Merger Concerns Spur Momentum for New Competition Laws

World Airline News, March 16, 2001

The Dingell bill, H.R. 907, was introduced March 7, and is the "most consumer-friendly" and the most severe on anti-competitive behavior, according to the representative's spokesman.

Dingell plans to hold a hearing on this bill on March 21 in the commerce, trade, and consumer protection subcommittee of the Energy & Commerce Committee. Dingell is the ranking Democrat on that panel.

The bill also contains language aimed at protecting passenger rights, which is another high-profile issue currently being debated by Congress.

On Feb. 27, Rep. Louise Slaughter (D-NY) introduced H.R. 761, that would impose a one-year moratorium on airline acquisitions that require federal consideration of antitrust laws.

The most important competition bill in the House, however, was introduced by Rep. James Oberstar (D-MN), the ranking Democrat on the Transportation and Infrastructure Committee and one of the leading aviation proponents in Congress. Sen. Harry Reid (D-NV) has introduced a companion to the Oberstar bill in the Senate.

The Oberstar bill, H.R. 142, would "authorize the Secretary of Transportation to oversee the competitive activities of the air carriers following a concentration in the airline industry." The provisions of the bill would be triggered if the DOT determines that three or fewer air carriers account for 70 percent or more of scheduled domestic passenger miles.

Under the Oberstar bill, the DOT would be able to investigate whether any carrier is "charging an unreasonably high fare" on any route, and order carriers to reduce the fares, offer the reduced fare for a specified number of seats on that route, and offer rebates to passengers charged the higher fare.

New fares could be prescribed for carriers that are deemed to be taking advantage of dominance on certain routes or hub airports by setting fares lower than those charged by new entrants. These new fares would be enforced for two years. In addition, any if a dominant air carrier is charging higher than average fees, the DOT could order the carrier to take action to increase opportunities for competition.

- Adrian Schofield

Summary of Aviation Competition Restoration Act

Findings:

There are 20 hubs where one carrier services more than 50% of the emplaned passengers. GAO, DOT, the National Research Council of the Transportation Research Board have all recognized that hub domination adversely affects consumers. These fortresses are impregnable systems today, making meaningful competition in many markets all but impossible.

Study after study has indicated that these hubs enable air carriers to charge higher fares, particularly for the smaller markets, and a recent DOT study found that such fares were higher by as much as 54% in small, short haul markets to hubs.

Provisions:

Restores the public role in aviation industry consolidation and enables carriers to compete.

Ensures that facilities are made available to all carriers at the fortress hubs.

DOT will be given the authority to ensure that competing carriers other than the dominant carrier have competitive access to essential, critical airport markets at the large hubs.