Dirty Tricks in Dallas

By John S. DeMott

Tipped by Braniff, the Government sues American

To colleagues at Dallas-based American Airlines, Robert Crandall, 47, is one of the smartest executives in commercial aviation today, a man who, says one, "forces you to think on higher levels." He is also short-tempered and sometimes ill-mannered, a man who has a low frustration level. To what degree was very evident last week when the Justice Department, in bringing a federal civil suit against Crandall and American, revealed the startling contents of a telephone conversation between him and Howard Putnam, 45, chairman of Braniff International.

In the conversation (see box), recorded in February of last year, Crandall suggests that the two airlines raise fares 20%. That would have defused a price war that was badly wounding American and, by May 1982, helped force Braniff into bankruptcy, where it remains today. Putnam promptly rejected the idea, but the conversation has become the centerpiece of Justice's action.

The suit stops short of accusing Crandall of outright price fixing, a violation of federal antitrust law punishable by fine and imprisonment. The most notorious such case occurred in 1961 and involved General Electric, Westinghouse and many others. The companies and their key executives paid a total of almost $2 million in fines; 30 executives, charged as criminals, faced sentencing, and seven actually went to jail.

The Justice Department has brought no criminal charges against Crandall or American, but it does contend that Crandall's words amounted to an effort at illegal monopolization, even though no agreement to fix prices was actually made. That could be because Putnam was in no mood to agree with Crandall about pricing, or for that matter much of anything. The Government wants Crandall thrown out of his job. In its suit, it asks that Crandall be enjoined from serving as president of American or any other airline for two years.

The suit climaxed a ten-month federal investigation of "dirty tricks" that Braniff said were played on it last year by American in an attempt to retaliate against low Braniff fares. According to one rumor, American pilots were causing delays on runways to disrupt Braniff flights. Another had American dawdling in the delivery of some $9 million in cash from Braniff tickets bought through American.

None of the rumors were proved, but they helped give American a "bad boy" image in Dallas. American, which had based its executive offices in New York City for about 40 years, moved its headquarters, and at least 1,100 jobs, to Dallas in 1979 and immediately began a fierce competition with the local boys, Braniff.

The Government's transcript, it seems, involved a bit of trickery on Braniff's part. According to American, Crandall telephoned Putnam to complain about an offensive Braniff advertisement, and Putnam returned the call, tape recorder ready. Crandall's language was damning. At one point, Putnam asked, ''Do you have a suggestion for me?" "Yes," said Crandall heatedly, "I have a suggestion for you." He then proposed the joint fare-raising scheme.

When the Government announced its suit, American Chairman Albert Casey said he stood by Crandall and expected the case to be "soundly repudiated in court." American contended that it and Braniff faced vigorous competition along their routes, so much so that they could not "have raised fares above competitive levels" even if they had tried.

Putnam broke no law by making the recording. It is legal in Texas, and many other states, for one party in a telephone conversation to record it without letting the other party know. William Baxter, the Justice Department's antitrust chief, let it be known last week that he thinks company bosses should always record their phone conversations with other company bosses. That would make it harder, reasoned Baxter, to try to fix prices over the phone. Many businessmen found the idea absurd. Could wired golf carts and bugged swizzle sticks be far behind? --By John S. DeMott. Reported by David S. Jackson/Washington and Allen Pusey /Dallas

With reporting by David S. Jackson, Allen Pusey This file is automatically generated by a robot program, so viewer discretion is required.