United States v. American Airlines, Inc.
743 F.2d 1114 (1984)
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Rule of Law:
A unilateral solicitation to a competitor to jointly monopolize a market by fixing prices can constitute an 'attempt to monopolize' under Section 2 of the Sherman Act, provided there is specific intent and a dangerous probability of success, even if the solicitation is rejected and no agreement is formed.
Facts:
- In February 1982, American Airlines and Braniff Airlines were the two dominant carriers at the Dallas-Fort Worth International Airport (DFW), collectively accounting for over 76% of monthly enplanements.
- The market had high barriers to entry, partly due to FAA limitations on new flights at DFW.
- American and Braniff were engaged in a fierce price war, which was negatively impacting both airlines' profitability.
- Robert Crandall, the president of American Airlines, initiated a telephone call with Howard Putnam, the president of Braniff Airlines.
- During the call, Crandall proposed that they end their price competition, stating, 'Raise your goddamn fares twenty percent. I’ll raise mine the next morning.'
- Crandall explained that if they coordinated on prices, 'You’ll make more money and I will too,' and there would be 'no room for Delta.'
- Putnam rejected Crandall's proposal, stating, 'We can’t talk about pricing.'
- Following the conversation, Putnam provided a tape recording of the call to the United States government.
Procedural Posture:
- The United States sued American Airlines, Inc. and its president, Robert L. Crandall, in the U.S. District Court for the Northern District of Texas.
- The government alleged that the defendants attempted to monopolize in violation of Section 2 of the Sherman Act and sought an injunction.
- The defendants filed a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), arguing that an unaccepted offer could not constitute an attempt to monopolize.
- The district court granted the defendants' motion and dismissed the government's complaint.
- The United States, as appellant, appealed the dismissal to the U.S. Court of Appeals for the Fifth Circuit.
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Issue:
Does a solicitation to enter into a price-fixing agreement with a direct competitor, which would create a joint monopoly if accepted, constitute an 'attempt to monopolize' under Section 2 of the Sherman Act, even if the solicitation is rejected?
Opinions:
Majority - W. Eugene Davis
Yes. A solicitation to fix prices with a competitor can constitute an attempt to monopolize under Section 2 of the Sherman Act, even without an agreement. The offense of attempted monopolization requires two elements: (1) specific intent to accomplish the illegal result of monopolization, and (2) a dangerous probability that the attempt will be successful. Crandall’s explicit proposal to Putnam to raise fares by 20% demonstrated a clear specific intent to control prices and exclude competition, thereby creating a joint monopoly. The dangerous probability of success is evaluated at the time of the conduct, not in hindsight. Given American and Braniff's combined market dominance and the high barriers to entry at DFW, had Putnam accepted the offer, the two airlines would have immediately acquired monopoly power. Therefore, Crandall's proposal, which was the most proximate act to the commission of the offense he could take, carried a dangerous probability of success. The court rejected the argument that an 'attempt' requires more than a 'mere solicitation,' finding that for a highly verbal crime like monopolization, a direct solicitation can be the substantial step needed to establish an attempt.
Analysis:
This decision significantly broadens the scope of liability for attempted monopolization under Section 2 of the Sherman Act. It establishes that a unilateral, unaccepted offer to collude can be sufficient to constitute an illegal attempt, removing the need for prosecutors to prove an actual agreement was formed. This holding acts as a powerful deterrent against anticompetitive communications between rivals, as executives now face antitrust liability for merely proposing a cartel. The case clarifies the distinction between an 'attempt,' which focuses on intent and probability of success, and a 'conspiracy,' which requires a meeting of the minds, thus lowering the incipiency gate for Section 2 violations involving solicitations.
