## Facts

- The United States sued AMR Corp., American Airlines, Inc., and AMR Eagle Holding Corp. under § 2 of the Sherman Act, alleging monopolization and attempted monopolization through predatory pricing tied to American’s Dallas/Fort Worth (DFW) hub.
- The claims focused on four DFW-connected city-pair routes: DFW–Kansas City (MCI), DFW–Wichita (ICT), DFW–Colorado Springs (COS), and DFW–Long Beach (LGB).
- The government alleged that when low-cost carriers entered or expanded on those routes, American (1) increased capacity (seats/flights) and (2) cut fares to levels alleged to be below an appropriate measure of cost to force rivals to exit or contract.
- The government further alleged that, after rivals withdrew or reduced service, American restored capacity and prices to approximately pre-entry levels and later recovered losses through higher fares, including by protecting dominance at the DFW hub.
- The district court granted summary judgment for American, concluding the government failed to raise a triable issue on below-cost pricing and on a dangerous probability of recoupment.
- The United States appealed to the Tenth Circuit.

## 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 predatory pricing theory under Sherman Act § 2.
2. Whether the government produced sufficient evidence of a dangerous probability that American could recoup any alleged losses through later supracompetitive pricing.
3. Whether American’s capacity increases and fare reductions in response to low-cost carrier entry could be treated as unlawful exclusionary conduct absent proof of below-cost pricing and likely recoupment.

## Decision

- The Tenth Circuit affirmed summary judgment for American.
- The court held the government failed to show a genuine dispute of material fact on either element required for predatory pricing: below-cost pricing and dangerous probability of recoupment.
- The court rejected the government’s proposed “incremental cost” formulations as not demonstrating below-cost pricing under an appropriate cost benchmark.
- The court concluded the record did not support a finding that American could likely recoup alleged losses, given competitive conditions and the prospect of entry or expansion in airline markets.

## Legal Principles

- Predatory pricing under Sherman Act § 2 requires proof of (1) pricing below an appropriate measure of cost and (2) a dangerous probability of recoupment of losses through later supracompetitive pricing.
- Cost measures used to show below-cost pricing must be economically coherent and tied to the costs attributable to the challenged output; methods that fail to isolate costs associated with alleged capacity additions are insufficient.
- Aggressive price competition, including capacity expansion and fare matching or undercutting, is not exclusionary conduct without the required showing of below-cost pricing and likely recoupment.
- Summary judgment is proper where the plaintiff’s evidence does not create a triable issue on essential elements of predatory pricing, particularly where the proposed cost test would risk condemning lawful competitive behavior.

## Conclusion

The Tenth Circuit held that the government’s evidence did not support a predatory pricing claim because it failed to establish below-cost pricing using an appropriate cost measure and failed to show a dangerous probability that American could later recoup losses; accordingly, American’s aggressive competitive response to low-cost carrier entry could not sustain § 2 liability on this record.


United States v. AMR Corp., 335 F.3d 1109 (10th Cir. 2003)