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Sixth Circuit Cancels Flight For Plaintiffs In Airline Price-Fixing Case

Posted  October 23, 2009

Antitrust plaintiffs are continuing to find their antitrust flights are being grounded by federal courts’ application of the Supreme Court’s Twombly case.

In Tam Travel, Inc., et al. v. Delta Airlines, Inc., et al. (In re Travel Agent Commission Antitrust Litigation), No. 07-4464 (6th Cir. Oct. 2, 2009), the Sixth Circuit affirmed dismissal, by the Northern District of Ohio, of a complaint alleging that multiple airlines conspired to fix the commissions they paid the plaintiff travel agencies.

Citing specific commission amounts, the plaintiffs had alleged that the defendants conspired lock-step to reduce, cap, and eventually eliminate the payments of so-called “base commissions” (a percentage of the ticket price).  According to the complaint, when one airline cut its commission to a certain amount, the other airlines soon followed, matching dollar-for-dollar.  This occurred five times between 1995 and 2002.  The complaint also specified the times and places of numerous meetings attended by the defendants, during which the defendants allegedly had the opportunity to conspire.

The district court dismissed the plaintiffs’ complaint, on the ground that the plaintiffs had failed to allege anything more than parallel conduct by the defendants.  Parallel conduct, without an agreement, has long been held not to satisfy the anti-conspiracy provision of Section 1 of the Sherman Act.

The Sixth Circuit affirmed the district court’s dismissal, holding that Twombly requires antitrust plaintiffs to “aver[] facts that raise a reasonable expectation that discovery will reveal evidence of an illegal agreement.  In the wake of Twombly, allegations of parallel conduct and bare assertions of conspiracy no longer supply an adequate foundation to support a plausible § 1 claim.”  In addition to citing Twombly, the Sixth Circuit cited the Supreme Court’s further explication of Twombly in Ashcroft v. Iqbal, in which the Court stated:  “Acknowledging that parallel conduct was consistent with an unlawful agreement, the Court nevertheless concluded that it did not plausibly suggest an illicit accord because it was not only compatible with, but indeed was more likely explained by, lawful, unchoreographed free-market behavior.”  The Sixth Circuit also held insufficient, as a matter of law, allegations of mere opportunities to conspire.

While the dissent criticized the majority for applying a heightened pleading standard to antitrust cases, the thrust of the majority’s analysis is the application—at the Rule 12(b)(6) stage—of the Supreme Court’s holding—at the Rule 56 summary judgment stage—in Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.  In Matsushita, the Court held that conduct that is as consistent with permissible conduct as with illegal conspiracy does not run afoul of the antitrust laws without more.  In other word, in antitrust conspiracy cases, a tie goes to the defendant.  Likewise, in Tam Travel the Sixth Circuit held:  “Based on these facts, we conclude that each defendant had a reasonable, independent economic interest in adopting a competitor’s commission cut rather than to maintain the status quo.  We therefore hold that plaintiffs have failed to allege sufficient facts plausibly suggesting (not merely consistent with) an agreement in violation of § 1 of the Sherman Act. . . As the Court stated in Twombly, ‘there is no reason to infer that [these defendants] had agreed among themselves to do what was only natural anyway.’”

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