Antitrust Essay, Research Paper

Antitrust – American Airlines: 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.?

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[Category]:

Law

[Paper Title]:

Antitrust – American Airlines

[Text]:

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

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