INTERN. TRAVEL ARRANGERS v. Western Air Lines, Inc.

• Decision Date: 05 March 1975
• Docket Number: No. Civ. 4-74-256.,Civ. 4-74-256.
• Parties: INTERNATIONAL TRAVEL ARRANGERS, Plaintiff, v. WESTERN AIR LINES, INC., Defendant.
• Court: U.S. District Court — District of Minnesota

408 F. Supp. 431

INTERNATIONAL TRAVEL ARRANGERS, Plaintiff, v. WESTERN AIR LINES, INC., Defendant.

No. Civ. 4-74-256.

United States District Court, D. Minnesota, Fourth Division.

March 5, 1975.

Harold J. Tomin, Los Angeles, Cal., for plaintiff.

Mackall, Crounse & Moore, Clay R. Moore, Minneapolis, Minn., for defendant.

MEMORANDUM AND ORDER

MILES W. LORD, District Judge.

The defendant Western Air Lines, Inc. (Western) has moved this Court for an Order dismissing this antitrust action on the grounds that the subject matter is exclusively within the jurisdiction of the Civil Aeronautics Board (CAB). Alternatively, defendant moves that this Court stay all proceedings pending a referral of the issues in this suit to the CAB for adjudication. The alternative motion is based upon the doctrine of primary jurisdiction.

The complaint seeks damages for conduct alleged to be in violation of sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2.

The plaintiff International Travel Arrangers (ITA) is a Minnesota corporation formed in 1972 for the purpose of organizing various types of charter air transportation. ITA is not a "travel agent" as that term is usually used, i. e., ITA does not have the authority to issue air travel tickets. Rather ITA solicits and organizes various forms of group charter travel and enters into the necessary contractual arrangements with air carriers for that purpose. In addition, ITA organizes ground arrangements, hotel space, ground travel, etc., in connection with charter group travel flights. The primary emphasis of its business is the vacation or leisure travel market.

The defendant Western is a certificated scheduled airline serving many points in the United States, Hawaii and Mexico, as well as other foreign points. As immediately relevant to the issues of this case, Western provides direct service between the Twin Cities and Las Vegas and direct service between the Twin Cities and Hawaii.

The CAB has over the years created, by regulation, various forms of permitted charters. These regulations are currently found in 14 C.F.R. §§ 207, 208, 212, 214, 372a and 378. The plaintiff ITA organizes charter flights which fall into three categories encompassed by these rules, single entity charters, affinity charters and travel group charters.

This case involves a type of permitted charter known as travel group charter which came into being as a result of regulations promulgated by the CAB effective September 27, 1972; 14 C.F.R. § 372a. Travel group charters were adopted for the purpose of allowing charter groups to be composed of persons who had no reason for association other than the charter flight itself. Prior rules, which required that the members of a charter group have some sort of prior "affinity," proved difficult to enforce.

The travel group charter rules are experimental and will terminate December 31, 1975 unless further regulatory action is taken by the CAB. 14 C.F.R. § 372a.5.

Western admits that from the beginning it has opposed the travel group charter concept and that it has published ads which point out its potential risks.

The background of ITA's antitrust claims involves in part ITA's relationship with the Minnesota State Automobile Association (MSAA). In 1972, ITA entered into certain arrangements with MSAA whereby MSAA would act as a "wholesaler" to a travel group charter program to be organized by the plaintiff.

In the summer of 1973, plaintiff organized several travel group charter trips to London which were sold through MSAA acting as a wholesaler. Also in 1973 the plaintiff and MSAA began to lay plans for a travel group charter program involving a number of flights to Hawaii and Mexico in January and February of 1974. Because of the provisions of the travel group charter rules, these flights were to be advertised several months in advance so as to comply with the various time requirements.

For several years, MSAA also had a continual working relationship with defendant Western, particularly with reference to vacation trips to Las Vegas. MSAA has organized a large number of three and four day Las Vegas trips for its members including hotel and other ground arrangements. These "Las Vegas Fun Fests" have been arranged through Western for air travel purposes, and Western, under its tariff, has been able to provide certain group rates to accommodate the MSAA trips. MSAA derives substantial revenues from its relationship with Western.

THE CLAIMED ANTITRUST VIOLATIONS

ITA charges in its complaint that Western engaged in the following conduct in violation of the antitrust laws:

(a) Western Airlines, Inc., forced M.S. A.A. to boycott ITA. Western used as a coercive club the economic power of being the only regularly scheduled airline with direct Minneapolis-St. Paul/Las Vegas service. Western threatened to reduce seat availability to M.S.A.A. on its regularly scheduled service for M.S.A.A. GIT programs. M.S.A.A. sells through its network of retail travel offices approximately 20,000 GIT seats to Las Vegas per year. M.S.A.A. derives substantial revenue from these sales. Because of this threat to profitable business, M.S. A.A. severed its business dealings with ITA.

(b) Western Airlines, Inc. induced retail travel agents to boycott travel group charters and instead steer their passengers to more expensive forms of travel irrespective of the passengers' needs.

(c) Western Airlines, Inc. undertook a campaign of misleading and deceptive advertising in the media to disparage in the public's mind the reliability of travel group charters.

(d) Western Airlines, Inc. at about the same time undertook a direct mail campaign to retail travel agents disparaging the honesty and reliability of travel group charter packagers and arrangers and the reliability of supplemental air carriers.

The essence of these claims is that Western persuaded MSAA not to do business with ITA and that Western conducted a misleading and deceptive advertising campaign against ITA aimed at dissuading the public and retail travel agents from participating in travel group charters.

REGULATORY POWER OF THE CAB

Section 102 of the Federal Aviation Act, 49 U.S.C. § 1302, defines the goals which the CAB is to promote in enforcing the Act.

§ 1302 . . .

(a) The encouragement and development of an air-transportation system properly adapted to the present and future needs of the foreign and domestic commerce of the United States, of the Postal Service, and of the national defense;

(b) The regulation of air transportation in such manner as to recognize and preserve the inherent advantages of, assure the highest degree of safety in, and foster sound economic conditions in, such transportation, and to improve the relations between, and coordinate transportation by, air carrier;

(c) The promotion of adequate, economical, and efficient service by air carriers at reasonable charges, without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices;

(d) Competition to the extent necessary to assure the sound development of an air-transportation system properly adapted to the needs of the foreign and domestic commerce of the United States, of the Postal Service, and of the national defense;

(e) The promotion of safety in air commerce; and

(f) The promotion, encouragement, and development of civil aeronautics. (emphasis added)

Section 411 of the Act, 49 U.S.C. § 1381, provides the CAB with a limited power to adjudicate disputes involving competitive practices.

§ 1381 Methods of competition.

The Board may, upon its own initiative or upon complaint by any air carrier, foreign air carrier, or ticket agent, if it considers that such action by it would be in the interest of the public, investigate and determine whether any air carrier, foreign air carrier, or ticket agent has been or is engaged in unfair or deceptive practices or unfair methods of competition in air transportation or the sale thereof. If the Board shall find, after notice and hearing, that such air carrier, foreign air carrier, or ticket agent is engaged in such unfair or deceptive practices or unfair methods of competition, it shall order such air carrier, foreign air carrier, or ticket agent to cease and desist from such practices or methods of competition.

Specifically with regard to travel group charters, the provisions of § 372a.24 provide that:

No charter organizer shall engage in unfair or deceptive practices or unfair methods of competition in air transportation or the sale thereof.

In addition to the above statutes, the CAB has issued interpretative regulations in 14 C.F.R. § 399(G) which set out various specific practices which the CAB considers deceptive. In particular, § 399.80 declares as unfair and deceptive:

(f) Misrepresentations as to fares and charges for air transportation or services in connection therewith.

The remedial power of the CAB, as indicated by § 411 above, is limited to ordering offenders to cease and desist from practices or methods of competition which the CAB finds to be unfair. The CAB has no power to award compensatory damages.

EXCLUSIVE JURISDICTION

A finding of exclusive CAB jurisdiction over conduct alleged to be an antitrust violation is a finding that the conduct is immune from the operation of the antitrust laws.

The Supreme Court of the United States has on several occasions warned that immunity from the operation of the antitrust laws is not to be lightly inferred from the enactment of a regulatory statute. Georgia v. Pennsylvania R. Co., 324 U.S. 439, 65 S.Ct. 716, 89 L.Ed. 1051 (1945).

Recently in Carnation Co. v. Pacific Westbound Conference, 383 U.S. 213, 218, 86 S.Ct. 781, 15 L.Ed.2d 709 (1966), the Supreme Court commented:

"Repeals of the antitrust laws by implication from a regulatory statute are strongly disfavored, and have only been found in cases of plain repugnancy between the antitrust and regulatory provisions." United States v.

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