Expert Article Library

Small Airlines Taking Off Face Fierce Competition from Larger Ones

Case Name: Spirit Airlines v. Northwest Airlines (http://www.ca6.uscourts.gov/opinions.pdf/05a0437p-06.pdf)

Court: District Court for the Eastern District of Michigan at Detroit; United States Court of Appeals for the Sixth Circuit

Date: December 15, 2005

Experts: Economists. Professor Kenneth G. Elzinga, Dr. Daniel P. Kaplan and Professor David E. Mills, all economists. Dr. Januz Ordover, specialty not indicated.

Issues: What type of market should form the basis for the calculation of costs and profits when evaluating whether an airline has violated the antitrust legislation?

Summary of Case: Spirit Airlines sued Northwest Airlines for monopolization and attempted monopolization claiming that Northwest Airlines participated in predatory pricing and other predatory tactics in the leisure passenger market on the Detroit-Boston and Detroit-Philadelphia routes by lower prices to match Spirit’s fares, in violation of the Sherman Antitrust Act.

Role of the experts: Professor Elzinga, Dr. Kaplan and Professor Mills testified for Spirit Airlines. Dr. Januz Ordover testified for Northwest Airlines.

Expert analysis: Spirit’s experts testified that to be economically fair, only Northwest’s prices and costs in the limited, relevant market (the low fare and leisure passenger fare) in which Spirit operated should be evaluated when trying to find out if Northwest had deliberately lowered its prices to drive Spirit out of that distinct market. Northwest claimed that the relevant market encompassed all air passengers on the route and that therefore a specific type of fare in a broader market was the relevant factor.

The district court deemed Spirit's expert proof and analysis of Northwest's costs and revenue to be implausible. However, the Sixth Circuit disagreed and found that a reasonable jury could have believed either Spirit’s or Northwest’s experts who all presented credible opinions supported by evidence. A reasonable trier of fact could find that Northwest engaged in predatory pricing. Case remanded for further proceedings.

Summary prepared by M. Dellinger, Student, Golden Gate Law University