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DOJ Flags Airline Deals - 9/3/2003

By R. Scott Macintosh and Judi Erickson

TravelAgeWest

Originally published at: http://www.travelagewest.com/newsarticle.asp?articleid=2448

The Department of Justice has found the proposed settlement with Lufthansa Airlines in agents’ landmark suit against the major carriers raises “serious concerns under antitrust laws.”

In a letter filed with the court and sent to attorneys last week, the department asks Lufthansa and the plaintiffs to come up with an alternate deal. The department’s concerns are the most significant to date as the proposed settlement nears a hearing Sept. 2 in U.S. District Court in Raleigh, N.C. The Association of Retail Travel Agents and American Airlines also recently filed formal objections to the settlement with the court.

The proposed Lufthansa settlement includes a bonus program that would pay agents as much as $100 when they book with the airline.

It also would create a mechanism for agencies that went out of business in the last five years to file claims for underpaid Lufthansa commissions.

In its letter, the department said the fact that the deal includes an agreement among competing travel agents to set commissions violates antitrust laws that stipulate competitors may not agree on their prices.

The department said any settlement should not incorporate agreements among travel agents to set commissions or to establish a common commission program. “We ask that Lufthansa and plaintiffs advise the Court that they will seek to reach an alternative settlement that does not have these antitrust defects,” the letter reads.

Attorney Daniel Shulman, an attorney for lead plaintiff Sarah Futch Hall, said he received the letter from the Justice Department late last week. Shulman said he expects the department’s concerns will be part of the Sept. 2 hearing.

“We think that is so out to lunch, it’s ridiculous,” he said. American filed its own objections with the court recently, arguing that the Lufthansa deal would constitute a joint action with travel agents to “reinstitute a commission model that the competitive marketplace ended” and would unfairly influence agents to steer business to Lufthansa.

John Hawks, ARTA president, said he was surprised to hear of the department’s concerns.

ARTA’s attorney, Alexander Anolik, said last Wednesday that he had heard about the department’s letter but had not yet seen it. “ARTA was right that there were problems, but not for the same reasons,” Anolik said.

ARTA filed formal objections to the deal opposing several specific points including minimum sales thresholds in the second and third years of the three-year deal.