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November 2008
General Counsel Corner By Peter H. Gunst, Esquire
Déjà Vu All Over Again The Federal Trade Commission recently charged U-Haul International with engaging in “unfair methods of competition” in violation of the Federal Trade Commission Act because U-Haul made an unsuccessful invitation to its competitor, the Avis Budget Group, to conspire to charge higher prices to their customers. Senator Orrin Hatch responded by complaining during a hearing of a Senate antitrust subcommittee that the “unfair and deceptive” practices standard applied by the FTC was too vague for companies like U-Haul to know whether their conduct was illegal. It is difficult to fathom why the senator was so solicitous of U-Haul’s supposed plight. Entering into an agreement with a competitor to raise prices charged to consumers has been illegal since the enactment of the Sherman Act one hundred twenty years ago. It is widely deemed to be the most heinous of all antitrust violations. Participants in such a scheme risk criminal prosecution and triple damage claims. The only reason why U-Haul could not be prosecuted for price-fixing was the fortuitous fact that its competitor rejected its invitation to conspiracy. The Sherman Act contains no explicit prohibition of “attempted conspiracy” analogous to, for example, a law criminalizing “attempted armed robbery.” Clearly, U-Haul knew that the goal it sought to achieve was wrong and illegal, so that the FTC was more than justified in charging U-Haul with engaging in an unfair method of competition. Invitations made by large corporations to their rivals to fix prices only occasionally see the light of day. One classic instance involved the call placed in 1982 by the president of American Airlines, Robert L. Crandall, to Howard Putnam, the president of its then-competitor, Braniff Airlines. Upset that consumers were not being charged high enough prices at the Dallas-Fort Worth International Airport, Crandall conducted the following dialogue with Putnam: Crandall: I think it’s dumb as hell for Christ’s sake all right, to sit here and pound the *** out of each other and neither one of us making a *** dime. *** Putnam: Do you have a suggestion for me. Crandall: Yes. I have a suggestion for you. Raise your goddamn fares twenty percent. I’ll raise mine the next morning. *** Putnam: We can’t talk about pricing. Crandall: Oh bull***, Howard. We can talk about any goddamn thing we want to talk about.
Unknown to Crandall, Putnam taped their call and turned it over to the government. The Justice Department, although unable to pursue a price-fixing claim because nothing had been agreed to by Braniff, was able to bring a suit for attempted monopolization because of the very high market share – a combined ninety percent – that American Airlines and Braniff enjoyed on flights from the Dallas-Fort Worth airport. In the U-Haul case, despite Senator Hatch’s concern of overreaching by the FTC, the company agreed in June of this year to accept a settlement order prohibiting it from colluding or inviting collusion for twenty years, and imposing monitoring and compliance provisions upon U-Haul. The case is a reminder of the risk that continues to exist that large corporations may be all too willing to yield to the temptation of engaging in predatory conduct directed against their customers, unless they are constrained by law. http://www.agtlawyers.com/thefirm/newsitem.php?item=39 October 3, 2009 SSDA-AT Executive Vice-President Paul Fiore presents the Friend of the Industry award to Sal Risalvato of NJGCA October 3, 2009 President David Freitag opens the Annual Mega Trade Show
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