Debate Slows Competition Regs
<B> Debate Slows Competition Regs</B>
By Barbara Cook
It will be early in the new year before the U.S. Department of Transportation makes final its airline competition policy guidelines, largely due to the overwhelming volume of public comments logged in the case, Secretary Rodney Slater said as the docket for such filings closed recently.
The outpouring of opinion on the controversial guidelines showed no letup in the final round of filings, with emotions running high from parties for and against DOT's plan to set parameters on airline pricing. As drafted, the competition policy is aimed at preventing major carriers from reducing fares below cost and selling large numbers of discount seats to drive smaller carriers out of a particular market.
In the final round of comments, the major airlines, represented by the Air Transport Association, continued to maintain that their studies demonstrate that "DOT's proposal suffers from profound factual, analytical and legal infirmities." ATA carriers were especially incensed over a white paper released by DOT that concluded competition is declining in the airline industry, with inflation-adjusted average fares increasing 23 percent in short-distance markets without low-fare competition. ATA argued that the white paper "when its methodological and analytical errors are exposed, is in reality an indictment" of the proposed policy. ATA urged DOT to withdraw the proposal and address any alleged predatory conduct in the airline industry through case-by-case enforcement proceedings under the existing antitrust laws.
The Air Carrier Association of America, which represents several new entrant airlines that have charged major carriers with predatory marketing behavior, told DOT that if the ATA carriers "are this concerned about guidelines, then the department should set standards by initiating immediate enforcement actions. After the first carrier is hit with civil penalties and certificate action, the ATA parties will begin to understand that this type of anti-competitive behavior is not going to be allowed to continue."
American Airlines filed separate comments in the proceeding, stating that most supporters of DOT's proposal "assume without analysis" that the department's determination that its guidelines are consistent with the antitrust laws is accurate. Instead, American contended, the policy "would chill and even affirmatively prohibit and punish conduct that the antitrust laws not only allow, but also promote." Further, American said, the carriers cannot rely on DOT to invoke the policy only in extreme situations. "Even if selectively enforced, the over-broad regulations in the proposed statement would impermissibly chill legitimate action," American said.
United Airlines claimed that the incidents relied upon by DOT to conclude that widespread predatory conduct by the major carriers does exist do not meet the department's own definition of predation. "Our preliminary analysis shows that fare and capacity responses are rare and occur in response to entry by majors--situations where predatory conduct is not alleged," United said.
The Business Travel Coalition submitted signatures from 426 individuals and corporations in support of the proposed policy. The BTC applauded DOT's leadership on behalf of travelers. Punishing the type of behavior anticipated by the guidelines would not penalize normal, competitive responses, BTC said.
Dr. Alfred Kahn, a key player in airline deregulation and an advisor to DOT on the competition policy guidelines, said DOT has proposed the rules in the belief that the antitrust laws, as they have been interpreted by the courts, have proven to be insufficient to protect competition in the airline industry against predation. "I share that belief," Kahn said, "without, however, intending in any way to discourage efforts by the antitrust agencies to enforce those laws vigorously.