VIII. ANTITRUST IMPACT

300. Defendants’ anticompetitive conduct enabled them to raise, fix, and stabilize prices to Plaintiffs and the Class members in excess of the prices Defendants otherwise would have been able to charge absent Defendants’ anticompetitive conduct.

301. Supracompetitive prices for products or services at a higher level of distribution generally result in higher prices at every level below. This case is no exception.

302. The Airlines passed on the supracompetitive prices of GDS services to Plaintiffs and Class members. GDS fees are traceable and identifiable throughout the chain of distribution from the Airlines to Plaintiffs and the Class members.

303. GDS fees are marginal costs to the Airlines, that is, they are a cost that is paid on a per-transaction basis. While even a monopolist would increase its prices when the cost of its inputs increased, the economic necessity of passing through cost changes increases with the degree of competition a firm faces. The Airlines are subject to vigorous price competition.

304. The Airlines have thin net margins, and are therefore at the mercy of their marginal costs, such that increases in the price lead to corresponding increases in prices for airline tickets at the consumer level. According to IATA, from 1970 to 2010 the airline industry overall generated just a 0.1 percent profit margin. For 2012, IATA estimated that global airline revenues were approximately $633 billion, with a profit of $3 billion equating to a 0.5 percent net margin.

305. The supracompetitive prices paid by Plaintiffs and Class members for Airline tickets are traceable to, and the direct, proximate and foreseeable result of, Defendants’ supracompetitive prices for GDS fees.

306. General economic theory recognizes that any overcharges in the form of supracompetitive prices at a higher level of distribution results in higher prices at every level below. Herbert Hovenkamp, Federal Antitrust Policy, the Law of Competition and Its Practice 624 (1994). Professor Hovenkamp goes on to state that “[e]very person at every stage in the chain will be poorer as a result of the monopoly price at the top.” He also acknowledges that “[t]heoretically, one can calculate the percentage of any overcharge that a firm at one distribution level will pass on to those at the next level.”

307. The economic and legal literature has recognized that unlawful overcharges of a product or service charge normally result in higher prices for products containing that price-fixed product or service. Two antitrust scholars – Professors Robert G. Harris (Professor Emeritus and former Chair of the Business and Public Policy Group at the Haas School of Business at the University of California at Berkeley) and the late Lawrence A. Sullivan (Professor of Law Emeritus at Southwestern Law School and author of the Handbook of the Law of Antitrust) – have observed that “in a multiple-level chain of distribution, passing on monopoly overcharges is not the exception: it is the rule.”

308. Economic literature further confirms that in markets where intermediaries (here Defendants) impose explicit pricing parity, this pricing parity causes over-consumption of intermediaries’ services and inhibits efficient intermediation, resulting in inflated retail prices.

309. This court has recognized that “[t]he practice complained of – the imposition of the Contractual Restraints – is anticompetitive because it allegedly restricts price competition in the market for GDS services, thus forcing US Airways to pay above-market prices, and possibly increasing ticket prices across the board. The supracompetitive fees complained of are classic ‘overcharge’ damages.”

310. The Airlines agree that absent the Contractual Restraint, ticket prices would be lower. They claim that “lower booking fees [], because of the intense price competition among airlines, translates into lower ticket prices for consumers.”

311. The DOT has found that the Contractual Restraint increases the cost of all airline passenger tickets. In a 2014 report, the DOT’s economic consulting firm found that “The contract provision effectively prohibits the carrier from offering a fare on its own website without the cost of the GDS fees built-in, removing a powerful tool for directing consumers to purchase directly from the carrier.” (emphasis added).

312. The precise amount of the overcharge can be measured and quantified. Commonly used and well-accepted economic models can be used to measure both the extent and the amount of the supra-competitive charge passed-through the chain of distribution. Thus, the economic harm to Plaintiffs and Class members can be quantified.

313. In fact, this overcharge was already quantified in the US Airways litigation against Sabre. When assessing the impact to travelers of Sabre’s conduct for the US Air litigation, Professor Joseph Stiglitz first noted that “most basic principles of economics show that if the average marginal costs of delivering a service are increased, the prices charged for that service will increase. It is thus airlines travelers who are ultimately harmed by Sabre’s anti- competitive practice, and in this case, some travelers are especially disadvantaged.” (Emphasis added.)

314. He went on to find that “Higher booking fees translate into higher US [Airways] costs, and higher fares to all passengers on US flights. Not only do these restrictions prevent discounts on airfares to travelers employing lower-cost ticketing outlets, these restraints on the price mechanism force self-booking leisure travelers to cross-subsidize travel-agency-served corporate travelers.” (Emphasis added.)

315. Professor Stiglitz opined that if the Contractual Restraint did not exist, in the “but for world,” “[c]ompetition in the airline business would cause US [Airways] to pass on its distribution cost savings to consumers in the form of lower airfares. This would result in a net benefit to all travelers, including those choosing to book through the GDS channel, who would pay competitive-level fees as a result of their choices.”