The recent DOT tentative approval of the Continental linkup with United, Lufthansa and the other airlines in the Star Alliance is facing bureaucratic opposition. The Department of Justice (DOJ) and the European Union (EU), in bureaucratic speak, are saying, “Go slow.”
Last week, the EU clearly demonstrated their reservations with the increasing power of airline alliances. “We were not convinced consumers are benefiting,” a spokesman said.
The European Commission said Monday it is investigating the alliance among Continental Airlines, United Airlines, Lufthansa and Air Canada, and the separate one of American Airlines, British Airways and Iberia Airlines. … Carriers with immunity can effectively merge operations within a geographic area, such as the trans-Atlantic routes. They can jointly set fare prices and determine which carrier’s planes fly which routes.
Bravo, European Union!
Now it is time for the DOJ to step up to the plate again before the DOT rulings are finalized. When the stakes are this high any decision on antitrust immunity should be coordinated between both the DOT and the DOJ.
Last December, the Senate Committee on the Judiciary sent a clear letter to the DOT asking to be part of the decision-making process for any grant of antitrust immunity. The letter was signed by bipartisan congressional heavyweights: Patrick Leahy, Arlen Spector, Herb Kohl and Orrin Hatch.
The Judiciary Committee members cautioned:
A grant of antitrust immunity, therefore, has the effect of enabling conduct that undermines free-market competition and can substantially harm consumer welfare, leading to higher prices, reduced output, lower quality, and reduced innovation for consumers, Given these substantial risks, immunity from the antitrust laws should be granted only in extraordinary circumstances.
The letter clearly stated that DOJ expected DOT to wait for a pending joint study on transatlantic competition.
…we recommend that DOT be cognizant of the joint study, currently being undertaken by the United States and the European Commission, on transatlantic aviation markets and competition. This study is scheduled for completion in mid-2009.
The Senate Judiciary Committee chairman and Ranking Member as well as the Subcommittee Chairman and Ranking Member of the Subcommittee on Antitrust were explicitly clear in their letter. (Click here for the letter in its entirety.)
The DOT should exercise its statutory authority to grant antitrust immunity sparingly, and only in what we expect would be rare circumstances where parties seeking immunity have sustained their heavy burden of establishing that competition must be supplanted to serve some other public interest.
We are watching the debate over the approval of antitrust immunity for Continental and the Star Alliance as well as the American/BA/Iberia link-up in the oneworld alliance.
Any final decisions should be delayed at least until the full joint report on transatlantic competition is completed.
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Continental has already raised the cost of upgrading to Business First, and the explanation I received was that this was done in order to be in alignment with Star Alliance carriers. As Platinum Elite we used to be able to afford to upgrade from Economy by purchasing an H fare. The H fare is theoretically still in existence but, bottom line, the cost of upgrading has soared so that we can no longer justify the expense. They would prefer to have unsold seats to discounting the seats to their very best customers. They are sorely testing our loyalty and we may soon start to look elsewhere…….provided there is an elsewhere.