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New airline price fixing complaint

Hon. Thomas A. Dickerson  May 19, 2016

In this week’s article we examine the complaint in Prosterman v. Airline Tariff Publishing Company, American Airlines, Inc., Delta Air Lines, Inc. and United Airlines, Inc., (N.D. Cal. April 18, 2016) which “takes aim at policy changes that American, United and Delta all made in the past several weeks resulting in significant fare jumps for multi-city trips...(also alleges) that the Virginia based Airline Tariff Publishing Company (ATPCO) aided and abetted the companies in the fixing and stabilizing of airfares on these trips...The policy change, which the complaint says was made by all the airlines on or about April 1, prohibits so-called ‘combinality’ of airline fares, which allowed the cost of a multi-city trip to be calculated by simply combining the price of one-way fares...’The claims made by these plaintiffs are completely without merit’ said Matt Miller, a spokesman for American”[ Hancock, Airlines Hit With Antitrust Suit Over Multi-City Fares, The Recorder (April 19, 2016)].

Travel Law Update

Zika, Zika, Zika

In Belluck, A Window Into the Workings of Zika, (5/9/2016) it was noted that “Dr. Song was wondering how to best test their three-dimensional model of a brain. Well. Not a brain, exactly, but an ‘organoid’, essentially a tiny ball of brain cells. Grown from stem cells and mimicking early brain development. ‘We need a disease’, Dr. Song said...‘Why don’t we check out this Zika virus”. Within a few weeks...That suggestion led to one of the most significant findings in efforts to answer a central question: How does the Zika virus cause brain damage, including the abnormally small heads in babies born to infected mothers?...One year after the virus was first confirmed in Latin America, with the raging crisis likely to reach the United States this summer, no treatment or vaccine exists”.

A Cruise To Remember

In Steinmetz, Fred Olsen cruise liner stuck in Portland, Maine, with 26 percent of passengers sick, (5/8/2016) it was noted that “This is a cruise passengers won’t forget. The place: Portland, Maine, USA. 27 percent of the passengers on US-bound cruise ship Balmoral, operated by Fred Olsen are sick and under surveillance by the US Centers for Disease Control for norovirus...The CDC reported 252 of 919 passengers onboard have become ill. Eight crew members of 520 have also gotten sick”.

Share Better Fights Airbnb

In Dawsey, Union Financed Fight to Block Airbnb in New York City, (5/9/2016) it was noted that “A political organization funded by a top hotel-trades union has helped develop a multifaceted lobbying effort to persuade New York City politicians to curtail Airbnb, according to emails and records reviewed by the Wall Street Journal. The group known as Share Better has written talking points and op-eds for City Council members, arranged meetings and suggested new rules for home-share services. The president of the 32,000-member New York Hotel Trades Council, which has funded Share Better, has met with Mayor Bill de Blasio at least four times, the documents show”.

Say Goodbye To Austin, Texas

In McPhate, Uber and Lyft End Rides in Austin to Protest Fingerrprint Background Checks, (5/9/2016) it was noted that “On Monday, the two leaders of the booming ride-hailing industry halted service in Austin, Tex., after losing a legislative fight over how they screen their drivers. The decision to leave an energetic city known for its young, well-educated population offered a stark illustration of how strenuously the companies oppose new rules that would require them to perform fingerprint background checks on drivers. Ending the service also meant that about 10,000 drivers would be out of work”.

See generally, Gig Economy: The Case For Local Regulation Of Ride Apps, Portfolio Media, Inc. (5/3/2016) (discussion of local regulation of ride-hailing companies) law360.c0m; Hancock, Uber Deal Signals Open Season on Gig Economy, (4/22/2016).

California Legislation To Set Fares

In Miller, Swift Demise for Bill That Would Set Uber Fares, (4/20/2016) it was noted that “State legislation that would have pushed regulators to set rates on Uber and Lyft rides died in a Senate committee late Tuesday amid opposition from the ride-hailing companies and their trade associations. Sen. Ben Hueso, D-San Diego, could not find enough support from fellow Democrats for SB 1035 which also would have asked the Public Utilities Commission to scrutinize the industry’s insurance practices, its driver background checks and its efforts to serve handicapped passengers”.

Uber Settles Blind Riders Claims

In Hancock, Uber Settles Blind Riders’ Discrimination Claims, (5/2/2016) it was noted that “Uber Technologies, Inc. will deactivate drivers who don’t accept ride requests from service animal-assisted blind passengers as part of a settlement resolving federal and state discrimination law claims...The settlement-reached after 11 months of negotiations-puts the company on the hook for up to $85,000 to monitor compliance with the agreement over the next five years. Uber will also pay as much as $300,000 to the National Federation of the Blind and $45,000 total to the three blind California plaintiffs on whose behalf the original lawsuit was filed. It will pay attorneys’ fees on top of that”.

Uber Can’t Shake Rape Suit

In Todd, Uber Can’t Shake ‘Jane Doe’ Rape Suit, (5/5/2016) it was noted that “Uber Technologies, Inc. won’t be able to turn to its customary defense to duck a lawsuit brought by two women who say they were sexually assaulted by Uber drivers, a federal judge ruled Thursday. Uber played what has become its standard card in trying to quickly junk civil suits-insisting that the drivers were independent contractors and that the company shouldn’t be held liable for their actions...But U.S. District Judge Susan Illston on Wednesday rejected those arguments and denied Uber’s early bid to dismiss the suit...’It matters not whether Uber’s licensing agreements label drivers as independent contractors, if their conduct suggests otherwise’ she wrote”.

Travel Law Article: The Prosterman Complaint

The Prosterman Complaint states, inter alia, the following:

Nature Of The Action

“1. This action arises out of a combination and conspiracy by the three largest commercial passenger airlines in the United States (United, American and Delta)(“Airline Defendants) who together control over 70 percent of the market for U.S. passenger air travel and the Airline Tariff Publishing Company (ATP) which the Airline Defendants, aided and abetted by ATP, agreed to increase the fares for domestic multi-city flights and no longer permit non-refundable fare for each leg of such flights to be combined to arrive at the price for the multi-city itineraries, thereby causing consumers to pay hundreds and even thousands of dollars more for exactly the same flights”.

“3. The intent, purpose and effect of the conspiracy was and is to fix, raise, maintain and or stabilize prices for air passenger transportation services on multi-city trips within the United States in Violation of Section of the Sherman Antitrust Act, 15 U.S.C. Section 1 and Section 16720 of the Cartwright Antitrust Act, Cal. Bus. And Prof. Code Section 16720 by, among other actions, colluding to fix the prices of airfares on multi-city trips in the United States”.

“4. The Airline Defendants each announced their agreement in substantially identical terms in written notifications given to members of the travel agency industry, including Plaintiffs”.

“5. The Plaintiffs are air travel passengers and travel agents who bring this action under Sections 4 and 16 of the Clayton Antitrust Act and Section 16750 of the California Cartwright Antitrust Act to prohibit the Defendants from fixing and stabilizing airfares for multi-city air travel in violation of Section 1 of the Sherman Antitrust Act and Section 16720 of the Cartwright Act”.

Trade And Commerce

“19. Each of the Airline Defendants provides scheduled domestic air passenger transportation and from city pairs within the United States. A city pair is set of two cities between which scheduled air passenger transportation services are provided. Each of the Airline Defendants competes with each of the other Airline Defendants...”

“20. Total sales of domestic air passenger transportation services were approximately $146 billion in 2014 and they are reasonably expected to have exceeded that amount in 2015...Domestic net income for all domestic air carriers in 2014 was $8.8 billion...”

ATP’s Mission

“25. At all-time relevant hereto, ATP has been engaged in the collection and dissemination of air passenger transportation fare data...The Airline Defendants transmit fare information such as fare amounts and restrictions to ATP, which in turn disseminates the information to the Airline Defendants...”.

“26. Part of ATP’s sated mission is to protect or increase airline revenue. It aids, abets and enables its airline owners, including the Airline Defendants, to fix prices on airfares”.

“27. ATP distributes fare and fare-related data to the Airline Defendants. ATP’s service allows the Airline Defendants to easily and flexibly create, modify, match, cancel, fix and stabilize airfares among and between the Airline Defendants in seconds”.

“28. ATP aids and abets the Airline Defendants in the fixing and stabilizing of airfares on multi-city trips”.

“29. Each of the Airline Defendants in an owner of ATP and ATP Maintains on their behalf a date base of airline fare information. For each fare submitted by an Airline Defendant to ATP for processing, each Airline Defendant supplies ATP with, among other things, a fare basis code (the name of the fare), the dollar amount, and the fare rules. The fare rules contain the conditions under which a fare can be used or sold (i.e., ‘fare restrictions’)”.

“31. After ATP receives the fare changes from the Airline Defendants, it processes the changes and disseminates information on daily fare changes to the Airline Defendants, including computer reservation systems owned by the Airline Defendants. The information disseminated by AT is comprised of many different types of information and includes the rules involved in each airline’s pricing actions”.

Changing The Rules

“32. Because of the substantial ownership of ATP by the Airline Defendants, American, United and Delta directly participate in the rules affecting airfares. In this case, the Airline Defendants and ATP changed the rules, including those pertaining to so-called CAT 10 fares for multi-city air travel, so that air passengers traveling on multi-city itineraries now pay hundreds and even thousands of dollars more than if they booked passage on the same flights to the same cities as separate one-way fares”.

Penalizing Plaintiffs

“34. The Airline Defendants have the ability, are likely, and have threatened, to penalize Plaintiffs, including by terminating their ability to book flights and purchase tickets as travel agents and by imposing substantial financial penalties on them if the Plaintiffs do not abide by the policies and rules set by the Airline Defendants and ATP, including the illegal price fixing and fare restrictions complained of herein”.

Price Fixing Cause Of Action

“35. Sometime prior to April 1, 2014, the Airline Defendants agreed to change ATP’s ‘CAT 10' rule on fare combinality...This conduct constitutes...(an) unreasonable restraint of intestate trade and commerce...”

“37. For the purpose of forming and effectuating the combination and conspiracy, the Airline Defendants...through ATP did the following things...”

“(a) agreed to higher fares for multi-city air travel by eliminating the ‘combinality’ of lower, non-refundable, one-way fares on multi-city trips and requiring that a single round-trip fare be established for all such flights, on the same planes, to the same destinations, at fares costing Plaintiffs and other consumers up to ten times the cost of the combined one-way fares”;

“(b) agreed to prohibit passengers and travel agents, including Plaintiffs, from buying separate legs of multi-city air travel”;

“(c) agreed, and threatened travel agents, including Plaintiffs, who fail to charge the new, higher, fixed airfares for multi-city travel that they would receive ‘debit memos’, requiring the travel agents to pay the Airline Defendants the difference between the lower per-leg prices at which they booked flights and the new, higher, fixed prices”;

“(e) agreed, and threatened, to charge passengers $200.00 in change fees for each leg of a multi-city itinerary where each leg is booked separately rather than as a single ticket at the new, higher, fixed price; and”

(f) agreed and threatened to refuse to deal with travel agents, including Plaintiffs, who do not charge the Airline Defendants’ higher, fixed prices, but instead book multi-city itineraries for their customers on a less expensive, per leg basis”.

“39. On April 1, 2016, American announced: ‘Recently American Airlines, along with other U.S. carriers, made changes to CAT 10 domestic combinality fare rules that impact certain one-way fares. These changes prevent combining non-refundable local fares to create a connecting itinerary’...”.

The Announcements

“40. With respect to the change in domestic combinality fare rules, American’s spokesman Joshua Freed said: ‘The change was made in mid-March to stop flyers from paying fares lower than the airline had intended for certain markets’”.

“41. On March 30, 2016, United announced: ‘Multiple U.S. carriers recently made changes to the CAT 10 domestic combinality fare rules impacting some one-way fares’...”

“42. On or about April 1, 2016, Delta stated: ‘Delta Air Lines recently made a change to the combinality of one-way fare products’ And, ‘End-on-end combinality of non-refundable fares has been restricted’...”.

“43. The above announcements and the implementation of the new airfare rules by the Airline Defendants were essentially contemporaneous, whereas fares and rule changes of such magnitude in the airline industry are usually first implemented by one airline, observed for some time by other airlines to determine their effectiveness, and then followed later by the other airlines. In this instance the Airline Defendants announced and implemented the fare rule change virtually simultaneously...”.

The Cranky Flier Blog

“46. The ‘Cranky Flier’ blog, which is devoted to air travel issues, reported on March 31, 2016, that under the Defendant’s agreement, a passenger flying an American itinerary in May 2016, from San Francisco to Washington DC, then from Washington DC to Dallas and then back to San Francisco will pay a round-trip fare of $1,837.20, rather than $412.80 if the segments were purchased individually for the very same flights, at the very same time, on the very same aircraft, in the very same seat (i.e., $206.60, $$88.10 and $118.10, respectively); an overcharge of $1,424.40".

“48. On April 8, 2016, U.S. Senator Bob Menendez called for an investigation of the Defendants for the acts alleged herein. Senator Menendez’s press release contains several examples graphically depicting the enormous fare increases which airline passengers are required to pay as a result of the illegal actions of the Defendants. Copies of the graphs contained in the press release exemplifying the dramatic increases in fares as a result of the Defendants’ acts are attached and incorporated as Exhibit D”. Stay tuned.

Justice Dickerson has been writing about travel law for 39 years including his annually updated law books, Travel Law, Law Journal Press (2016) and Litigating International Torts in U.S. Courts, Thomson Reuters WestLaw (2016), and over 400 legal articles many of which are available at Justice Dickerson is also the author of Class Actions: The Law of 50 States, Law Journal Press (2016). For additional travel law news and developments, especially in the member states of the EU, see

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New airline price fixing complaint
Hon. Thomas A. Dickerson

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