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Foreign travel agents cannot bring antitrust claims against airlines in the United States for allegedly conspiring to fix and reduce the commissions because the antitrust laws were designed to regulate only conduct that affects the economy of the United States, the 3rd U.S. Circuit Court of Appeals has ruled. “That certain activities might have taken place in the United States is irrelevant if the economic consequences are not felt in the United States economy,” 3rd Circuit Judge Anthony J. Scirica wrote in Turicentro S.A. v. American Airlines et al. “Fixing the commissions paid foreign travel agents might constitute an illegal conspiracy. But this conspiracy only targets the commissions foreign travel agents would receive for work performed outside the United States. United States antitrust laws only apply when a price-fixing conspiracy affects the domestic economy,” Scirica wrote in an opinion joined by 3rd Circuit Judge Robert E. Cowen and visiting Judge Jane A. Restani of the U.S. Court of International Trade. The decision upholds a July 2001 decision by U.S. District Judge J. Curtis Joyner, which dismissed a class action suit brought by travel agents in the Caribbean and Latin America who claimed that four airlines based in the United States conspired to reduce their commissions to a flat rate of 7 percent. “While it may be true that the antitrust conspiracy alleged here has significantly injured the plaintiffs’ businesses in the Caribbean and Latin America, American antitrust laws do not regulate the competitive conditions of other nations’ economies,” Joyner wrote. “The plaintiffs must look to the laws of the Caribbean and Latin America for redress in this case and we therefore find that this court lacks the requisite subject matter jurisdiction to hear this matter,” Joyner wrote. Attorneys Joseph C. Kohn, Robert J. LaRocca and William E. Hoese of Kohn, Swift & Graf filed the suit against the International Air Transport Association and four U.S. airlines — Delta, American, United and Continental. The suit focused on a decision made in July 1999 during a meeting of the IATA’s passenger tariff coordinating conference in Montreal to lower the commission paid to some IATA-accredited travel agents to the 7 percent flat rate. Until then, commission rates paid to travel agents in Latin America and the Caribbean varied, depending upon the country. In the case of Peru, Panama, Bolivia and Nicaragua, the commission rate was as high as 10 percent to 11 percent. According to the suit, Latin American and Caribbean travel agents must be licensed or accredited by the IATA to make international reservations. Without such registration, the agents cannot receive the identification number needed to enter the airlines’ reservation systems. The suit also said reservations on American, Continental, Delta and United airlines account for most of the business done by travel agents in Latin America and the Caribbean. The named plaintiffs were four travel agencies — in San Jose, Calif.; Costa Rica; and Managua, Nicaragua. The suit alleged that the airlines tried to hide the roles they played in pushing for the reduced commissions. Minutes from the IATA meeting show that U.S.-based members didn’t participate in the discussions, but the plaintiffs alleged that the four airlines were “aware of and endorsed and encouraged IATA to adopt and implement this change in commission structure” and “assisted in planning this agenda, were aware this vote would be taken, and endorsed the tariff conference’s lowering the commission rates.” As a result, the suit said, the airlines had acted in concert to lower the commission rates — an action that had devastating effects on the plaintiffs’ businesses. But defense lawyers for the airlines and the IATA argued that even if all the allegations were true, there was no violation of the Sherman Antitrust Act. The plaintiffs, they said, lack antitrust standing because American antitrust laws do not regulate competitive conditions in foreign countries. As a result, they said, the federal courts lack subject matter jurisdiction over the case. Joyner agreed, finding that Congress placed specific limits on the geographic scope of antitrust law in 1982 when it passed the Foreign Trade Antitrust Improvement Act. Now the 3rd Circuit has ruled that Joyner was correct in holding that the FTAIA barred the claim because the setting of commissions for foreign travel agents cannot be considered an “import.” “Although defendants paid commissions in United States dollars, neither the payments nor their calculations on computers based in the United States are properly considered ‘imports.’ No items or services were brought into the United States by the payments alone,” Scirica wrote. Plaintiffs’ lawyers argued that the airlines’ conduct had substantially reduced the travel agents’ business values, forcing at least one member of the putative class out of business. But Scirica found that Joyner was correct in holding that none of the allegations in the suit amounted to any “effect” on United States commerce. “Generally, federal antitrust laws do not extend to protect foreign markets from anticompetitive effects and do not regulate the competitive conditions of other nations’ economies,” Scirica wrote. Attorney George G. Gordon of Dechert represented American Airlines and argued the appeal for all of the defendants. He was joined on the brief by Dechert attorney Jennifer R. Clarke. Attorney Ann T. Field of Cozen O’Connor represented Continental Airlines; and attorney Francis P. Newell of Montgomery, McCracken, Walker & Rhoads represented Delta. Attorneys Bert W. Rein and John B. Wyss of Wiley Rein & Fielding in Washington, D.C., and attorney Bruce P. Merenstein of Schnader Harrison Segal & Lewis represented the International Air Transport Association. United Airlines was represented by attorney Richard J. Favretto of Mayer, Brown, Rowe & Maw in Washington, D.C.

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