Antitrust

I feel American Airlines is in violation of all three of the major pieces of
antitrust legislation in one way or another. The three acts are the Sherman Act,
the Clayton Act, and the Federal Trade Commission Act. Section I of the Sherman
Act prohibits: “Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among the several States, or
with foreign nations, is hereby declared to be illegal and is a felony
punishable by fine or imprisonment.” Section II applies to: “Every person
who shall monopolize, or attempt to monopolize, or combine or conspire with any
other person or persons, to monopolize any part of the trade or commerce among
the several States, or with foreign nations, shall be deemed guilty of a felony
and is similarly punishable.” American Airlines is in per se violation of the
restraint of trade element of Section I. American Airline’s former chairman
admitted that they took willful action to put Vanguard Airlines, Sunjet
International, and Western Pacific out of business or at least out of that
market. This is blatantly anticompetitive. American may also be in per se
violation of Section II because of its use of predatory pricing methods.
American Airlines tried to cement their monopoly on the Dallas Fort Worth Area
by increasing its capacity while reducing fares at a rate that defies business
logic in an obvious attempt to snuff out the newer, smaller companies. Another
major element of Section II is monopolization. Monopolization is defined by the
Supreme Court as having these two elements: “the possession of monopoly power
in the relevant market and the willful acquisition or maintenance of the power
as distinguished from growth or development as a consequence of a superior
product, business acumen, or historic accident.” To be in violation of Section
II, these two elements have to be breached. Does American Airlines meet the
definition of a monopoly? It does carry 77 percent of the passengers who fly
nonstop to and from Dallas. American may not be the sole entity in this market,
but it does hold a considerable amount of market power in the area. Also, did
American Airlines exhibit anticompetitive behavior and intent? I feel it did.
The former chairman admitted that they wanted to take the competition out of the
market. The price rate reduction and escalation only reinforces his comments.
There was an attempt at monopolization because even with the competition,
American still had a large market presence in the area. Concerning the Clayton
Act, I feel American Airlines is in violation of the price discrimination
section of the act. American Airlines meets the criteria of this section because
it does engage in interstate commerce and the price discrimination it was
involved in effected competition greatly by lessening it. I also think American
was guilty of violating an amendment to the Clayton Act, the Robinson-Patman
Act. American substantially reduced prices to levels below their competitors and
“did not do so in good faith to meet an equally low price of a competitor.”
The Federal Trade Commission Act has an “umbrella” section (5) which
prohibits: “Unfair methods of competition in or affecting commerce, and unfair
or deceptive acts or practices in or affecting commerce are hereby declared
illegal.” This clause is very “all encompassing.” I think American
Airlines is obviously guilty of using unfair methods of competition and by using
these unfair methods affected commerce greatly in the greater Dallas-Fort Worth
Area. Is it “just business” or is it “just unethical?” Sometimes it’s
hard to distinguish between the two. The goal of business is to maximize company
profits as much as possible. In an ideal world business should also want to
satisfy consumer needs. American Airlines did provide to the consumer a
substantial discounted cost for a period, however, once the competition was
gone, the fares were drastically increased to make up for the lost earnings
during the discounted period. Sometimes the means businesses use is illegal.
American Airlines knew their actions would drive out their competitors. Their
actions were willful, blatant, intentional, and unethical. The Sherman Act is
very clear in that the consequences of violating the act can be fine or
imprisonment. The DOJ or the other airlines that were ran out out of the market
by American can pursue damages. Vanguard Airlines, Sunjet International, and
Western Pacific could pursue damages that would represent the lost revenue that
they would have earned had they not fallen victim to the predatory pricing of
American

Category: Law