1. Airline Tariff Publishing Investigation
DOJ Investigation Began in 1991
Settled by Consent Decree in 1994
Never Went to Trial

2. Airline Tariff Publishing Company (ATPCO)
Central clearinghouse for dissemination of fare change information
Airlines send information to ATPCO daily
New fares added
Old fares removed
Existing fares changed
ATPCO sends compilation to
Computer reservation systems (CRS)
Available to travel agents and consumers
All major airlines

3. Information Transmitted by ATPCO
Fare basis code or “name” of fare
Origin and destination airports
Price
First and last ticket dates
First and last travel dates
Restrictions
Advance purchase
Minimum stay
Blackout dates
Specific routing or set of flights

4. Focus of Investigation
By setting a future first ticket date, an airline could announce a fare increase, but delay its implementation.
“Pre-announcement” of price changes
Ticket and travel dates as well as restrictions were submitted as footnotes to the fare.
“Footnote designators” are names for footnotes submitted by airlines
Fare basis codes and footnote designators could be used as a means of communication

5. DOJ’s Case: December 21, 1992
Filed charges against ATPCO and 8 airlines
Airlines used ATPCO to collude to raise prices and restrict competition
Data from ATPCO records and airlines’ internal documents
One carrier announces fare increase on future date
Other carriers announce increases on same route, often at a different fares
Iterated back and forth until all charge same fare on same date
When “agreement” was not reached, fare increase did not go into effect

6. Multimarket Coordination
Suppose Middle Tennessee Airlines has a hub at Nashville and offers non-stop flight to New Orleans and Chicago
Mid-South Airlines has a hub at Atlanta offering non-stop flights to New Orleans and Chicago
Both also operate flights on the Atlanta- Nashville route
Each offers one-stop service in competition with the other’s non-stop flights

7. Multimarket Coordination
Suppose MTA is unhappy with MSA’s Atlanta to Chicago fare
MTA cuts its Nashville to New Orleans fare with a short last ticket date below that offered by MSA using a basis code similar to MSA’s for Atlanta-Chicago
MTA then matches MSA’s Nashville-New Orleans fare with a first ticket date the same as the previous last ticket date
If MSA gets the message,
it ends its cheap Atlanta-Chicago fare and matches MTA’s fare on that route
with a first ticket date that is the same as MTA’s last ticket date on the cheap Nashville-New Orleans fare
Result: each carriers’ one-stop fare matches the other’s non-stop fare

8. Airlines’ Defense Not a per se violation of Sherman Act
Consumers benefit from fare info
Evidence: Bookings surge near end of sale, fall shortly after fare increases
Court should use a rule of reason standard
All firms respond to actions of competitors
DOJ allegations indistinguishable from competition
Pre-announcement also occurred on monopoly routes where collusion is irrelevant
No pre-announcement of price decreases
Decreases are more destabilizing to cartel behavior
Basis codes and designators not used to signal connections between fares
Unknown number of seats available for any fare
Low profits, frequency of exit implies any price- fixing is not effective at raising profits

9. DOJ Response
Consumer benefits small in comparison to opportunity to coordinate prices
Surges occurred only on a few well-publicized occasions, not those with multiple end-date changes
Pre-announcement on monopoly routes shows some value to consumers
Pre-announcement of fare decreases were avoided because of likely antitrust problems
Remaining seat availability for a fare is known, even if total number of seats is not
Profits not relevant, collusion may raise profits (reduce losses) even when firms still lose money

10. Remedy
When DOJ filed its case, it also filed a settlement with two airlines
United and USAir
Agreed to stop pre-announcement of fares
Tunney Act: Court must review government antitrust settlements
Other airlines opposed
DOJ said harm to conspiracy only reason to oppose
Court accepted settlement
March 17, 1994 final settlement
No restrictions on fares, but no pre-announcement
No linking with codes or designators
Expires in 10 years (2004)

11. Subsequent Fare Setting Practices
Airlines announce fare increases on Friday afternoon effective Saturday
Traffic is low on weekends; few tickets sold
If competitors do not match by Sunday afternoon,
Increase is withdrawn Sunday night
Old fare in effect Monday morning
If competitors match the increase, the higher fare remains in effect

12. Importance Did not go to trial
no court decision or order
no antitrust precedent was created
Signaled the DOJ’s willingness to pursue coordinated prices made possible by rapid communication
In Economic terms, the airlines’ use of ATPCO was a facilitating practice
Still not clear if this was evidence of conspiracy (per se violation) or an illegal practice under rule of reason