Thursday, June 11, 2009

Senate Judiciary Committee on Alliances

Despite winning tentative approval and antitrust immunity from the Department of Transportation last month, the expanded Star Alliance--which is set to include Continental Airlines--may have to put its plans on standby.  In a letter sent on June 8 to Transportation Secretary Ray LaHood (available online here), Senate Judiciary Committee members Herb Kohl (D), Orrin Hatch (R), and Patrick Leahy urged the DOT not to issue a final order on the Star application "until the Justice Department has had a full opportunity to submit formal comments."  The letter also "entreat[s] the DOT to adopt any proposed conditions recommended by the DOJ which are intended to serve the interest of competition."  The letter closed by expressing the senators' "firm belief" that the DOT should refrain from acting on any alliance application "until all interested government agencies" have "an opportunity to assess the impact those grants might have on American consumers and the American economy."  The letter also mentioned the ongoing DOJ/European Commission study of international alliances and asked the Department to "be cognizant" of it.

As readers of the blog may recall, the DOT's tentative approval for the Star application was issued despite Rep. James Oberstar's legislative proposal to sunset all antitrust immunity for international airline alliances.  Since then, the House of Representatives has passed the proposal as part of the 2009 FAA Reauthorization Act, H.R. 915, 111th Cong., though the Senate has yet to vote on it.  While some analysts believe Rep. Oberstar's proposal will ultimately be dropped from the final version of the bill, it appears that the alliance system will remain under heavy political scrutiny.  The Judiciary Committee's letter may also signal a more expansive role for the DOJ in the alliance application process.  Given the DOJ's recent turn toward tough rhetoric on antitrust enforcement and consumer protection, see, e.g., Christine A. Varney, Assistant Attorney General, U.S. DOJ Antitrust Division, Vigorous Antitrust Enforcement in This Challenging Era, Remarks to the U.S. Chamber of Commerce (May 12, 2009) (available online here), even if the present alliance system survives, it may be forced to do so under a wide banner of new restrictions.

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