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“A Sense Of Disgust With Airlines”: Enough With The Crazy Change Fees

In 2014, airlines in the United States billed more than three billion dollars in “change fees”—fees charged to customers who cancelled or changed itineraries. This bounty came after most of the industry (minus Southwest) tacitly agreed to create a new industry standard of two hundred dollars per change, plus, in some cases, an additional fifty-dollar service fee for tickets booked on non-airline Web sites. And the worst may be yet to come: as the airline-revenue-optimization consultant Tom Bacon wrote a little while back, “Don’t be surprised if you see change fees increase again. … My guess is that change fees will eventually hit $300.” Meanwhile, fees can be four hundred dollars on international routes; on some first-class fares, they are as much as seven hundred and fifty dollars. The size of the fees alone may cause many a sense of disgust: Why pay so much for something that feels like nothing? But the strongest case against high change fees is that they introduce a rigidity into the travel system that is inconsistent with the fast-moving contemporary economy.

Modern life moves quickly, and we change plans constantly, but if we need to change our travel plans we face harsh punishments. It’s as if this one part of modern life—planning how we move through the air—is stuck in another age, while everything else is in flux. This rigidity translates into an economic case against high change fees, based on what an economist might call “the deadweight costs” created by stranded passengers.  Consider two travellers—each is on a trip and, due to changed circumstances (perhaps a meeting is cancelled, or a family member falls ill), each should come home early. The first pays the two-hundred-dollar change fee. The second does not, either because she cannot afford it or because she cannot, subjectively, bring herself to pay it. The second traveller creates stranding costs—wasted time, missed meetings, neglected children, and so on—without any benefit to the airline.

Airlines prefer the high change fees for reasons both obvious and less so. The obvious reason is the money. The less obvious reason is that change fees “protect” revenue and help airlines keep their planes as full as possible (achieving “higher load factors,” in the jargon). Without high fees, last-minute changes would be more common, leaving behind seats that are hard to fill on short notice and at the high price that airlines charge last-minute travellers.

High change fees surely both generate and protect revenue for the airlines. But the potential losses from empty seats caused by changes are mitigated in several ways. For one thing, travellers who change their tickets usually absorb any increase in fares, and sometimes the airlines profit from the change, by effectively selling the same seat twice. When changes are made far in advance, there’s plenty of time for the airline to resell the seat. No one can deny that high change fees yield higher profits (for what’s presently a profitable industry). But the fact that Southwest charges no change fees yet remains highly profitable counters the argument that an airline cannot be run without them.

Sometimes airlines defend their change fees by pointing out that they also sell “fully refundable” tickets without such fees, effectively blaming consumers for failing to read the fine print. This argument comes close to a sham, for it ignores the fact that the fares without fees are so expensive that, in practice, only customers in highly unusual situations would purchase them, particularly given that the refund process is itself highly unreliable. This pricing actually serves to protect the change-fee racket, because no rational person would buy a ticket at, say, three times the normal fare instead of one at the regular price, plus a potential change fee. In other words, offering a fully refundable fare simply creates an illusion of choice that the airlines exploit.

Are high change fees a problem that we can expect competition to solve? In an ideal world, yes. But the airlines find it more profitable to collude instead of compete when it comes to fees, despite this being a country where price-fixing is supposedly a felony. To its credit, the Justice Department is currently investigating the price-fixing of fares through agreements to place limits on the number of available seats. But, when it comes to change fees, the airlines rely on a legal form of collusion. The major airlines simply take turns initiating fee increases and then play follow-the-leader. The latest increase (to two hundred dollars) was quietly initiated by United, in the spring of 2013, and copied almost immediately by the other major airlines. If the agreement were explicit, it would be a crime, but the same results are achieved legally, neutering the power of competition. Consolidation after rounds of mergers does not help; Southwest Airlines’ continued defection from the fee cartel has exerted no apparent competitive pressure on larger airlines such as United, Delta, and American.

The Department of Transportation is supposed to prohibit “unfair” and “unreasonable” practices in air transportation. All this suggests that the D.O.T., or perhaps Congress, ought do more hard thinking about what an “unfair” or “unreasonable” change fee looks like. If free changes are too much to ask for, imposing a return to the fifty-dollar fees that were charged in the late nineteen-nineties might more fairly balance the airlines’ interest in dealing with constant changers with the national interest in a more flexible and adaptable travel system. The consumer group flyersrights.org has filed a petition with the D.O.T. requesting a limit on international fees at the reasonable level of a hundred dollars. The major airlines would surely protest, but it is worth remembering that they, like the banks, have been protected by taxpayers against financial failure. In exchange for providing a safety net and putting up with so much else, the public deserves more in return.

 

By: Tim Wu, Professor, Columbia School of Law, The New Yorker, July 21, 2015

July 25, 2015 Posted by | Airline Industry, Change Fees, Flying Public | , , , , , , , , | 1 Comment

“Jeb Bush Raises Tons Of Money, Loses Credibility”: He’s Just “Actively Exploring”, A Phrase More Suitable To A Prostate Exam

The following words were actually spoken last week by Jeb Bush’s non-campaign spokesperson: “Gov. Bush is actively exploring a run. He has not made a final decision.”

Every grownup in America knows this is a lie.

The voters know Jeb has already decided to run for the White House in 2016. Campaign donors know he’s running. And the entire busload of other Republican presidential candidates knows he’s running.

Two campaign-finance watchdog organizations, the Campaign Legal Center and Democracy 21, want the U.S. Justice Department to investigate the “charade” of Bush’s non-campaign. They say it’s merely a weasel move that allows him to rake in unlimited, and mostly unregulated, donations.That’s absolutely true. It’s an epic weasel move, though probably legal.

By pretending he hasn’t made up his mind, Jeb can personally go out and raise many millions of dollars for his super political action committee, loftily named “Right to Rise.”

The funds taken will eventually be used for his TV and digital advertising, once the fake non-campaign becomes an acknowledged one.

Fittingly, the logo of the Right to Rise SuperPAC features an open hand reaching upward. This might as well be Jeb’s hand, waiting to be stuffed with money.

Right to Rise was on pace to raise $100 million by the end of May, an obscene sum that dwarfs what the SuperPACs of other GOP hopefuls have collected.

Several of the contenders have formally announced their candidacies, and others will soon.

The Politico website reports that Jeb is holding off until mid-June before making it official. Meanwhile, he has a campaign manager, press aides and a vast network of experienced fund raisers.

Think of the stressful jobs they’ve got, running a non-campaign at full speed.

Part of your time is spent telling the media that Jeb really truly hasn’t made a decision. Imagine trying to keep a straight face while you say that.

Then the rest of your day is spent reassuring billionaires like the Koch brothers and Sheldon Adelson that Jeb is totally, deeply, profoundly committed to winning the presidency — so please don’t write any more checks to Marco Rubio.

The reason for maintaining the public lie about Jeb’s non-decision can be traced to federal campaign laws, which were written as a template for high-stakes political weaseling and then expanded into a free-for-all by the current Supreme Court.

As long as Jeb doesn’t declare himself a candidate for federal office, he can jet all over the country soliciting unlimited riches for Right to Rise.

Once he officially throws his golf cap in the ring, however, the donations he requests for the SuperPAC would be capped. He and his staff would also be banned (on paper) from strategizing with his pals who run Right to Rise, because SuperPACs are supposed to operate independently of individual campaign committees.

So, the longer Jeb postpones his announcement, the larger the war chest he can accumulate and the more control he can exert over the organization that will bankroll his inevitable candidacy.

Meanwhile, he’s free to behave like a legitimate candidate. He can swoop into primary states such as Iowa and New Hampshire, shake hands, pose for pictures, smooch babies, bash Obama, suck up to Fox News, and even pull a Romney-style flip-flop when asked about the Iraq war.

All this while insisting he’s not running for the White House — he’s just “actively exploring,” a phrase more suitable to a prostate exam.

Sometimes Jeb hasn’t made it easy for his non-campaign staff to keep up the act.

During a recent non-campaign stop in Nevada, he actually let slip the forbidden words: “I am running for president in 2016.”

Then, in a rather unsmooth way, he scrambled to say, “If I run….”

The fundraising benefits of perpetuating this farce will at some fast-approaching time be outweighed by the risks. Voters who aren’t yet sold on Jeb might start to feel that he’s insulting their intelligence.

Another danger is that he appears at ease in the role of wry deceiver. People prefer straight-talking candidates, or at least candidates who do a good impression of straight talking.

After stumbling so badly on the subject of Iraq, Jeb can’t afford to look either indecisive or evasive.

Nobody believed Hillary Clinton for all those months while she denied that she’d made up her mind to run. Nobody believes Jeb now.

He’s probably raised more money than all the other GOP candidates put together, but he might need every penny to buy back some credibility.

 

By: Carl Hiaasen, Columnist for The Miami Herald; The National Memo, June 2, 2015

June 3, 2015 Posted by | Campaign Financing, GOP Presidential Candidates, Jeb Bush | , , , , , , | 1 Comment

“I’m Not An ‘Official’ Candidate”: Will Jeb Bush Get Away With His ‘Scheme’ To Skirt Campaign Finance Rules?

With candidates and outside groups already raking in money for the 2016 presidential contest and the Federal Election Commission abdicating its duty to enforce campaign finance laws, watchdog groups are pushing the Department of Justice to fill the void. To start, groups are asking the DOJ to investigate one of the most blatant exploiters of lax enforcement: Jeb Bush.

For months now the former Florida governor has kept up the elaborate charade that he is not quite sure if he will run for the Republican presidential nomination. “No, no. I’m not an official candidate,” he said during an exchange with reporters a few weeks ago—never mind that he’s been crisscrossing the country raising amounts cash unprecedented for an undeclared candidate. Bush himself has struggled to maintain the farce, as he demonstrated minutes later when he accidentally declared, “I’m running for president in 2016.”

The implications of Bush’s protracted non-candidacy are serious. By waiting to announce his bid for the White House, Bush has skirted one of the last remaining campaign finance rules: the ban on coordination between candidates and super PACs. (To be sure, that supposed firewall already looks more like a shower curtain.) Once Bush officially declares his intention to run, his campaign will be bound by that rule and by limits on donations directly to candidates ($2,700 in the primaries). But until then, absent action by regulators, Bush is apparently free to raise money and direct strategy for Right to Rise, the super PAC that is expected to eventually take on many operations normally undertaken by a campaign committee—not just television and online advertising but also direct mail, data collection, and phone banking. And unlike a campaign committee, the Super PAC’s ability to raise money for these activities won’t be hampered by contribution limits.

In a letter sent to Attorney General Loretta Lynch on Wednesday, the Campaign Legal Center and Democracy 21 allege that Bush and Right to Rise are “engaged in a scheme to allow unlimited contributions to be spent directly on behalf of the Bush campaign and thereby violate the candidate contribution limits enacted to prevent corruption and the appearance of corruption.” The groups asked the DOJ to appoint a special counsel from outside the department to investigate the allegation, noting that it would look suspicious were a Democrat-appointed Attorney General to go after a Republican candidate.

The letter argues that Bush should be considered a candidate despite his disavowals, because he’s been acting like one “in all pertinent respects.” He’s hired strategists and buttered up local Republican leaders in early primary states like New Hampshire and Iowa. He’s headlined dozens of events for Right to Rise, many of them fundraisers with a $100,000 ticket price. His advisers are overseeing the super PACs operations. Reportedly Bush has even set the timing of his official campaign announcement—expected mid-June—to leave room for a “cross-country fundraising tour” for Right to Rise before the non-coordination rule kicks in.

Democracy 21 president Fred Wertheimer said that Bush’s association with Right to Rise is “the most blatant example to date” of how super PACs dedicated to a single candidate are being used to circumvent contribution limits. But Wertheimer’s group and the Campaign Legal Center are preparing to ask the DOJ to probe other potential violations by presidential candidates and individual-candidate super PACs.

While the FEC has jurisdiction over civil enforcement of campaign finance laws, the Justice Department can pursue criminal, or “knowing and willful,” violations. The DOJ’s first prosecution involving coordination between a super PAC and a campaign committee was announced in February, in a case involving a campaign manager for a Virginia congressional candidate who coordinated with a super PAC to leverage $325,000 in advertising against a rival. Assistant Attorney General Leslie Caldwell said at the time that the department “is fully committed to addressing the threat posed to the integrity of federal primary and general elections by coordinated campaign contributions, and will aggressively pursue coordination offenses at every appropriate opportunity.”

“The Justice Department is the only place where we have a chance of getting the laws enforced,” Wertheimer said. “The FEC is useless.” The chairwoman of the commission, which is hamstrung by a three to three split among the commissioners, acknowledged as much recently when she told the New York Times that “the likelihood of the laws being enforced is slim… People think the FEC is dysfunctional. It’s worse than dysfunctional.” If neither enforcer steps up, then according to Wertheimer “We’re going to see the most massive campaign finance violations in the history of the country, done by various presidential candidates.” (A DOJ spokesperson told The Nation that the department would review the letter, but declined to comment further.)

Daniel Weiner, counsel for the Democracy Program at the Brennan Center for Justice and a former FEC staffer, shares Wertheimer’s critique of the commission. “It beggars belief that there hasn’t been a single case worth bringing in the last six years,” he said, noting that the FEC hasn’t pursued any cases related to the coordination rule since the Supreme Court unfettered super PAC spending in Citizens United.

But Weiner doesn’t believe that the DOJ can “substitute for competent and active civil enforcement,” because not all violations that warrant a response from regulators rise to a criminal level. “Sooner or later we need to do something about the FEC. It’s nice to talk about the Justice Department, and I support efforts to get disclosure through other avenues, but as long as we have a completely dysfunctional civil regulator there’s going to be an elephant in the room,” he said.

And if that doesn’t happen before the 2016 contests truly heat up? “We’re going to have the Wild West,” Weiner concluded.

 

By: Zoe Carpenter, The Nation, May 27, 2015

May 28, 2015 Posted by | Campaign Financing, Federal Election Commission, Jeb Bush, Super PAC's | , , , , , | Leave a comment

“Whatever Happened To Antitrust?”: Ambushed By The Giant Companies It Was Designed To Contain

Last week’s settlement between the Justice Department and five giant banks reveals the appalling weakness of modern antitrust.

The banks had engaged in the biggest price-fixing conspiracy in modern history. Their self-described “cartel” used an exclusive electronic chat room and coded language to manipulate the $5.3 trillion-a-day currency exchange market. It was a “brazen display of collusion” that went on for years, said Attorney General Loretta Lynch.

But there will be no trial, no executive will go to jail, the banks can continue to gamble in the same currency markets, and the fines – although large – are a fraction of the banks’ potential gains and will be treated by the banks as costs of doing business.

America used to have antitrust laws that permanently stopped corporations from monopolizing markets, and often broke up the biggest culprits.

No longer. Now, giant corporations are taking over the economy – and they’re busily weakening antitrust enforcement.

The result has been higher prices for the many, and higher profits for the few. It’s a hidden upward redistribution from the majority of Americans to corporate executives and wealthy shareholders.

Wall Street’s five largest banks now account for 44 percent of America’s banking assets – up from about 25 percent before the crash of 2008 and 10 percent in 1990. That means higher fees and interest rates on loans, as well as a greater risk of another “too-big-to-fail” bailout.

But politicians don’t dare bust them up because Wall Street pays part of their campaign expenses.

Similar upward distributions are occurring elsewhere in the economy.

Americans spends far more on medications per person than do citizens in any other developed country, even though the typical American takes fewer prescription drugs. A big reason is the power of pharmaceutical companies to keep their patents going way beyond the twenty years they’re supposed to run.

Drug companies pay the makers of generic drugs to delay cheaper versions. Such “pay-for-delay” agreements are illegal in other advanced economies, but antitrust enforcement hasn’t laid a finger on them in America. They cost you and me an estimated $3.5 billion a year.

Or consider health insurance. Decades ago health insurers wangled from Congress an exemption to the antitrust laws that allowed them to fix prices, allocate markets, and collude over the terms of coverage, on the assumption they’d be regulated by state insurance commissioners.

But America’s giant insurers outgrew state regulation. Consolidating into a few large national firms and operating across many different states, they’ve gained considerable economic and political power.

Why does the United States have the highest broadband prices among advanced nations and the slowest speeds?

Because more than 80 percent of Americans have no choice but to rely on their local cable company for high capacity wired data connections to the Internet – usually Comcast, AT&T, Verizon, or Time-Warner. And these corporations are among the most politically potent in America (although, thankfully, not powerful enough to grease the merger of Comcast with Time-Warner).

Have you wondered why your airline ticket prices have remained so high even though the cost of jet fuel has plummeted 40 percent?

Because U.S. airlines have consolidated into a handful of giant carriers that divide up routes and collude on fares. In 2005 the U.S. had nine major airlines. Now we have just four. And all are politically well-connected.

Why does food cost so much? Because the four largest food companies control 82 percent of beef packing, 85 percent of soybean processing, 63 percent of pork packing, and 53 percent of chicken processing.

Monsanto alone owns the key genetic traits to more than 90 percent of the soybeans planted by farmers in the United States, and 80 percent of the corn.

Big Agribusiness wants to keep it this way.

Google’s search engine is so dominant “google” has become a verb. Three years ago the staff of the Federal Trade Commission recommended suing Google for “conduct [that] has resulted – and will result – in real harm to consumers and to innovation.”

The commissioners decided against the lawsuit, perhaps because Google is also the biggest lobbyist in Washington.

The list goes on, industry after industry, across the economy.

Antitrust has been ambushed by the giant companies it was designed to contain.

Congress has squeezed the budgets of the antitrust division of the Justice Department and the bureau of competition of the Federal Trade Commission. Politically-powerful interests have squelched major investigations and lawsuits. Right-wing judges have stopped or shrunk the few cases that get through.

We’re now in a new gilded age of wealth and power similar to the first gilded age when the nation’s antitrust laws were enacted. But unlike then, today’s biggest corporations have enough political clout to neuter antitrust.

Conservatives rhapsodize about the “free market” and condemn government intrusion. Yet the market is rigged. And unless government unrigs it through bold antitrust action to restore competition, the upward distributions hidden inside the “free market” will become even larger.

 

By: Robert Reich, The Robert Reich Blog, May 24, 2015

May 26, 2015 Posted by | Antitrust, Big Banks, Corporations | , , , , , , , | Leave a comment

“Chris Christie’s Problems Are Just Beginning”: Why The Bridgegate Indictments Don’t Clear His Name

While other Republican presidential contenders get to make their case for why they should lead the country, or take pot shots at former Secretary of State Hillary Clinton,  New Jersey Governor Christie is doing his best to not let his past define him. But when that  past, in the form of Bridgegate,  continues to dominate the news, that gets  harder and harder to do.

Just wait for the Bridgegate trials to begin.

If Bloomberg News is right, Federal prosecutors haven’t just been going after Bill Baroni, Bridget Anne Kelly, and David Wildstein, all of whom were indicted yesterday on federal corruption charges, and the latter of whom has already pleaded guilty; prosecutors are also apparently looking at former Port Authority Chairman and Christie confidant David Sampson in a separate criminal probe not related to Bridegate, but to allegations Samson tried to shake down United Airlines.

In the meantime, in damage control mode, Christie used Wildstein’s guilty plea and the indictments of Baroni and Kelly, and the fact that he was not himself named in the indictment, as proof that he’s in the clear on Bridgegate. In a statement, Christie said that the “charges make clear what I’ve said from day one is true: I had no knowledge or involvement in the planning or execution of this act.”

U.S. Attorney Paul Fishman, who has been on the Bridgegate caper since January of 2014, did offer Christie a kind of qualified lifeline at his press conference Friday, saying: “Based currently on the evidence available  to my office and the agents  with whom we have been working, we will not be bringing any further charges related to the matters discussed in today’s indictment.”

Yet just minutes after Wildstein’s guilty plea was formally announced, his lawyer Allan Zegas was serving up red meat for hungry reporters. Zegas relayed to reporters Wildstein’s contrition for his role in the  alleged plot, but before he walked away from the microphones, he re-iterated what he has said before, that “evidence exists that the Governor knew of the lane closures while they were occurring.”

Zegas told reporters that Wildstein, one of Christie’s former point men in the Port Authority, had been cooperating for some time with federal prosecutors, had answered thousands of question from them, and was still being questioned. Zegas volunteered also that “there is a lot more that will come out,” all of which he said that Wildstein will be willing to testify about at trial. Wildstein is scheduled to be sentenced in August, but that could be moved until after the trial, when the government and the judge in the case can fully assess just how well Wildstein cooperated with prosecutors.

When U.S. Attorney Paul Fishman was asked directly at yesterday’s press conference about Zegas’s tantalizing comments about Christie, Fishman declined to answer. When Fishman was asked directly if Christie “was in the clear,” he said “I am not sure what that means so I really can’t answer that question.”

“Is he going to be further investigated,” the questioner pressed.

“I am not going to comment on whether anybody is going to be further investigated in connection with this or any other matter ever,” said Fishman.

“Can we say [Christie is] cooperating?” another reporter asked.

“I am not going to say whether witnesses are, or are not, cooperating.”Fishman responded.

Another reporter asked if it could be said that Governor Christie had been misled by the conspirators. Fishman passed on that question as well.

But Fishman did have his version of a “stay tuned” tease when he confirmed  that other names might surface in the case as “un-indicted co-conspirators,” who may have been willful participants but might not be charged for their role in what prosecutors allege was a criminal conspiracy.

“The indictment does say Bridget Kelly, Bill Baroni, David Wildstein and others” Fishman conceded. “We don’t identify un-indicted co-conspirators in our indictment by name unless they have been previously mentioned in a publicly filed court document, and that is not the case here. There may come a time during the course of the proceedings when we  will make a disclosure to the court or defense council who the co-conspirators are, but it is Department of Justice policy not to do it now,” Fishman told reporters.

“To charge someone and to convict someone, we have an obligation to only bring a case in which we have sufficient evidence  to prove beyond a reasonable doubt that someone is in fact guilty of a crime. That is not the standard for somebody to be an un-indicted co-conspirator. The standard for an un-indicted co-conspirator can be less than that. It can also be that we don’t plan on charging somebody that was involved,” Fishman said.

The indictment charges that Baroni, Kelly and Wildstein purposefully timed the George Washington Bridge lane closures in September 2013 to create maximum havoc on the first day of school, punishment doled out after Fort Lee’s Democratic Mayor Mark Sokolich refused to endorse Christie for re-election. What will come out in excruciating detail at trial is just how vindictive the plan actually was in its particulars. This will no doubt provide an opportunity for the news media to run archival tape of Governor Christie publicly offering the defense that the Fort Lee traffic jam was caused by a legitimate Port Authority traffic study, a cover story Federal prosecutors now charge was entirely fabricated, and a part of the criminal conspiracy.

Based on the tenor of  the post-indictment press availabilities for lawyers representing Bill Baroni, and a similar availability held by former Deputy Chief of Staff Bridget Kelly and her attorney, what the public is going to be treated to at trial will be a public circular firing squad. It will be Christie operative turning on Christie operative, all with their liberty hanging in the balance. All parties have vowed to mount vigorous defenses that will paint  David Widlstein as a liar.

And what do all three of these folks have in common? Governor Christie thought they were all fit to hold high positions of public trust.

 

By: Robert Hennelly, Salon, May 2, 2015

May 4, 2015 Posted by | Bridgegate, Chris Christie, GOP Presidential Candidates | , , , , , , , , | 2 Comments

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