Senator Richard Blumenthal has asked the Justice Department to probe whether airline carriers were colluding to slow growth. The Senator’s letter urged the department to “investigate this apparent anticompetitive conduct potentially reflecting a misuse of market power, and excessive consolidation in the airline industry.” Following the letter, the Department of Justice (DOJ) launched an antitrust investigation into the four major airlines: Delta Air Lines, Inc., American Airlines Group, Inc., United Continental Holdings, Inc., and Southwest Airlines Co. These four airlines have undergone numerous mergers within past several years and now account for approximately 80 percent of all domestic air travel.
The airlines received inquiries from DOJ to determine whether they are discussing how to control the supply of seats, a crucial factor in determining fares. American and Southwest also confirmed receiving DOJ requests for details of conversations, meetings and conferences where industry capacity was discussed. Antitrust lawsuits were also filed against all four major airlines alleging collusion among major airlines to limit routes, information, and available seats in order to keep airfares artificially high. As one complaint explains:
Plaintiffs allege that defendants illegally signaled to each other how quickly they would add new flights, routes, and extra seats. To keep prices high on fares, it was undesirable for the defendants to increase capacity.
A motion was filed before the Judicial Panel on Multidistrict Litigation (JPML) to consolidate the cases into a multidistrict litigation (MDL). The JPML will hear argument in October before determining whether to consolidate the actions and if so where the MDL should be. It will be most interesting to see if an MDL is created. We will continue to monitor the situation and will update things as they develop.
Sources: Wall Street Journal
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