Sunday, April 8, 2018

Southwest Airlines: Antitrust Lawsuit and Collusion Allegations (January 2018)

Image result for southwest antitrust lawsuit
Southwest Airlines; one of the top airlines in the nation
            The case at hand is the antitrust lawsuit against Southwest Airlines and the three other biggest airlines in the nation. The federal government has put in place regulations and requirements that companies must follow. These regulations restrict companies from controlling too much of an industry so in return there is a fair competition amongst all the companies in that industry. The four biggest airlines in the nation are Southwest Airlines, Delta Airlines Inc., United Continental Holding Inc., and America Airlines Group Inc. These four companies make up for 69% of all the domestic air travel in the U.S. All four of these companies began to show up on the U.S. Department of Justice’s watch list in 2015 for suspicion of collusion between them. A passenger litigation began when more than 100 combines lawsuits were filed around the country. The passengers involved claimed there was raise in air fare prices and reduced flight options while the prices of jet fuel had decreased. With these changes as well as additional fees for baggage and services, the powerhouse’s in airlines were able to declare record profits. The reason that it is believed that these companies were in collusion is because these four companies own so much of the industry that if they all agree to raise prices; customers would have no other choice than to buy the overpriced tickets. It is also believed that these companies limited the amount of seats available on flights, in order to make the available seats more valuable. This case was brought to the U.S. District court in Washington D.C. in the beginning of 2018. The four companies had all denied any wrong doings that collusion was involved. However, Southwest Airlines was the only one that had pleaded guilty to the antitrust lawsuit. They agreed to pay a settlement of $15 million in the class action litigation. Although Southwest agreed to pay the settlement, they also made a statement saying that it “does not constitute any admission of wrongdoing” and denied having entered into any unlawful agreements with its competitors (New York Times). This statement was made to cover the reputation of Southwest after being questioned on very unethical business behavior. They had claimed that the settlement was made so that the company could avoid any future cost and distractions in further litigations (Reuters). The rest of the three companies had denied the settlement and requested to extend the lawsuit. The D.C. federal judge had granted an extension for the discovery deadline until 2019. The lawsuit against Delta, America, and United will continue to see if there truly was any collusion between the four companies.


            There are quite a few stakeholders that have been impacted by this investigation. The first of them is the ones that were impacted initially, the customers that had to pay for overpriced air fares. The passengers that bought tickets from these four airline companies were forced into paying for expensive tickets because the massive amount of control the four companies have in the industry. A lot of the flights that passengers need to make are only provided by the four big companies. Smaller companies don’t have the means to make those flights nor do they provide the same quality or services as the big four. The next stakeholder in the lawsuit is Southwest Airlines. Whether the statements of collusion were true or not, Southwest still had decided to pay a large settlement. Although the payment will not dramatically impact the company, they still are being held accountable. Southwest also has its reputation to worry about after this lawsuit. Being accused of collusion and breaking antitrust law is something that is looked upon as a shallow and dishonorable offence in the business world. They now have a shadow of making crooked business interactions that could affect how customers view them and could be a reason why someone wouldn’t want to fly with Southwest Airlines. They also look suspicious by paying they settlement and making a statement that it’s only to avoid distractions because this could be a tactic to cover up what they knew was wrong.  The last major stakeholder in this investigation was the other three companies, Delta, United, and American airlines. These three companies all denied any wrongdoings and refused to pay a settlement which in return will hold them liable to prove their innocence in a future hearing. This could also mean that Delta, United, and American will have to pay even larger amounts if they are found guilty of collusion. All of the stakeholders at hand are impacted because of the unethical actions that these companies have made.
Southwest CEO, Gary Kelly

            The concept behind individualism is that a company will do what is in the best interest for making a profit and benefiting their shareholders. In this particular lawsuit, an individual would consider the actions of Southwest to be unethical. Although they raised their air fares to reach the highest amount of profit they have ever produced, they were doing so illegally. Individualist believe that the sole purpose of a business is to make profit while staying in the laws. Since Southwest broke antitrust laws in participated in collusion, they were increasing their profits unethically. Individualist would also say that Southwest has a duty to keep their reputation clean to improve future business, but by doing an illegal action, they put the name of their company in jeopardy.

            When looking at this case through the eyes of a Kantian, they would deem Southwest’s actions unethical. Kantianism is all about doing the right thing for the right reasons, acting rationally, and not using people as a mere means to get what you want. By using the power that Southwest and the other three big companies has in the industry, Southwest would be using other companies to get what they want. A Kantian would also say that Southwest was treating humanity as their puppets because no matter what prices they set their air fares as, the customers would be forced in paying due to their dominance in the industry. Southwest was not acting rationally because they were only looking out for how much profit they could make and not on the impact this would have on people. With such high prices, being able to travel becomes an even more luxurious experience that a lot of Americans simply can’t afford. Southwest actions have been disrespectful to humanity by making outrageously expensive prices just to better their profits.

            This theory is based off maximizing the overall happiness of all stakeholders. A utilitarian would say that the antitrust lawsuit against Southwest was an unethical business decision. Although a raise in profits will increase the happiness of people that work for Southwest, Delta, United, and American, the raise in air fare is decreasing the happiness of millions of people who wish it was cheaper to fly. Paying a settlement fine is also decreasing the happiness of the company. Since the air travel industry is primarily controlled by these four companies from their profit growth, the smaller airlines companies have no means to grow and therefore their happiness is detained as well. 

Virtue Theory
            Virtue Theory is looking at whether an action is morally good and is made with intention of good character. The four virtues that make up morality are courage, honesty, temperance, and justice. The actions of Southwest, Delta, United, and American would be considered unethical under the Virtue Theory. Southwest was not acting courageously. If they had been, they would have stuck up for their customers and turned down proposals to collude with the other three companies. Southwest was not acting honestly because they lied about being in terms with other major companies in the industry. They also didn’t practice temperance in raising the air fares. Instead of keeping reasonable prices and not joining in collusion, they choose to break the law to make some extra profit. Southwest was definitely not just in their actions because they broke the law and made it very expensive to travel. By not following any of the four virtues and not having the intention of good character, Southwest has been unethical under the virtue theory.

Stempel, Jonathan. January 4, 2018. “Refile- Southwest Airlines to pay $15 mln to settle price collusion lawsuit”

Stevens, Matt. January 6, 2018. “Southwest Airlines Settles Suit but Denies Colluding to Keep Ticket Prices High”

Martin, Hugo. January 4, 2018. “Southwest spends $15 million to settle lawsuit alleging collusion among airlines”

Stanley, Chuck. January 2, 2018. “Southwest Inks $15M Deal To Exit Airline Price-Fixing MDL”

Stanley, Chuck. February 12, 2018. “Airline Antitrust MDL Discovery Deadline Pushed to 2019”

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