Court Rejects Airfare Conspiracy Claim

SAN FRANCISCO (CN) - A federal court rejected foreign injury claims brought by a class of air passenger travelers against 26 airlines, finding allegations of a decade-long international conspiracy to fix ticket prices unconvincing.

In a consolidated complaint, the class accused the airlines of collectively scheming to inflate ticket prices of flights between the United States and Asia/Oceania and disguise the new rates as surcharges, in violation of the Sherman Antitrust Act.

The airlines responded by filing 13 consolidated motions to dismiss the Sherman Act claims based on the Foreign Trade Antitrust Improvements Act and filed rate doctrine.

During a hearing before U.S. District Judge Charles R. Breyer of the Northern District of California, attorneys for the class argued that it satisfied the FTAIA import commerce exception based on its definition of the word import.

According to the class, the airlines are "engaged in the business of delivering air passengers from place to place," and that "[p]ursuant to the FTAIA, the delivery of air passengers from airports in Asia/Oceania to airports in the United States and vice versa constitutes or involves import trade or import commerce."

To support its argument, the class relied on "a dictionary definition of import that defines the verb 'import' but not the noun" and cited "a variety of cases from vastly different legal contexts in which courts have used the word 'import' as something that can be done to a person," the court stated.

But Breyer didn't buy that rationale, holding that "it is too great a leap to equate air passenger travel with the importing of people, or to characterize air passengers as 'a product (or perhaps a service).'"

Secondly, the class had argued since most of the travel budget would be absorbed by a high ticket price there would be less money to spend on commercial goods within the United States.

But Breyer rejected the domestic effects argument as well.

"As an initial matter, the Court finds unpersuasive Plaintiff's allegation that travelers who spent too much money on their air transportation will be forced to 'allocate a smaller fraction of their total travel budget to the purchase of commercial goods and services,'" he wrote.

Breyer said the class's domestic effects argument was "entirely indirect" and that it "makes numerous assumptions about travelers' spending habits that are by no means certain; who is to say that all air passengers have fixed 'travel budgets' or that they strictly abide by those budgets?"

"Accordingly, this is not a type of domestic effect that is recognizable by the law," he said.

While Breyer described as "fairly indisputable" the belief that U.S. residents and citizens paid more than others for the air transportation that was the focus of the lawsuit, he said the "Plaintiffs fail to explain how a domestic effect of diminished spending activity, rather than the conspiracy itself, caused Plaintiffs' foreign injuries."

However, Breyer's ruling was far from a slam dunk for the airlines as he rejected their argument that the filed rate doctrine bars the class' damages claims based on its obligation to "file certain rates with the Department of Transportation."

"Several factual matters that would guide the Court in assessing Defendants' arguments are currently undeveloped," he wrote. "For example, it is not clear which rates at issue in this case were actually filed and which were not. Nor is it clear whether the DOT believes that its market-based rates are covered by the filed rate doctrine, or what role the foreign regulators at issue play and whether such role warrants this Court's deference," Breyer wrote.

"Accordingly, the Court finds that is not appropriate to grant Defendants' Motion on the basis of the filed rate doctrine at this time, and so denies the Motion as to the filed rate doctrine," he concluded.

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