22 airlines Caught in Collusion Price Fixing

[revelarts]

http://consumerist.com/2011/03/21-airlines-fined-in-price-fixing-scheme.html

22 airlines Caught in Collusion Price Fixing


The Justice Department has fined 21 airlines in a massive global price-fixing scheme. British Airways, Air France-KLM and Virgin Atlantic were among the airlines indicted. Even four executives have gone to jail. What did they do? The JD charges that the airlines colluded to artificially inflate fuel surcharges for passengers industry-wide, as well as cargo surcharges. The case probably wouldn't have been broken if Luthansa and Virgin Atlantic hadn't come forward and confessed under the Justice Department's amnesty program that provides leniency for finking. In an interesting turn, the scheme was so codified that various airlines had entire committees and sub-committees devoted to managing it...

the market doesn't always self correct.
there's no moral check on capitalism
Small numbers of large players controlling -having major market share- of an industry stifles the corrective market forces.
the people's servant the Gov't need to step in from time to time smack some honesty back into the process when the players forget to fear God.

[fj1200]

the market doesn't always self correct.
there's no moral check on capitalism
Small numbers of large players controlling -having major market share- of an industry stifles the corrective market forces.
the people's servant the Gov't need to step in from time to time smack some honesty back into the process when the players forget to fear God.

Aren't fuel surcharges transparent to the passengers and cargo shippers?

Nevertheless, Capitalism doesn't need a moral check, competition is it's own check. Regulations and actions should be limited to areas that provide the basis for perfect competition.

[NightTrain]

Aren't fuel surcharges transparent to the passengers and cargo shippers?

Nevertheless, Capitalism doesn't need a moral check, competition is it's own check. Regulations and actions should be limited to areas that provide the basis for perfect competition.

I don't know about passenger cargo, but when I worked in the freight industry years ago there would be an additional 2.5% fuel surcharge levied every summer on the cargo ships from Seattle to Anchorage... that was a separate line item additional to normal freight charges.

[logroller]

Aren't fuel surcharges transparent to the passengers and cargo shippers?

Nevertheless, Capitalism doesn't need a moral check, competition is it's own check. Regulations and actions should be limited to areas that provide the basis for perfect competition.

Only to those who pay attention. The airlines are obviously taking advantage of ignorant consumers. Luckily the DOJ encourages rat-finking your competitors to amend such behavior. Who wants fair competition when you can gain an advantage under the guise of a whistleblower.

[LuvRPgrl]

http://consumerist.com/2011/03/21-airlines-fined-in-price-fixing-scheme.html

22 airlines Caught in Collusion Price Fixing



the market doesn't always self correct.
there's no moral check on capitalism
Small numbers of large players controlling -having major market share- of an industry stifles the corrective market forces.
the people's servant the Gov't need to step in from time to time smack some honesty back into the process when the players forget to fear God.

If the profits are excessive, then a player not on the board will step up and make his play. That will correct the problem. Now, when another player shows up, and the current players correct their illegal activity, it would become apparent the activities were illegal and then the DOJ could prosecute with real fines (going to those who were overcharged) and prison time.

Then again, you could start a coalition of overpaying consumers and strike. If someone had the iniative, it could be done.

[fj1200]

Only to those who pay attention. The airlines are obviously taking advantage of ignorant consumers. Luckily the DOJ encourages rat-finking your competitors to amend such behavior. Who wants fair competition when you can gain an advantage under the guise of a whistleblower.

:laugh: I guess that last line is proof that competition will win out. I think that the surcharges are disclosed lessens the anti-competitive aspect of it, however...


If the profits are excessive, then a player not on the board will step up and make his play. That will correct the problem. Now, when another player shows up, and the current players correct their illegal activity, it would become apparent the activities were illegal and then the DOJ could prosecute with real fines (going to those who were overcharged) and prison time.

Then again, you could start a coalition of overpaying consumers and strike. If someone had the iniative, it could be done.

... they're not saying the surcharges are illegal only the collusion across the board in instituting them.

It's interesting that the two US firms walked out of the initial conversations overseas; I wonder if they knew better of the illegality of the collusion and the foreign firms didn't know or it's more standard operating procedure for them. Why wasn't the EU in on it?

[Alias.258]

MSNBC (AP) (http://www.msnbc.msn.com/id/41926712/ns/travel-news/)

BBC (http://www.bbc.co.uk/news/business-11719507)

Sorry there aren't more. Couldn't find any major sources that I trust other than BBC that featured this. Those who did seemed to be using the Associated Press story. That being said due to the lack of info from those I did include MSNBC's feature of the Associated Press story because I am fond of AP. For good measure, I will post Yahoo's feature of AP just for good measure:

Yahoo (AP) (http://news.yahoo.com/s/ap/20110305/ap_on_bi_ge/us_airline_price_fixing)

The BBC Article has the little bonus of who was fined what although it is in Euros with their source as the European Commission, and I will do everybody a favor and spare you of the conversion rounded to the nearest Hundredth:

Air France-KLM (includes Martinair): $480.87m

British Airways: $147.26m

Cargolux: $113.14m

Singapore Airlines: $105.92m

SAS: $99.40m

Cathay Pacific: $80.85m

Japan Airlines: $50.55m

Air Canada: $29.73m

Qantas: $12.60m

LAN Chile: $11.61m

Once again for good measure the above figures are rounded to the nearest hundredth.

[fj1200]

BBC (http://www.bbc.co.uk/news/business-11719507)


Had the Commission not intervened the "deplorable" cartel "would have continued", said EU Competition Commissioner Joaquin Almunia.

:confused: How could it have continued if it had already stopped in 2006?

[Thunderknuckles]

Nevertheless, Capitalism doesn't need a moral check, competition is it's own check. Regulations and actions should be limited to areas that provide the basis for perfect competition.
Capitalism needs a check, moral or whatever. Look no further than the asset backed securities meltdown that pulled us into this recession.

[Alias.258]

:confused: How could it have continued if it had already stopped in 2006?

"The European Commission has fined 11 airlines almost 800m euros (£690m) for fixing the price of air cargo between 1999 and 2006." --BBC

"What they came up with, according to federal prosecutors, was a massive price-fixing scheme among airlines that artificially inflated passenger and cargo fuel surcharges between 2000 and 2006 to make up for lost profits." --MSNBC (AP): the same one that was referenced in the original article posted here. The only mismatch I see is by a year...

The Charges are for the fixing of the prices for the dates 1999-2006 according to BBC. And 2000-2006 according to AP.

Also:
"British Airways and Korean Air pleaded guilty to violating the Sherman act; each was fined $300 million in August 2007. " -AP
The prosecution had already started by 2007.

[fj1200]

Capitalism needs a check, moral or whatever. Look no further than the asset backed securities meltdown that pulled us into this recession.

Packaged securities are immoral? Imagine that.

And as I said, competition is a check.

[fj1200]

...

I saw all of that.

[Alias.258]

I saw all of that.

Saw all of what?
If you saw that the prosecution had already started, and that the charges were for that time period, then what were you confused about?

[LuvRPgrl]

:laugh: I guess that last line is proof that competition will win out. I think that the surcharges are disclosed lessens the anti-competitive aspect of it, however...



... they're not saying the surcharges are illegal only the collusion across the board in instituting them.

It's interesting that the two US firms walked out of the initial conversations overseas; I wonder if they knew better of the illegality of the collusion and the foreign firms didn't know or it's more standard operating procedure for them. Why wasn't the EU in on it?

Yes, but if the surcharges are across the board, then it will naturally follow that collusion was necessary to create it.

[fj1200]

Yes, but if the surcharges are across the board, then it will naturally follow that collusion was necessary to create it.

Not necessarily, one airline can float the new charge in public and see if other airlines join in or not. They do that frequently with potential fare increases, if no other airlines raise their prices then many times they'll rescind the increase.

[Thunderknuckles]

Packaged securities are immoral? Imagine that.

And as I said, competition is a check.
The packages themselves? Of course not. Massaging risk based calculations to make those securities appear to be good investments when they are in fact junk? Immoral.
There was no competition to create a check...everyone was doing it.

Let's also not forget what the source of the entire securities collapse as well. Thanks to loosened loan restrictions, courtesy of Bill Clinton and continued by George Bush, people who had no business buying a home were now capable of doing so based on stated income and no money down. Folks making the loans knew they were selling to people who would most likely default but what did they care? As soon as the loan was made they sold it off to larger financial institutions for securitization. Again, competition at this level meant nothing. Everyone was doing it because the money was easy.

Despite that, you don't think that mess needed some oversight?

[Sitarro]

I work for an airline and after seeing it from almost every angle, I don't see how it's possible for them to make any money at all. Lease of aircraft that burn in excess of 1000 gallons an hour, airport space and the incredible upkeep, we have over 500 tugs and beltloaders being used constantly 20 hours a day......... I should say abused by employees that think the giant corporation owes them a living........ typical union attitudes. The pilots making hundreds of thousands of dollars a year to drive a jet powered bus and all they do is bitch. The mechanics making very high wages, flight attendants constantly whining, they sound like teachers. Ticket counter people that get paid very little to listen to the lying public bitch about everything while wearing shorts and flip flops, most should be on Greyhound! The electricity that stays on 24 hours a day. If a bag misses and has to be delivered..... domestic....40 - 60 dollars......international......100 dollars.......and most of the time it's the idiots with customs or TSA holding on to bags till the last second, stealing from them, leaving them in a shambles and we get blamed. Then the jerk public out to get away with anything they can. They stuff their bags until they break and we get blamed so they can try to rip off a new bag out of the airline. Whining about the cost even though it is cheap compared to any other form of travel(if your time is worth anything). Complaining about the food, the drinks, the movies..... all while flying at 37,000 feet in air conditioned comfort for what..... a couple of hours? There is no way I would ever invest in an airline, ever!

[fj1200]

Let's also not forget what the source of the entire securities collapse as well.

The Federal Reserve pumping excess liquidity into the markets since 2003 and new Mark-to-Market regulations that began to slowly pop the bubble in 2007.


Despite that, you don't think that mess needed some oversight?

I didn't say that, there's a distinct lack of transparency in banking these days.