A recent bill introduced in the US House of Representatives calls for a study of the effect of immunized antitrust alliances on competition, and may lead to a revision of the legal requirements and policies that the US Department of Transportation ("DOT") uses when determining whether to grant airlines antitrust immunity.
On December 19, 2008, the Senate Judiciary Committee sent a letter to then-Attorney General Michael B. Mukasey and then-Transportation Secretary Mary Peters warning of the "substantial risks" involved in granting antitrust immunity to international alliances: "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." The Senate Judiciary leaders urged DOT to grant antitrust immunity only in "rare circumstances where parties seeking immunity have sustained their heavy burden of establishing that competition must be supplanted to serve some other public interest."
The latest Congressional activity to limit the potential grant of antitrust immunity comes as competition authorities in the United States (the DOT and the Department of Justice) and the European Union (the European Commission) consider the approval of immunity for the alliance among American Airlines, British Airways, and Iberia. The proposed alliance has generated significant opposition from competitors such as Virgin Atlantic Airways and Continental Airlines, as well as interest groups such as the Allied Pilots Association and the American Society of Travel Agents.
Congressional Scrutiny May Increase With Passage Of New Legislation
Consistent with the growing concern on Capitol Hill over immunized international airline alliances, on February 3, 2009, House Transportation and Infrastructure Chairman James L. Oberstar (D-Minn.) introduced a bill to study the effects of airline alliances and antitrust immunity on competition in the United States and abroad. In support of the bill, Mr. Oberstar cited concerns with the "decline of competition in international markets, particularly between the United States and Europe." Specifically, Mr. Oberstar pointed to reduced competition in the United States and Europe as a result of three major alliances: Star, SkyTeam, and oneworld. The proposed legislation will result in a revision of existing laws and policies with an eye towards increasing the level of scrutiny for immunity applications and making it harder for alliances to obtain antitrust exemptions. "I believe that the time has come to reassess the wisdom of allowing the continuation of the reduced level of competition, which results from antitrust immunity for alliances," Mr. Oberstar stated.
The proposed bill would require the US Government Accounting Office ("GAO") to study the legal requirements and policies followed by DOT in deciding whether to approve alliances and grant antitrust exemptions, and determine whether any changes should be made to those laws and policies. Additionally, the GAO would be tasked with assessing whether DOT and the US Department of Justice ("DOJ") have created conflicting agency recommendations. In particular, the GAO would consider whether requests for antitrust immunity should be treated as mergers, subject to a traditional merger analysis by DOJ.
Proposed Bill Would Cancel All Previously Immunized Agreements
Under the proposed legislation, all previously granted alliance immunities would automatically expire three years from the date of the bill’s enactment, unless DOT affirmatively decides that the immunity should continue under any applicable new rules or policies. Exemptions would not be renewed until after DOT considered the GAO’s recommendations and made decisions regarding any policy changes that would be implemented. The proposed bill does not provide procedures for immunized airlines to petition for renewal or to challenge a denial of renewal.
The proposed bill has been referred to the House Transportation and Infrastructure Committee, the House Judiciary Committee, and the House Aviation Subcommittee. The committees will consider the bill and may make revisions to it before deciding to send it to the House or Senate for general debate.