## Facts

- The United States sued AMR Corporation, American Airlines, Inc., and AMR Eagle Holding Corporation under § 2 of the Sherman Act, alleging monopolization and attempted monopolization.
- The challenged conduct concerned American’s competitive responses on certain city-pair routes to and from Dallas/Fort Worth International Airport (DFW), where American held a dominant position and operated a hub-and-spoke network.
- From roughly 1995 to 1997, low-cost carriers entered selected DFW routes with low fares and limited capacity.
- The government alleged American responded by adding capacity and matching or undercutting the entrants’ fares on the affected routes.
- The government contended the low-cost entrants exited after American’s response, and that American then raised fares and reduced capacity, allegedly allowing it to recover short-run losses.
- To show predation, the government offered cost tests using average total cost and incremental-cost proxies, supported by internal business documents said to reflect a deliberate strategy to drive out low-cost competitors.
- Defendants argued their actions were lawful competition—fare matching and capacity additions—and denied pricing below an appropriate cost measure.

## Issues

1. Whether the government produced sufficient evidence that American priced below an appropriate measure of cost on the challenged routes, as required for a Sherman Act § 2 predatory-pricing theory.
2. Whether the government’s average-total-cost and incremental-cost proxy methodologies were legally sufficient cost measures for identifying predatory pricing.
3. Whether the government raised a genuine issue of material fact that American had a dangerous probability of recouping any alleged below-cost losses through later supracompetitive pricing.

## Decision

- The court granted defendants’ motion for summary judgment on the federal Sherman Act § 2 claims.
- The court held the government’s cost evidence was legally inadequate to establish below-cost pricing under the governing predatory-pricing framework.
- The court further held the government failed to show a triable issue on the dangerous probability of recoupment.
- The court concluded that fare reductions and capacity increases, without legally sufficient proof of predation and recoupment, could not support monopolization or attempted monopolization liability.

## Legal Principles

- Summary judgment is appropriate when there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law; the nonmovant must present significantly probative evidence, not speculation.
- A predatory-pricing claim under § 2 requires proof that challenged prices were below an appropriate measure of cost and that the defendant had a dangerous probability of recouping the losses from below-cost pricing.
- Cost tests must reliably measure the costs tied to the allegedly predatory incremental output; a methodology that is overly aggregated or fails to isolate costs of challenged capacity additions is insufficient.
- Antitrust law does not require a firm to choose the strategy that maximizes short-run profits; price cutting and output expansion can be consistent with lawful competition even by a dominant firm.
- Courts should avoid condemning vigorous price competition absent rigorous proof, because mistaken findings of predation risk deterring consumer-benefiting conduct.

## Conclusion

The court entered summary judgment for the airline defendants because the government did not present legally sufficient, route-specific proof of below-cost pricing or a dangerous probability of recoupment, and thus could not establish predatory pricing or § 2 monopolization or attempted monopolization based on American’s fare matching and capacity increases at DFW.


United States v. AMR Corp., 140 F. Supp. 2d 1141 (D. Kan. 2001)