Tuesday, June 30, 2009

More on the DOJ/Star Alliance Fallout

Today's Wall Street Journal has a good story on the Department of Justice's opposition to Continental Airlines joining a Star Alliance fully immunized from U.S. antitrust law.  A few points from the story worth considering:

  • "The Justice Department . . . technically has no authority over international aviation agreements, but it typically weighs in on such DOT rulings. In this case, however, it waited nearly two months after the comment period closed before registering its opinion with the DOT on Friday."
  • "The Justice Department's objections also could signal problems for a separate application for antitrust immunity by members of the oneworld group of carriers[.]"

  • "Unions representing United pilots and flight attendants also have signaled their opposition, contending the antitrust immunity would lead to the outsourcing of U.S. jobs."

The story which is beginning to unfold is that of interagency meddling and labor, which is currently enjoying the inflation of its political clout under the Democrats' regime, attempting to hold the alliance proceedings hostage out of malcontent.  A recent letter from United's flight attendants to the DOT "call[s] on the Administration to enact durable and meaningful provisions designed to insure an equitable measure of protections for workers" as part of the Star application.  See Press Release, Association of Flight Attendants-CWA, Flight Attendants Press DOT for Job Protections in UAL/CAL Alliance (June 30, 2009) (available here).  What these "durable and meaningful provisions" should look like is left unsaid.  What also seems to be left out of labor's concerns is any genuine reflection on what a highly restricted alliance could mean for United and Continental's market share.  If potential job losses are their real concern, they would do well to stay out of the way and let the airlines freely compete on a global level.

As for the interagency issue, there is no question that the DOJ's Antitrust Division is looking to take a hard line on 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 here).  But even so, as the WSJ story correctly highlights, they are not the agency apportioned by statute to approve and, potentially, immunize intercarrier agreements involving foreign air transportation; the DOT is.  It's no secret the DOJ has been less-than-thrilled with the DOT's immunization powers.  In the words of former Assistant Attorney General Anne K. Bingaman: "It is not necessary for code share partners to receive antitrust immunity for any agreement that would not violate antitrust laws; and conduct that would violate antitrust laws should not be permitted, much less immunized."  Consolidation and Code Sharing: Antitrust Enforcement in the Airline Industry, Address to the ABA Forum on Air and Space Law, Washington, D.C. (Jan. 25, 1996) (available here).  In the 13 years since this protest was made, Congress has not seen fit to divest the DOT of its broad immunization powers, nor has it made the move to allow airlines to consummate crossborder mergers.  This latter fact is telling about why airlines have sought the "pseudo-merger" benefits of alliances, especially in a commercial environment where consumers have come to expect and rely upon the route networks alliances provide.  See Michael E. Levine, Commentary, Airline Alliances and Systems Competition: Antitrust Policy Toward Airlines and the Department of Justice Guidelines, 45 Houston L. Rev. 333 (2008).  If the U.S. has finally reached that "absolute moment" in the history of airline regulation where antitrust immunity appears as nothing other than a dark artifice whose purpose and logic have been extinguished by the light of authentic liberalization, then let the citizenship purity rules for airline ownership be vanquished and the noble knights of competition protection at the DOJ stand guard.  If not, then these knights serve as nothing more than Praetorians of protectionism with the DOT's antitrust immunity power the only shield between them and the freedom of the airlines to operate international services efficiently and effectively in a globalized world.


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