Delta Air Lines and AirTran Airways were served yesterday with a complaint filed by Kotchen & Low LLP accusing the airlines of colluding regarding the imposition of a $15 first checked bag fee. Plaintiffs Brent Avery and David Watson are Delta and AirTran passengers who paid the fee that both airlines announced in November 2008 for flights taken on or after December 5, 2008.
Delta and AirTran both have hubs in Atlanta and are each other’s primary competitors. Plaintiffs allege that the unilateral imposition of a first bag fee on consumers would have been against each airline’s economic self-interest, as the airline would have lost customers to its competitor if it increased fees. By acting in concert, however, both airlines benefited from increased revenues without any increased expenditures.
The complaint alleges that the scheme was initiated when AirTran invited Delta to collude in an investor conference call. AirTran’s CEO stated that he wanted to impose a first bag fee, that AirTran had put the technological capability in place to implement the fee, and that AirTran would follow suit if Delta enacted a first bag fee:
We have the programming in place to initiate a first bag fee. And at this point, we have elected not to do it, primarily because our largest competitor in Atlanta [i.e., Delta], where we have 60% of our flights, hasn’t done it. . . . I think we prefer to be a follower in a situation rather than a leader right now.
Robert Fornaro, AirTran Investor Call (Oct. 23, 2008). Just over a week later, on November 5, 2008, Delta announced that it would begin charging passengers a $15 first bag fee, which Plaintiffs allege was an acceptance of AirTran’s invitation to collude. As promised in the conference call, AirTran followed Delta’s lead, and announced the following week that it would impose the same $15 fee, effective the same date as Delta’s fee.
As a result of the collusion, Plaintiffs allege that passengers have been charged tens of millions of dollars in anti-competitive fees. “Because the airline industry has so few competitors, especially in specific markets, it is highly susceptible to collusion,” stated attorney Daniel Low, a partner with Kotchen & Low LLP, a law firm representing the Plaintiffs. Low added, “several cases have been brought against airlines in recent years accusing them of conspiring to raise prices by signaling future pricing intentions, and we hope that our lawsuit will help consumers by discouraging such unlawful practices.”
In addition to Kotchen & Low LLP, Plaintiffs and the putative class are represented by Richardson, Patrick, Westbrook, & Brickman, LLC, McCulley McCluer PLLC, and Conley Griggs LLP.