Airlines To Pay $300 Million Each For Price Fixing

[LeighAnn]

Source: CBS via CBS-4 Denver

Two major airlines were fined $300 million apiece Thursday after admitting they conspired to fix prices on international flights.

British Airways PLC, Britain's largest airline, and Korean Air Co., South Korea's national carrier, pleaded guilty to antitrust conspiracy charges. Both saw their potential fines reduced because they cooperated with Justice Department investigators.

U.S. District Judge John D. Bates said the case "involved considerable commerce and reflected long-term and widespread conduct involving major airlines and players."

The airlines admitted that they colluded with rivals over cargo rates and fuel surcharges, which were added to fares in response to rising oil prices. That meant higher costs for international shippers and passengers.

Read more: http://cbs4denver.com/business/finance_story_235075048.html

[acmavm]

1. Other than maybe some Mom & Pop companies, I wonder how

many honest and ethical ones there are left in this world. I bet it wouldn't take two hands to count 'em.

[truthisfreedom]

2. The problem now being, they have to raise their prices to pay this fine.

So the consumer loses. Twice.

[Selatius]

4. Not unless the government takes the fine by taxing net income at the end of the fiscal year.

An income tax can't be passed onto consumers, as it is a tax on (naturally) income, not a tax on production. Taxes on production, such as sales taxes, can and are passed onto consumers.

[youngdem]

5. Not really.

If they are to be competitive and fill their planes, their fares have to be fair or consumers will fly RyanAir or similar discounters.

The whole impetus to break price fixing laws is due to downward price pressure due to competition, which they essentially short-circuited.

Raising prices to recover the amount would in fact cause further losses, as they would be selling fewer tickets and flying less full planes.

The real crime is that the $300M isn't going to the consumers who paid too much for the tickets during the time frame referenced in the complaint. But, as here (especially in SEC fines) the fines go to the gubment.

[enlightenment]

3. I was reading about this a couple of weeks ago, and

found it fascinating that Virgin Air managed to escape unscathed - pretty scummy behaviour on their part, imo. Collude and than turn on your partners to protect yourself.

As part of its plea deal, British Airways admitted that between mid-2004 and early 2006, it colluded with Virgin Atlantic over the surcharges, which were added to fares in response to rising oil prices. Virgin Atlantic is not named in the Justice Department case and is not expected to face a fine in Britain because it reported the misconduct to authorities.

I think Sir Richard better "re-envision" that whole customer first thing. If the company will treat competitor's with such contempt, what's to say that attitude won't be trickling down to the passengers (more than it already does). I've flown Virgin the last few trips to London - I'm not entirely certain I want to use them anymore. Virgin's response to this really leaves a bad taste in my mouth.