(Newswire.net — July 2, 2015) — Major US airlines are being investigated by the Justice Department for “possible unlawful coordination” in ticket pricing, the AP reported. The probe comes after allegations that airlines are earning extra profit by holding higher prices even though the jet fuel prices have decreased.
Giving that Americans are flying more than ever before, airlines have implemented one of the oldest rules of thumb in economics, ‘the higher the demand, the higher the price.’ However, artificially creating higher demand by limiting available seats in airplanes is not quite in the spirit of the liberal capitalism, especially since major airline companies may have reached an agreement to keep the price of the tickets high and benefit from the extra profits.
The Department of Justice opened an investigation after Sen. Richard Blumenthal (D-Connecticut) wrote to William J. Baer, head of the Justice Department’s antitrust division last month, accusing carriers of holding “sky-high fares,” which trapped customers in an “uncompetitive market with a history of collusive behavior.”
In a letter sent to US airlines, the Department of Justice demanded the copies of all communications between the airlines, looking into “possible unlawful coordination among some airlines,” DoJ representative Emily Pierce told the AP. However, she refused to name exactly which companies are being investigated.
United and American Airlines confirmed to the AP that they were cooperating with the department’s request, while Southwest and Delta made no immediate comment. Reportedly, small carriers like Frontier Airlines, said they had not been contacted by the Justice Department.
A series of airline bankruptcies and mergers since 2008 have led to a consolidation of US carriers, cutting the number from nine to four: American, Delta, Southwest and United. Not only did these four carriers recover, but they now control 80 percent of the US market.
According to the Bureau of Transportation Statistics, the average airfares rose 13 percent from 2009 to 2014.
Referring to the investigation, president of the American Antitrust Institute Diana Moss said that airlines had it coming for a long time, the Washington post reported. She said that airlines have continuously signaled “to each other that it was in their joint interest to keep capacity tight and to keep prices high.”
United States antitrust law is a collection of federal and state government laws, which regulates the conduct and organization of business corporations, generally to promote fair competition for the benefit of consumers.