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United States v. AMR Corporation

140 F. Supp. 2d 1141 (2011)

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United States v. AMR Corporation

United States District Court for the District of Kansas
140 F. Supp. 2d 1141 (2011)

Facts

From 1995 to 1997, several low-cost airline carriers began operating low-cost routes based in Dallas-Fort Worth. Up to this point, American Airlines (American) (defendant) had been the dominant carrier on these routes. In response, American drastically reduced its own fares for such routes. American also increased the number of routes it provided based in Dallas-Fort Worth. As a result, all of the low-cost carriers eventually ceased operations. After the low-cost carriers ceased operations, American raised the prices of the routes back to what they had originally been and cut the number of routes back to their original number. The United States (plaintiff) brought suit against American, AMR Corporation, and AMR Eagle Holding Company (defendants), alleging that these actions amounted to an unlawful predatory-pricing scheme. To demonstrate this, the United States employed a formula showing that American had lowered its prices below the company’s average total cost. This formula demonstrated that American had failed, in the short run, to maximize its profits. The government maintained that this was a satisfactory test of incremental cost. American and the other defendants moved for summary judgment.

Rule of Law

Issue

Holding and Reasoning (Marten, J.)

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