fares
and
determine
their
competitors
willingness
to
do
likewise,
without
risking
any
loss
of
traffic.
Through
a
process
of
repeated
filing
and
changing
last
ticket
dates,
often
in
conjunction
with
the
use
of
footnote
designators
to
link
markets,
the
airlines
can
develop
at
virtually
no
cost
a
consensus
on
whether
and
when
a
discounted
fare
should
be
removed.
Consequently,
airlines
can
remove
discount
fares
with
greater
certainty
of
their
competitors'
likely
actions.
-17-
Last
ticket
dates,
first
ticket
dates,
and
footnote
designators
also
facilitate
trades
among
the
airlines
during
the
negotiation
process.
Increased
prices
desired
by
some
airlines
are
exchanged
for
increases
desired
by
others
in
different
markets.
Often
such
trades
involve
hubs.
Each
airline
tends
to
prefer
higher
fares
on
routes
to
or
from
its
hub
cities,
where
it
tends
to
have
high
market
shares
and
generate
the
highest
profits.
Thus,
an
airline
may
be
willing
to
raise
fares
above
its
most
preferred
fare
on
others'
hub
routes
in
order
to
ensure
that
those
airlines
charge
the
higher
fares
it
desires
on
its
own
hub
routes.
By
using
first
and
last
ticket
dates
and
footnote
designators
to
link
the
markets
involved
in
the
trade,
the
airlines
can
more
precisely
communicate
the
terms
of
such
multimarket
trades
at
very
low
cost.
2.
ATP
Makes
Punishing
Deviations
More
Effective
and
Less
Costly
When
coordinated
prices
are
above.
the
competitive
level,
an
airline
will
have
an
incentive
to
deviate
from
the
coordinated
price,
that
is,
to
lower
its
price.
The
greater
the
incentive
to
deviate,
the
less
likely
it
is
that
firms
will
attempt
to
coordinate
prices
in
the
first
place,
and
the
less
effective
will
be
any
coordination.
However,
if
deviations
from
coordinated
fare
levels
can
be
detected
quickly
and
made
unprofitable
("punished")
by
other
airlines,
effective
coordination
becomes
more
likely.
-18-
The
broad
and
rapid
dissemination
of
fares
in
the
airline
industry
ensures
that
any
airline's
fare
changes
can
be
detected
easily
and
rapidly
by
other
airlines.
Because
of
the
large
number
of
markets
and
the
frequency
of
fare
changes,
however,
determining
whether
fare
changes
are
deviations
from
coordinated
fare
levels
is
more
difficult.
Punishment
is
unlikely
to
be
effective
if
a
deviating
airline
cannot
determine
which
fare
changes
are
intended
as
punishment,
or
which
of
its
fare
actions
elicited
the
punishment.
Moreover,
the
risk
of
other
airlines
misinterpreting
fare
changes
intended
to
be
punishment
as
deviations,
which
themselves
should
be
punished,
raises
the
cost
of
punishment.
ATP
makes
punishment
easier
and
less
costly.
The
airlines
use
footnote
designators
or
last
ticket
dates
to
link
city-pair
markets
together,
communicating
to
both
the
cheater
and
its
other
competitors
that
a
fare
action
is
intended
as
punishment
for
another
airline's
fare
action,
not
itself
a
deviation
that
should
be
punished.
In
this
way,
ATP
facilitates
the
successful
elimination
of
many
discounts
and
discourages
competitive
pricing
in
the
first
place.
While
first
and
last
ticket
dates
and
footnote
designators
are
of
immeasurable
value
to
the
airlines
in
facilitating
pricing
coordination,
they
provide
little
benefit
to
consumers.
Because
the
airlines
change
the
ticket
dates
often
as
they
react
to
each
other's
messages
and
attempt
to
reach
a
consensus,
the
ticket
dates
for
a
particular
fare
do
not
-19-
provide
travel
agents
or
consumers
with
reliable
information
on
when
the
fare
will
be
increased
or
discontinued.
Consumers
cannot
rely
on
the
presence
or
absence
of
a
last
ticket
date
on
a
fare
as
assurance
that
the
fare
will
be
available
for
a
certain
period
of
time
the
airlines
may
withdraw
the
fare
or
may
stop
making
seats
available
at
the
fare
without
prior
notice.
Determining
whether
fare
changes
will
actually
be
implemented
requires
the
ability
to
sort
fare
change
data
to
reveal
patterns
and
connections
between
fares.
This
requires
information
and
analytical
tools
not
readily
available
to
travel
agents
through
CRSs.
The
airlines,
on
the
other
hand,
have
the
incentive
and
ability
to
sort
the
fare
change
data
to
make
maximum
use
of
the
communicative
value
of
first
and
last
ticket
dates
and
footnote
designators
and
to
predict,
with
some
certainty,
each
other's
fare
actions.
III.
EXPLANATION
OF
THE
PROPOSED FINAL
JUDGMENT
The
proposed
Final
Judgment
is
intended
to
ensure
that
the
United
and
USAir
do
not
continue
to
use
the
ATP
fare
dissemination
system
or
any
similar
mechanism
in
a
manner
that
unnecessarily
facilitates
fare
coordination
or
that
enables
them
to
reach
specific
price-fixing
agreements.
It
prohibits
the
settling
defendants
from
disseminating
first
ticket
dates
or
using
designating
mechanisms,
and
substantially
restricts
their
use
of
last
ticket
dates.
It
does
not,
however,
prevent
-20-
United
and
USAir
from
instituting
programs
to
protect
passengers
from
unanticipated
fare
changes,
such
as
guaranteeing
fares
at
the
time
a
reservation
is
made.
The
proposed
Final
Judgment
also
prohibits
other
conduct
that
would
allow
the
settling
defendants
to
communicate
costlessly
their
pricing
intentions
or
signal
competitors
that
fare
actions
in
different
markets
are
linked.
The
proposed
Final
Judgment,
however,
does
not
prevent
the
settling
defendants
from
disseminating
their
currently
available
fares
through
ATP
to
CRSs
for
consumer
booking
and
ticketing,
from
advertising
current
fare
information
to
consumers,
or
from
offering
for
sale
fares
for
which
travel
can
only
begin
in
the
future,
for
example,
offering
fares
in
the
summer
that
apply
to
winter
travel
to
Florida.
Finally,
nothing
in
the
Final
Judgment
regulates
the
independent
pricing
decisions
of
United
and
USAir,
whether
or
not
their
prices
respond
to
or
evoke
a
response
from
other
airlines.
A.
Prohibited
Conduct
Section
IV
of
the
proposed
Final
Judgment
contains
six
categories
of
prohibited
conduct.
Certain
exceptions
to
these
prohibitions
are
contained
in
the
limiting conditions
in
Section
V.
Section
IV(A)
contains
general
prohibitions
on
agreements
between
airlines
"to
fix,
establish,
raise,
stabilize,
or
maintain
any
fare."
This
provision
prohibits
the
settling
defendants
from
any
further
price
fixing
whether
by
the
means
-21-
alleged
in
the
Complaint
or
by
other
means
violative
of
the
Sherman
Act.
Section
IV(B)
contains
one
of
the
key
provisions
of
the
proposed
Final
Judgment.
It
prohibits
the
settling
defendants
from
"disseminating
any
first
ticket
dates,
last
ticket
dates,
or
any
other
information
concerning
the
defendant
airline's
planned
or
contemplated
fares
or
changes
to
fares."
This
provision
bars,
with
limited
exceptions
discussed
below,
the
settling
defendants'
use
of
first
and
last
ticket
dates,
as
well
as
any
alternative
means
of
communicating
their
future
pricing
intentions.
For
example,
it
prevents
the
settling
defendants
from,
with
any
precision,
negotiating
fare
increases
through
press
releases.
Similarly,
it
prevents
the
settling
defendants
from
beginning
to
use
travel
dates
to
coordinate
fare
changes
rather
than
to
communicate
meaningful
information
to
consumers
on
the
relevant
travel
periods
for
particular
fares.
This
provision
will
prevent
United and
USAir
from
participating
in
the
extensive
and
costless
negotiation
over
the
amount,
scope
and
timing
of
fare
changes.
The
ban
on
the
settling
defendants'
use
of
first
ticket
dates
is
absolute.
All
of
the
settling
defendants'
fares,
whether
in
ATP, a
CRS
or
elsewhere,
must
be
currently
available
for
sale
to
consumers.
The
settling
defendants
may
continue
to
use
last
ticket
dates,
but
only
in
very
limited
circumstances.
Section
V(C)
of
the
Final
Judgment
permits
the
settling
defendants,
through
-22-
advertising
in
media
of
general
circulation
or
through
mass
mailings,
and
in
a
manner
designed
to
directly
reach
a
meaningful
number
of
likely
potential
consumers,
to
state
that
a
promotional
fare
(a
new
fare)
will
end
on
a
particular
date.
Once
having
included
the
last
ticket
date
in
such
advertising,
the
settling
defendants
may
indicate
the
promotional
fares'
last
ticket
dates
in
a
CRS
and
elsewhere.
Once
another
airline
has
disseminated
a
last
ticket
date
for
a
promotional
fare
in
accordance
with
this
section,
the
settling
defendants
may
disseminate
a
last
ticket
date
in
a
CRS
or
elsewhere
on
an
identical
new
fare
in
one
or
more
of
the
same
city
pairs
without
advertising.
These
restrictions
apply
only
when
a
settling
defendant
chooses
to
use
a
last
ticket
date.
The
settling
defendants
remain
free
to
advertise
and
market
their
services
and
fares
in
any
other
manner
they
choose,
including
any
marketing
or
advertising
that
a
fare
will
be
available
only
for
a
short
period
of
time.
The
restrictions
on
the
dissemination
of
last
ticket
dates
contained
in
Section
V(C)
increase
the
likelihood
that
last
ticket
dates
will
not
be
used
by
the
settling
defendants
to
coordinate
fare
changes
but
rather
to
generate
whatever
additional
consumer
demand
may
be
created
by
advertising
that
a
fare
ends
on
a
precisely
defined
date.
The
requirement
that
the
fare
be
a
new
fare,
and
that
the
last
ticket
date
be
disseminated
at
the
time
the
fare
is
first
offered
for
sale,
will
help
to
ensure
that
last
ticket
dates
are
not
used
to
-23-
engage
in
an
iterative
negotiation
process
to
eliminate
existing
discount
fares
or
to
facilitate
trades
across
markets.
However,
the
restrictions
are
flexible
enough
to
allow
the
settling
defendants
to
tailor
their
advertising
programs
that
employ
last
ticket
dates
to
particular
promotions
and
to
allow
the
settling
defendants
to
take
advantage
of
changes
in
the
nature
of
mass
communication:
The
restrictions
do
not
require
that
advertising
that
uses
last
ticket
dates
be
national
in
scope,
nor
do
they
prescribe
the
advertising
medium
that
must
be
used
to
justify
use
of
a
last
ticket
date.
Thus,
for
a
nationwide
promotion,
the
settling
defendants
might
need
to
broadly
advertise
to
reach
a
meaningful
number
of
potential
consumers,
while
for
a
local
or
regional
promotion,
local
or
regional
advertising
would
be
sufficient.
Similarly,
as
new
methods
of
advertising
become
more
prevalent
and
widely
used
by
consumers,
those
methods
may
satisfy
the
requirement
that
the
last
ticket
date
be
advertised
in
media
of
general
circulation.
Section
V(D)
provides
a
limited
exception
to
the
prohibition
on
disseminating
information
relating
to
planned
or
contemplated
fare
changes.
It
_will
allow
the
settling
defendants
to
continue
to
give
consumers
general
information
on
impending
fare
changes.
For
example,
the
settling
defendants
may
make
general
public
statements
that
because
of
increases
in
costs
they
expect
fares to
increase,
or
may
advertise
that
certain
low
fares
are
for
a
limited
time
only.
Because
the
-24-
information
is
general,
it
is
unlikely
that
the
settling
defendants
could
use
it
to
coordinate
fares.
Section
IV(C)
prohibits
the
settling
defendants
from
"making
visible
or
disseminating
its
own
tags
or
any
other
similar
designating
mechanism
to
any
other
airline."
This
provision
prohibits
the
settling
defendants
from
using
any
device
to.
link
markets
and
coordinate
fare
changes
in
the
way
that
they
currently
use
footnote
designators.
It
would,
for
example,
prevent
the
settling
defendants
from
attaching
arbitrary
but
unique
travel
complete
dates
to
fares
in
different
markets
in
order
to
communicate
a
connection
or
link
between
those
fares.
Section
IV(D}
prohibits
the
settling
defendants
from
"making
visible
or
disseminating
to
any
other
airline
any
fare
that
is
intended
solely
to
communicate
a
defendant
airline's
planned
or
contemplated
fare
or
contemplated
changes
to
fares."
This
provision
would
proscribe
fares
that,
although
technically
available
currently
for
sale,
will
not,
as
a
practical
matt.er,
be
considered
by
consumers.
For
example,
Section
IV(D)
would
preclude
a
settling
defendant
from
communicating
its
intention
to
increase
fares
by
filing
fares
that
are
higher
but
otherwise
identical
to
existing
fares,
and
then
waiting
for
other
airlines
to
file
identical
higher
fares
before
withdrawing
its
lower
fares.
Because
no
rational
consumer
would
purchase
the.
higher
fares
as
long
as
the
lower
existing
were
available,
the
higher
fares
would
be
"intended
-25-
solely
to
communicate"
a
settling
defendant's
contemplated
changes
to
fares.
Section
IV(E)
prohibits
the
settling
defendants
from
"disseminating
two
or
more
footnote
designators
that
identify
footnotes
that
contain
identical
information."
This
provision
will
prevent
the
settling
defendants
from
continuing
to
use
multiple
footnotes,
each
with
different
designators,
that
contain
the
same
ticketing
and
travel
date
information.
In
addition,
Section
IV(E)
prohibits
the
settling
defendants
from
disseminating
any
footnote
designator
that
identifies
an
"empty"
footnote,
that
is,
one
that
has
no
travel
dates,
last
ticket
date
or
other
information.
In
both
cases,
the
footnote
designator
serves no
purpose
other
than
to
communicate
connections
between
fares
or to
call
competitors'
attention
to
particular
fares.
Section
IV(F)
prohibits
the
settling
defendants
from
"using
fare
codes
that
convey
information
other
than
fare
class
or
terms
and
conditions
of
sale
or
travel."
Certain
standard
fare
codes
are
used
throughout
the industry
to
identify
the
class,
as
well
as
the
restrictions
associated
with
a
fare,
such
as
advance.
purchase requirements
This
provision
is
intended
to
prevent
the
settling
defendants
from
using
codes
not
related
to
either
the
fare
class
or
the
terms
and
conditions
of
sale
or
travel
to
send
messages
and
link
markets.
For
example,
Section
IV(F)
prevents
a
settling
defendant
from
sending
a
message
to
-26-
another
airline
by
placing
letters
that
identify
that
airline
in
the
settling
defendant's
fare
code.
B.
Compliance
Program
and
Certification
In
addition
to
the
prohibitions
contained
in
Sections
IV
and
V,
each
settling
defendant
would
be
obligated
to
implement
an
antitrust
compliance
program.
This
program
would
require
each
settling
defendant
to
designate
an
Antitrust
Compliance
Officer
within
30
days
of
entry
of
the
Final
Judgment.
The
Antitrust
Compliance
Officer
for
each
settling
defendant
would
be
responsible
for
distributing
copies
of
the
Final
Judgment
to
all
officers
of
that
defendant
and
to
employees
of
that
defendant
who
have
any
responsibility
for
fares.
These
persons
would
be
required
annually
to
certify
that
they
understand
and
agree
to
abide
by
the
terms
of
the
Final
Judgment.
Each
settling
defendant
must,
within
45
days
after
the
Antitrust
Compliance
Officer
learns
of
any
violations
of
the
Final
Judgment,
take
appropriate
action
to
terminate
or
modify
the
activity
so
as
to
comply
with
the
Final
Judgment.
Finally,
the
settling
defendants
must
maintain
records
relating
to
their
use
of
last
ticket
dates
under
the
limited
exception
provided
in
Section
V(C).
C.
Effect
of
the
Proposed
Final
Judgment
on
Competition
The
relief
in
the
proposed
Final
Judgment
is
designed
to
remove,
as
to
United
and
USAir,
the
artificial
restraints
that
have
been
imposed
by
all
defendants
on
competition.
The
proposed
Final
Judgment
effectively
will
remove
United
and
-27-
USAir
as
participants
in
the
coordination
of
fares
through
ATP.
The
Department
of
Justice
believes
that
the
proposed
Final
Judgment
contains
sufficient
provisions
to
prevent
further
violations
by
United
and
USAir
of
the
type
alleged
in
the
Complaint
and
remedy
the
effects
of
the
alleged
conspiracy
as
to
these
defendants.
IV.
REMEDIES AVAILABLE
TO
POTENTIAL PRIVATE LITIGANTS
Section
4
of
the
Clayton
Act,
15
U.S.C.
§
15,
provides
that
any
person
who
has
been
injured
as
a
result
of
conduct
prohibited
by
the
antitrust
laws
may
bring
suit
in
federal
court
to
_recover
three
times
the
damages
suffered,
as
well
as
costs
and
reasonable
attorney's
fees.
Entry
of
the
proposed
Final
Judgment
will
neither
impair
nor
assist
the
bringing
of
such
actions.
Under
the provisions
of
Section
5(a)
of
the
Clayton
Act,
15
U.S.C.
§
16{a),
the
Judgment
has
no
prima
facie
effect
in
any
subsequent
lawsuits
that
may
be
brought
against
any
defendant
in
this
matter.
v.
PROCEDURES
AVAILABLE
FOR
MODIFICATION OF
THE
PROPOSED FINAL
JUDGMENT
As
provided
by
the
Antitrust
Procedures
and
Penalties
Act,
any
person
believing
that
the
proposed
Final
Judgment
should
be
modified
may
submit
written
comments
to
Mark
C.
Schechter,
Chief,
Transportation,
Energy
and
Agriculture
Section,
U.S.
Department
of
Justice,
Antitrust
Division,
555
Fourth
Street,
-28-
N.W.,
Room
9104,
Washington,
D.C.
20001,
within
the
60-day
period
provided
by
the
Act.
These
comments,
and
the
Department's
responses,
will
be
filed
with
the
Court
and
published
in
the
Federal
Register.
All
comments
will
be
given
due
consideration
by
the
Department
of
Justice,
which
remains
free
to
withdraw
its
consent
to
the
proposed
Judgment
at
any
time
prior
to
entry.
VI.
ALTERNATIVE
TO
THE
PROPOSED
FINAL
JUDGMENT
The
alternative
to
the
proposed
Final
Judgment
would
be
a
full
trial
of
thecase
against
United
and
USAir.
In
the
view
of
the
Department
of
Justice,
such
a
trial
would
involve
substantial
cost
to
the
United
States
and
is
not
warranted
because
the
proposed
Final
Judgment
provides
relief
that
will
remedy
the
violations
of
the
Sherman
Act
alleged
in
the
United
States'
Complaint.
-29-
VII.
DETERMINATIVE MATERIALS
AND
DOCUMENTS
No
materials
and
documents
of
the
type
described
in
Section
2(b)
of
the
Antitrust
Procedures
and
Penalties
Act,
15
U.S.C.
§
16(b),
were
used
in
formulating
the
proposed
Final
Judgment.
Respectfully
submitted,
MARK C. SCHECHTER
ROGER W. FONES
Attorneys
U.S.
Department
of
Justice
DONNA
N. KOOPERSTEIN
MARY JEAN MOLTENBREY
MICHAEL
D.
BILLIEL
D.C.
Bar
No.
394377
JILL A. PTACEK
BRADLEY S. LUI
D.C. Bar No. 425033
Attorneys
U.S.
Department
of
Justice
Antitrust
Division
555
4th
Street,
N.W.
Room
9104
Washington,
D.C.
20001
(202)
307-6388
-30-
DATED: Dec. 21, 1992
