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NAW News

Legal Update

- January 2011

Invitation to Collude: Price-Fixing Charges Against Airlines Survive Motion to Dismiss

In 2009 Delta Airlines and AirTran were sued in multiple class action suits alleging that the two airlines conspired to fix baggage fees in violation of federal antitrust laws. Atlanta is the principal hub for both companies. Combined, the companies account for more than 90% of the air traffic at Hartsfield-Jackson Airport. (In Re Delta/AirTran Baggage Fee Antitrust Litigation).

The complaint alleges that AirTran invited Delta to collude (through a series of “earnings calls” with financial analysts and presentations at industry conferences) by inviting Delta to impose a first-bag fee on checked articles. The complaint further alleges that two weeks following AirTran’s invitation, Delta accepted—and imposed a $15 first-bag fee. A week later AirTran announced that it would impose the same fee with the same effective date. The airlines conceded that each closely monitor their competitor’s earnings calls. The complaint also alleges a conspiracy to reduce capacity—an illegal form of price fixing. Some of the comments cited in the complaint:

     4/23/08 Delta earnings call—“I think Delta can’t do it [price tickets to be profitable] alone. We have to
     do it in conjunction with other carriers…if the industry could achieve a 10% reduction in capacity…we’d
     be in pretty good shape given today’s fuel environment.” Delta believed “the industry has got to maintain
     discipline with respect to capacity.”

     10/23/08 AirTran earnings call—“We [AirTran] have the programming in place to initiate a first-bag fee.
     And at this point, we have elected not to do it, primarily because our largest competitor in Atlanta [Delta]…
     hasn’t done it…I’m not saying we won’t do it. But at this point, I think we prefer to be a follower in a situation
     rather than a leader right now.” (Emphasis added).

     11/5/08—Delta announces that it will begin charging passengers a $15 first-bag fee effective December 5, 2008.

     11/12/08—AirTran announces it will impose a $15 first-bag fee effective December 5, 2008.

The complaint alleges that the airlines acted in concert to fix prices (via a first-bag fee), alleging that the defendants: (1) engaged in collusive communications through earnings calls and industry conferences; (2) aligned their business practices following the collusive communications; (3) implemented business practices contrary to their self-interest following the communications; (4) offered a pretextual explanation for the implementation of the first-bag fee; and (5) undertook this concerted action to raise prices and achieve higher revenues.

The federal district court in Atlanta denied the defendants’ motion to dismiss the complaint, finding that plaintiffs had alleged sufficient factual specificity to establish an unlawful price-fixing conspiracy, but observing that “the complaint has its weaknesses.” The case now proceeds to discovery and trial.

The legal dangers of extending an “invitation to collude” to competitors highlighted in this case are also discussed in an earlier NAW advisory, FTC Settles “Invitation to Collude” Charges Against Truck Rental Company (link).

Enforcement of the FTC’s Red Flags Rule Scheduled to Start January 1, 2011

The Federal Trade Commission Red Flags Rule has an enforcement deadline of January 1, 2011. The original enforcement date of November 1, 2008 has been postponed by the Commission several times at the request of certain members of Congress. The rule requires all financial institutions and “creditors” with covered accounts to adopt written programs that help identify, detect and respond to patterns and practices that could indicate identity theft of their customers.

On December 18, 2010, the President signed the Red Flag Program Clarification Act of 2010, S.3987, which can be viewed at www.ftc.gov/redflagsrule. The new law amends the definition of “creditor” and limits the circumstances in which creditors are covered by the red flags rule. The FTC reports that it is reviewing the new law and will be revising the materials on its site to reflect the change in law.

For more information on the Red Flags Rule, see the FTC’s website, www.ftc.gov/redflagsrule.

NAW Joins Two Amicus Briefs Filed with the NLRB

The National Labor Relations Board (NLRB) is hearing several cases with significant importance to employers, and the ability of employees to decide—without coercion or duress—whether or not to join a union. NAW has joined the Coalition for a Democratic Workforce (www.myprivateballot.com) and other business organizations in filing amicus briefs in two of those cases, advocating NLRB decisions that are consistent with federal labor laws and protective of the employees’ right to vote in a secret ballot election monitored by the NLRB. A brief summary of the cases follow.

Lamons Gasket Company, No. 16 RD-1597 - The amicus brief urges the NLRB to protect employees’ rights to a secret ballot election in union organizing campaigns. The Board was asked not to abandon important protections against card check elections that were established in the Board’s 2007 decision in the Dana Corp. case. Specifically, the brief urges the Board to preserve the employees’ right to petition for a secret ballot election within 45 days of unionization via an employer’s voluntary recognition of a union by card check. The brief stressed that the well-recognized need for a federally-supervised private ballot vote by workers when deciding whether or not to join a union. This need has even been recognized in an earlier brief filed by the AFL-CIO, citing a U.S. Supreme Court decision that stated a representational election -

     “is a solemn … occasion, conducted under safeguards to voluntary choice… [whereas] other means
     of decision-making are not comparable to the privacy and independence of the voting booth.”

Roundy’s, Inc., No. 30-CA-17185 – This case involves the rights of a company to deny access to its private property to a nonemployee union (i.e., a union that does not represent the company’s employees) that is urging a consumer boycott of the company. The U.S. Supreme Court and numerous appellate courts have upheld an employer’s right to deny nonemployee union agents access to private property for purposes of handbilling or urging boycotts. The amicus brief asks the Board to prohibit nonemployee union agents from trespassing on private property for the purpose of harming the employer’s business through boycotts under any circumstances; or alternatively, employers should not be required to allow nonemployee union agents access to private property for the purpose of harming the employer’s business unless the employer permits such access to non-labor organizations for similarly harmful purposes.