Difference between revisions of "Airline antitrust restrictions"

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*[[Is opposed by::Associations - Business Councils, Partnerships, and Chambers of Commerce]]. Assumption: Maximizing profit is the main goal. <ref> http://www.bloomberg.com/news/articles/2015-07-01/u-s-justice-department-opens-antitrust-probe-into-airlines </ref>
 
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Revision as of 19:17, 11 November 2015

Airline antitrust regulations exist because to protect consumers from higher prices by ensuring the continuation of market competition. The Federal Government enforces antitrust laws including The Sherman Antitrust Act, The Clayton Act, and The Federal Trade Commission Act. Airlines have a history of trouble running into antitrust laws because the industry’s high concentration (small number of firms) makes it is easier to collude prices. Since it is such a big industry, (it has a large number of customers) there is support behind the regulation.

Remember, whenever in doubt, see [Colocation] for a sample policy page.

CONCEPT


Goals
Example

An airline company wants to maximize profits. One way to do this is by increasing ticket prices for customers. Since the current air travel market is arguably inelastic this is possible – except for the competition of lesser ticket prices of other airline companies. The competition driving down airline prices disappears when companies have mergers or when price collusions are negotiated. These inter-company agreements create a monopolistic control over the airline industry, eliminating the customers’ freedom of choice within the market. This type of market control is bad because it leads to a decrease of incentives for company innovation and an increase of ticket prices for customers. Federally regulated policies act to ensure this does not happen. When antitrust action is suspected, it is investigated and is taken to court if substantial evidence supporting the occurrence is acquired. [1]

Tradeoffs

Tradeoffs of implementing this policy may include:

  1. Pros: Regulations protect market competition, which benefits customers and incentivizes innovation within the industry.
  2. Cons: Overregulation burdens companies by causing an increase of costs for their operations (hiring lawyers, etc.), which are then passed to the customers, increase in the cost of their product, in this case air travel.
Compatibility Assessment

If answered yes, the following questions indicate superior conditions under which the policy is more likely to be appropriate:

  1. When airlines are colluding prices
  2. When two airlines that make up a large portion of the market are merging
Design

The following questions should be considered when determining how to implement this policy:

  • If someone is thought to be breaking antitrust law:
  1. Does the DOJ think they broke it? (Then the DOJ investigates)
  2. Does the DOJ have strong evidence that they broke it? (Then the DOJ brings the defendant to court)
  • If a major merger is occurring: (The DOJ reviews all major mergers in airline industry)
  1. Does the DOJ think the merger substantially lessens competition? (The DOJ investigates)
  2. Does the DOJ have strong evidence indicating the merger does substantially lessen competition? (Then the DOJ brings the defendants to court to challenge the merger. It is then up to court’s decision. The merger may fall through (because defendants don’t want a lawsuit)


ADOPTION


PolicyGraphics
Adopters

STAKEHOLDERS


Supporters
Opponents

REFERENCES


Research
  • Chan, Michelle. "Politics In The American Airlines--U.S Airways Merger And Antitrust Settlement." Fordham Journal Of Corporate & Financial Law 20.1 (2014): 175-201. Legal Collection. Web. 11 Nov. 2015. [1]
  • Bilotkach, Volodymyr, and Kal Hüscheirath. "Airline Alliances, Antitrust Immunity, and Market Foreclosure." The Review of Economics and Statistics 95.4 (2013): 1368-85. Print. [2]
  • GILLESPIE, WILLIAM, and OLIVER M. RICHARD. "Antitrust Immunity Grants To Joint Venture Agreements: Evidence From International Airline Alliances." Antitrust Law Journal 78.2 (2012): 443-469. Business Source Complete. Web. 11 Nov. 2015. [3]
Resources
Footnotes
  1. http://www.justice.gov/opa/pr/justice-department-files-antitrust-lawsuit-block-uniteds-monopolization-takeoff-and-landing
  2. INSERT a reference.
  3. http://www.justice.gov/atr
  4. INSERT a reference.
  5. http://www.bloomberg.com/news/articles/2015-07-01/u-s-justice-department-opens-antitrust-probe-into-airlines
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