A federal judge yesterday dismissed a Justice Department antitrust suit against American Airlines that was based on a secret tape recording in which the airline's president, Robert L. Crandall, urged the chairman of Braniff International Airlines to "raise your . . . fares 20 percent."
The decision was a blow to Assistant Attorney General for antitrust William Baxter, who had shown a keen interest in the much-publicized case and had personally supervised its handling. The case relied exclusively on the taped conversation in which Crandall, using unusually blunt and salty language, told then-Braniff chairman Howard Putnam that if he did raise his fares, "I'll raise mine the next morning."
"Although Crandall's conduct was at best unprofessional and his choice of words distasteful, the remedy does not lie in the antitrust laws," U.S. District Judge Robert Hill of Dallas ruled in dismissing the case.
The Justice Department has not yet decided whether to appeal.
In a 19-page decision, Hill said the government's case was filled with "aerodynamic deficiencies" and saddled by "too little horsepower," essentially because Putnam immediately rejected Crandall's offer and thus no price-fixing or agreement to fix prices ever took place. "The complaint alleges nothing more than a rebuked solicitation . . . ," Hill said. "Without an agreement or conspiracy the government's case must fail."
A spokesman for American Airlines in Dallas hailed the decision as a complete victory for the company and said it "fully vindicated" Crandall. "The judge has taken the position that we've taken all along--that the case has no merit," said Lowell Duncan, American's vice president for corporate communications. "This fully vindicates American and Mr. Crandall."
As for the judge's characterization of Crandall's conduct and language, Duncan said there was "no intent" by the company president to commit any crime. "Obviously, all of us say some things when we're talking in private that we might not say in a public forum."
Elliot Seiden, the chief of the antitrust division's transportation section, said division lawyers had not yet had time to review Hill's decision so any consideration of an appeal would be "premature."
A spokeswoman for Braniff, which is in reorganization after filing for bankruptcy protection last year, declined to comment on the judge's decision.
The case had attracted widespread attention when it was filed in February, mainly because of the tape, which provided a rare glimpse of the private conversation of business executives. The conversation was recorded by Putnam without Crandall's knowledge and later was supplied to the Justice Department by Braniff lawyers.
In the transcript of the recording, which was included as part of the Justice Department's lawsuit, Putnam complains about American's actions in matching Braniff routes out of Dallas and says, "I can't just sit here and allow you to bury us without giving our best effort."
Putnam continues: "Do you have a suggestion for me?"
Crandall: "Yes. I have a suggestion for you. Raise your goddamn fares 20 percent. I'll raise mine the next morning.
Putnam: "Robert, we . . . "
Crandall: "You'll make more money and I will too."
Putnam: "We can't talk about pricing."
Crandall: "Oh bull----, Howard. We can talk about any goddamn thing we want to talk about."
The problem for the government in bringing the lawsuit was that Putnam's explicit refusal of Crandall's "suggestion" ruled out Justice Department reliance on Section 1 of the Sherman Antitrust Act, which prohibits agreements between competitors to restrain trade, antitrust lawyers said. Instead, the department used what Hill called an "innovative" interpretation of the law, arguing that Crandall's solicitation of Putnam constituted an "attempt to monopolize" that is forbidden by Section 2 of the Sherman Act.
Several antitrust experts said yesterday the weaknesses in the government's case were apparent from the outset, although they understood why the government was eager to act. "It was a neat try," said Joe Sims, a Washington lawyer who formerly served in the antitrust division.