Air Transport World

Antitrust: The case of the missing case.

There are plenty of rules, but have been no willing enforcers

In the run-up to deregulation, much debate involved enforcement of competition rules. The end of the Civil Aeronautics Board meant the end of domestic route and rate regulation. It also meant the industry would have to obey competition laws applicable to deregulated businesses. But questions remained over the extent to which that would occur and which agency would enforce it.

Many had grave doubts about DOT, a highly political policymaking agency with a promotional mission. DOJ, though not apolitical, had a neutral image vis-a-vis any particular industry, not a plus in the view of airlines accustomed to favored treatment. Creating a new agency after dumping CAB was silly. DOT, after much self-interested lobbying and with airline support, won the prize.

Enforcer candidate No. 1 was the Department of Justice, overseer of antitrust matters in most industries except for those it cedes to the Federal Trade Commission. The Department of Transportation, heir to regulatory authority not sunsetting with CAB, was another contender. A third possibility was creation of a new independent agency.

But Sec. 412 of the Federal Aviation Act gave DOT transitional authority for competition enforcement only until 1988, when oversight of mergers and other competition matters such as monopolization, price-fixing and conspiracy went to Justice. However, a rewritten Sec. 411 left Transportation with authority over "unfair methods of competition," at least a partial overlap of DOJ's power. DOT also kept sole control for international affairs.

CAB was long gone but airlines still had their very own agency. The result: Until 1988, DOT approved all domestic mergers based on the then-prevailing economic concept of wide-open market "contestability." More broadly, in 21 years DOT has found nothing worthy of major enforcement action, though privately it has twisted some arms on behalf of start-ups.

Recently it has become more active, as in the scolding of Northwest about its behavior toward Reno Air, one of several start-ups to complain about NWA over the years. Last year, rather than bring an antitrust case DOT proposed guidelines defining anticompetitive behavior. Even that was at the behest of Major airlines claiming they were unsure of competition's limits. DOT accepted that claim even though other businesses manage to learn the limits of the Sherman and Clayton Acts from so-called "rule of reason" analyses, speeches by DOJ officials, case precedent and private talks. But the carriers were stalling, using the plea for guidelines to prevent DOT from bringing a case. …

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