For years the watchdogs at the US justice department have known of alleged price gouging and ‘capacity discipline’.
what was behind
the blight of modern air travel: “Major airlines, in tandem, have
raised fares, imposed new and higher fees, and reduced service,” they
Eighteen months ago the U.S. Department of Justice opened a probe whether the major US carriers colluded in expansion plans. We said
it was time.
The government accused America’s leading airline companies, American, Delta, United and Southwest, of a preference for “tacit coordination over full-throated competition”; and possible violation of US Anti-Trust laws.
Airline Collusion: Nothing New, But Very Difficult To Prove
But after over a year of worrying, US airlines can now relax
because the US Justice Department is taking a step back from its
investigation of collusion, reported Bloomberg
A person familiar with the investigation told Bloomberg that
the Department of Justice (DOJ) investigators did not find enough
evidence to support a case, and that it is unlikely that the department
will file formal action against the airlines.
Most Closely Guarded Secrets
is it that despite a protracted investigation into the commercial
airline sector, the Justice Department could not find any smoking-gun
evidence of collusion it needed?
DOJ has known of alleged price gouging and ‘capacity discipline’ for
years – but has been unsuccessful in finding cut-and-dried evidence of
Airline insiders and legal analysts said
government’s case against the industry was near-impossible to prove –
regardless that the feds have known about these airfare schemes for
years, but they have not been able to fight back against the lobbyists.
“Airfare decisions normally are among the most closely guarded secrets at airlines,” said a 2015 Bloomberg article
Looking For The Lie
That is the nature of the beast: collusion is difficult to prove
, and the tricky thing about colluders is that they operate in secret. Suspicions
and evidence of identical prices are not enough to prove a criminal
offence. Securing a cartel conviction requires the Justice Department to
submit evidence that proves, beyond a reasonable doubt, that there is
an agreement between competitors to fix prices.
airline strategy involves ‘conscious parallelism’ – all doing the same
thing even though they never explicitly communicate the intention, or
communicate at all – like when all the gas stations in a trade area end
up selling at the same price. The fact alone tempts the conclusion that
conspiracy must exist, but also that there are non-conspiratorial
explanations for the phenomenon.
We know the DOJ has no problems or issues successfully pursuing, proving and prosecuting anti-trust violators – such as the infamous lysine cartel (amino acid) from the US, Japan, the Republic of Korea and Europe, several years ago.
The question becomes: where is the competition? Where
are Easyjet and Ryanair to disrupt air travel in America? Nowhere: the
country’s protectionist policy keeps out foreign airlines. THIS is what
needs to change. The difference in airfares between Europe and North
America is staggering. You can fly from one European country to another
sometimes for the cost of a taxi ride. But every flight in North America
costs a small fortune, particularly, short-haul flights.