U.S. Airlines Face New Collusion Lawsuits-Sharing Data To Keep Ticket Prices High

Airfares rose 22.4% over the past year, according to the government’s September inflation report. And American Airlines, Delta, United other major carriers are accused of using shared airfare and customer shopping data to keep ticket prices high. Two new class action lawsuits say the airlines have built a way to spot competitors’ discounts and discourage the price cutting that could save passengers money. There’s a plausible antitrust claim here. There’s also a straightforward explanation for much of the same activity: airlines need to know when they’re charging more than competitors so they can lower their prices. The kind of information sharing that’s happening does not – on its own – amount to a legal violation. I just wrote about former American Airlines CEO Doug Parker explaining how airlines use Wall Street analysts to pressure competitors to stop growing, even while denying that executives signal each other. These lawsuits raise a related question about the systems pricing departments use every day: whether airlines have agreed to share information in a way that helps them avoid competing. Cory Garner flags two new complaints: Ward v. ATPCO, filed in federal court in Seattle, and Brown v. ATPCO, filed in Virginia. Between them, they name American Airlines, Delta Air Lines, United Airlines, Southwest Airlines, Alaska, Hawaiian and JetBlue, along with the Airline Tariff Publishing Company and its 3Victors subsidiary. ATPCO is owned by airlines and has long distributed fares and fare rules. These cases target its newer shopping data business. Airlines increasingly generate offers that vary by channel, itinerary, bundle and customer. Those offers can be harder for competitors to observe than a published fare. Iris collects shopping data. Airlines and other participants contribute information and receive competitive information in return. PriceEye makes offers easier to compare. It supplies competitive data and alerts that draw attention to differences in pricing. DemandView identifies demand before it becomes bookings. Search activity can show where customers want to travel even when they haven’t bought tickets. 3Victors describes the information exchange as “the more you contribute, the more you receive.” And it says Iris collects all the offers returned by a shopping request, including different brands, cabins and prices which is more than an airline would get scraping a limited website search result. The lawsuits argue this gives competitors visibility into competitor pricing they wouldn’t otherwise have, including for offers that haven’t resulted in sales. An airline that might discount to fill seats instead knows rivals can quickly discover and respond to the offer, so they do not make it. If an airline expects every price cut to be matched almost immediately, it may see less opportunity to win business by cutting in the first place. The same information can make tickets cheaper. If an airline is selling a flight for $100 more than a competitor, getting an alert that they’re being underpriced lets them adjust their fares to avoid losing a sale. And better demand information can support an extra flight or a larger aircraft, adding seat supply which supports lower fares. As I’ve explained when American, United and Southwest all showed the same $523 fare, independently responding to a rival’s price isn’t an antitrust violation. Similar prices aren’t enough to establish an agreement. An airline can generally observe a publicly available price and decide to match it. Competitors agreeing to keep prices above a certain level is price fixing. An agreement to exchange sensitive information that makes competition less vigorous is somewhere in beteween – it’s alleged here that the agreement violates the Sherman Act by unreasonably restraining competition. The lawsuit itself doesn’t establish that happens – they need to get to the discovery stage and come up with something juicy. In United States v. Container Corp., the Supreme Court found reciprocal exchange of recent customer-specific prices even without an agreement to adhere to a price schedule to violate the law. On the other hand, the Court also recognized that information exchanges can improve competition. Garner points out that the old government case against ATPCO involved airlines circulating proposed fares before customers could buy them. Airlines could see whether competitors would go along with an increase before exposing themselves to losing sales. PriceEye’s ability to show current offers for future flights isn’t the same thing. A price you can buy today for travel next June isn’t advance notice of a planned price increase. I’m skeptical that what the airlines are doing here actually breaks the law. At a minimum, their defenses are pretty good. A faster, more reliable way to observe bookable fares can help airlines compete. These systems don’t make pricing decisions. There’s no common agent fixing fares. Higher fares alone don’t show this system caused them. Fuel prices and resulting capacity discipline have mattered a lot. Meanwhile, airfares have actually been falling in inflation adjusted terms and even with the recent run-up are lower than they were pre-pandemic. Assuming the cases make it through to discovery, actual contracts airlines signed and feeds will show agreements and the real data being shared, as well as how the services are marketed and discussed at the airlines. If the case goes very far, I’d imagine we’d see a settlement involving money and tighter limits on data sharing to avoid triple damages plus fees. Topics on this page