During a June 2015 International Air Transport Association conference, the CEO of Lufthansa Air announced that the airline was planning to impose an $18 surcharge on price-comparison websites; these public statements may have encouraged competitors collectively representing the vast majority of the market to follow Lufthansa’s lead in raising prices
In a letter to the Transportation Secretary and Attorney General, Klobuchar, Lee, and Blumenthal urged the Department of Transportation (DOT) and the Department of Justice (DOJ) to thoroughly investigate the matter and to address any violations found with an appropriate remedy
WASHINGTON, DC—Today, U.S. Senators Amy Klobuchar (D-MN), Mike Lee (R-UT), and Richard Blumenthal (D-CT) called on the U.S. Department of Transportation (DOT) and the U.S. Department of Justice (DOJ) to investigate airline surcharges. During a June 2015 International Air Transport Association conference, the CEO of Lufthansa Air announced that the airline was planning to impose an $18 surcharge on price-comparison websites. These public statements may have encouraged competitors collectively representing the vast majority of the market to follow Lufthansa’s lead in raising prices. In a letter to Transportation Secretary Foxx and Attorney General Lynch, Klobuchar, Lee, and Blumenthal urged DOT and DOJ to thoroughly investigate the matter and to address any violations found with an appropriate remedy.
“The Department of Justice, which enforces the Sherman Act, has the ability to prosecute anticompetitive conduct, such as collusion, price signaling, monopolization and attempted monopolization,” the lawmakers wrote. “Lufthansa’s public statements at the IATA conference may have encouraged competitors collectively representing the vast majority of the market to follow Lufthansa’s lead in raising prices. Although no other carrier has publically followed Lufthansa, the Department of Justice should determine what other steps, if any, Lufthansa took, what reaction occurred, and whether those actions run afoul of the Sherman Act.”
Klobuchar and Lee are the ranking member and chairman, respectively, of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights.
The full text of the lawmakers’ letter is below:
Dear Secretary Foxx and Attorney General Lynch,
We write to you to express our concerns regarding competition in the commercial air transportation industry. Specifically, we are concerned about issues raised by Lufthansa CEO Carsten Spohr’s participation in the “CEO Insight” panel at the June, 2015 International Air Transport Association (IATA) conference in Miami, Florida.
On June 8, 2015, at a panel of the IATA conference with more than 100 executives from competing airlines in the audience, Mr. Spohr announced that Lufthansa was planning to impose an $18 surcharge on price-comparison websites. The panel moderator asked, “If the others don’t follow and you end up being on your own with this fee, will you have shot yourself in the foot?” Mr. Spohr replied, “Well, then I will ask [another airline] to buy me,” and the questioner joked, “You’ll have no value.” The other CEOs on the panel indicated that they agreed with Lufthansa’s surcharging plan, with one “commend[ing]” it as “a brave step.” During an investor call on July 30, 2015, Lufthansa’s CFO said, “What we are hearing from the industry is that other airlines view this as very promising . . . . It's a first step and I believe others will follow.” Indeed, when airline executives in the audience were asked whether they would follow Lufthansa, 96 of 118 respondents said they “might make a similar move.”
As you know, your agencies share competition and antitrust enforcement authority in this area. The Department of Justice, which enforces the Sherman Act, has the ability to prosecute anticompetitive conduct, such as collusion, price signaling, monopolization and attempted monopolization. Lufthansa’s public statements at the IATA conference may have encouraged competitors collectively representing the vast majority of the market to follow Lufthansa’s lead in raising prices. Although no other carrier has publically followed Lufthansa, the Department of Justice should determine what other steps, if any, Lufthansa took, what reaction occurred, and whether those actions run afoul of the Sherman Act.
If no agreement was reached, Lufthansa may have engaged in an invitation to collude, which could be an unfair method of competition. The Department of Transportation has authority to police “unfair method[s] of competition” by air carriers, foreign air carriers, and ticket agents. This statutory authority is similar to Section 5 of the Federal Trade Commission Act, which makes illegal “unfair methods of competition.” The Federal Trade Commission has interpreted Section 5 of the FTC Act to prohibit invitations to collude and has found reason to believe that an invitation to collude has occurred based on public statements. Based on the facts in the public record, it appears that Mr. Spohr may have engaged in an invitation to collude.
As we mentioned above, we are concerned by Mr. Spohr’s comments last summer. We urge you both to thoroughly investigate this matter and, if you find that there has been a violation, to address it with an appropriate remedy.
Thank you for your attention to this matter.
Sincerely,
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