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Lufthansa Deal May Spark More Settlements

By Kevin Brass



A federal judge has approved the first settlement in the Sarah Futch Hall antitrust case against the major airlines, prompting speculation that more settlement agreements may soon follow.

The deal with Lufthansa has been considered a bellwether for future negotiations in the class-action lawsuit, which charges 17 major airlines with conspiring to eliminate agent commissions.

Lawyers for the agents held preliminary discussions with several airlines during the summer, but sources involved in the case said the talks had stalled as participants waited for the court to rule on Lufthansa’s proposal.

Daniel Shulman, the co-counsel for Hall, declined to discuss settlement talks. He said the agreement with Lufthansa shows other airlines “the wisdom” of negotiating with agents “instead of fighting a battle they will lose.”

Airlines contacted last week declined to comment.

The Association of Retail Travel Agents had vigorously opposed the settlement with Lufthansa, in part out of fear that it would set a precedent for future deals.

The Lufthansa deal calls for the carrier to set up a “bonus program” for agents who book flights directly through the airline, but includes no damage payments or admission of guilt concerning commissions.

More than 700 ARTA members, American Airlines and the Department of Justice had opposed the deal.

American Airlines’ protest charged that the deal would “set a new precedent for how incentive agreements should operate industry-wide.” It said the settlement was an attempt “to reinstitute a commission that the competitive marketplace ended.”

The Department of Justice filed a brief with the court expressing official concern that the deal represented an inappropriate attempt by travel agents to set up a new fee system.

But Judge W. Earl Britt decided the settlement agreement “is fair, adequate, reasonable and in the best interests of the plaintiff class for settlement purposes.”

Shulman said it would be inappropriate to suggest that the Lufthansa deal would be a model for any future deals. “What would be a model is the process we used,” finding mutual interests, Shulman said.

To arrive at a deal with Lufthansa, the parties spent three days in mediation with Robert Mnookin, director of the Harvard Negotiation Research Project.

Parties have 30 days to appeal Britt’s decision. ARTA won’t appeal the ruling, even though “agents won’t make any money off of it,” according to its attorney, Alexander Anolik. But the group will oppose any future deals that don’t offer damages.

The Lufthansa settlement represented a “break in the cartel,” but future settlements will have to “make up for the loss,” Anolik said.

Details of the Settlement

• Trans-Atlantic Bonus Program is to begin January 2004.

• Agents will be able to register online at www.lufthansa-usa.com.

• All agents will be eligible in the first year. In the second year, only agents who booked $10,000 worth of Lufthansa tickets; in the third year, only agents who booked $20,000.

• Lufthansa will pay $100 for first- and business-class bookings, $30 for economy class and $20 for S-class. Agents will be paid when tickets are booked. Lufthansa will pay a $10 administrative fee for cancellations.

• Agencies that went out of business after April 1, 1998 and booked Lufthansa-plated tickets between April 1, 1998 and June 2003 may receive payment for underpaid commissions, up to 10 percent.

• Agents have until Dec. 23 to file claims.

• Lufthansa says an administrator will be established to handle claims. There will be a link to the administrator at www.lufthansa-usa.com.