Q: For several years, the three antitrust-immunized alliances of transatlantic carriers (Oneworld, SkyTeam and Star) have been presenting our agency with one commission and override agreement that applies to all flights of the immunized carriers within the alliance. The domestic commissions and overrides apply only to the major U.S. carrier, and the international deal applies to all alliance partners. I have no doubt that we are receiving lower commissions and overrides due to this immunized form of price fixing. I understand that this price fixing by the alliance partners is legal on transatlantic flights, but what if it affects our domestic revenue, too? Specifically, if U.S. Carrier A won't pay any domestic overrides unless we meet our market-share quota on the transatlantic, isn't such "tying" a violation of the antitrust laws?
A: The tying that you describe may well violate antitrust law, if the net effect is lower domestic overrides for your agency. The Department of Transportation (DOT) should investigate these allegations, and if the effect is as you describe, it should require the carriers to untie the offers and set up a wall between the override offerings in each market.
A grant of antitrust immunity means that the airlines can engage in what would otherwise be criminal behavior, such as price fixing and geographical division of markets. For reasons that have never made sense to me, the DOT granted this immunity to the three major alliances' major transatlantic carriers late in the last decade.
As a result, the carriers have immunity from prosecution and civil liability for joint marketing, joint sales, joint commission-setting and the like, as long as the activities "relate to foreign air transportation."
"Foreign air transportation" is a defined term in U.S. air transportation law; it means carriage of passengers from a point within the U.S. to a point outside the U.S. For example, if you fly with Oneworld partners American Airlines and British Airways on a single ticket from Nashville to London, with a connection in New York, the entire trip is "foreign air transportation," which means that the carriers can fix the commission for all segments on the trip and fix your overrides for that sale.
In the DOT's order approving the Delta-Air France price-fixing arrangement, the department specifically noted that "United States antitrust laws ... shall remain fully applicable to ... an unlawful restraint of competition within any market for air transportation solely within the United States."
In your case, there appears to be a "restraint of competition" if the level or existence of your domestic overrides is dependent on your transatlantic sales quotas. But for the immunized transatlantic quota imposed on you, your domestic overrides might well be higher.
Similarly, in the case of negotiated corporate airfares, tying domestic discounts to a corporation's attainment of a transatlantic purchasing quota may also be a restraint of competition in domestic air transportation. If an alliance imposes such requirements on corporations, they may well have an antitrust claim against the airlines.
Restraining domestic overrides and domestic corporate discounts is clearly beyond the bounds of what the DOT envisioned when it granted immunity to the transatlantic alliances. The government needs to examine this tying issue.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].