January 11 - Big Three Hide Behind Noerr-Pennington to Collude for International Profits


INDUSTRY ANALYSIS


Big Three Hide Behind Noerr-Pennington to Collude for International Profits

Campaign produces windfall financial returns on the backs of consumers


By Kevin Mitchell

In very significant news last week, Southwest Airlines has pledged “extensive cooperation” with class action consumer plaintiffs suing Delta Air Lines, American Airlines and United Airlines (Big Three) for consumer-harmful commercial collusion. Southwest was a co-defendant in that case where it is alleged that the four major US airlines, which have monopolized thousands of city-pair markets and together now control an alarming 80 percent of domestic passenger seats, colluded on capacity levels to increase fares and reduce consumer choice. Southwest’s pledge of cooperation against the Big Three was made in conjunction with its agreement to pay $15 million to settle that case against it.

The Big Three colluding against consumers? Is this a shockingly far-fetched proposition? Hardly. One needs to look no further than the Big Three’s recent coordinated campaigns to thwart new competitive entry in international markets to see their collusive and anti-consumer inclinations on full display.

The Big Three’s political campaign against consumer choice offered by Emirates Airline, Etihad Airways and Qatar Airways (Gulf Carriers) – aka the Great Open Skies Hoax – is a troubling example of Big Three-orchestrated anti-competitive collusion and the lengths to which they are prepared to go. 

For the past three years, the Big Three have demanded that the US Government abandon its hugely successful pro-consumer Open Skies policy solely to pander to their profit-maximizing mission to eliminate the much-needed competitive choice Gulf Carriers provide to passengers. Let’s be crystal clear, the Big Three’s anti-competitive demand has absolutely nothing to do with violations of law or breaches of the UAE and Qatar Open Skies agreements.

The Big Three have offered political sound bites and platitudes, but zero rock solid facts to support their allegations. If the Open Skies matter was really about the law and facts, the Big Three would have filed an International Air Transportation Fair Competitive Practices Act (IATFCPA) complaint years ago and the statutory clock for any corrective action deemed warranted would have put this alleged matter to rest in 2015. Their failure to file an IATFCPA complaint is a flashing neon sign – an admission – that their anti-Open Skies “case” is a hoax.   

The Big Three’s Open Skies hoax is about three things only: 1) greed to add to already record-setting profits; 2) a cynical belief that raw political power is more important than the law and facts; and 3) corporate hubris run amok. 

The Great Open Skies Hoax represents a coordinated scheme to restrict competition posing under the guise of a policy initiative. In this way, the Big Three can hide behind the Noerr-Pennington doctrine that permits collective action even though the direct result of the advocacy would have anticompetitive and anti-consumer effects. 

What’s more, there is little doubt that indirectly, the Big Three’s scorched-earth campaign chills enthusiasm among foreign airlines and governments to risk entry to the US market. Frustrating new entry in this manner can produce success and a financial return on their multi-million dollar campaign investment sufficient to carry on with it into year four.

In reality, this harmful anti-consumer behavior is no different than the three oligopolists meeting in a smoke-filled backroom scheming to identify which commercial weapons they can jointly deploy to kill competition in what they arrogantly regard to be “their” market for “their” customers. The Big Three’s campaign is a ruse. It has nothing to do with public policy, and everything to do with collusive anti-competitive avarice. 

Not convinced? In addition to the Gulf Carriers, ask Norwegian Air International and Norwegian Air UK if they believe the Big Three, along with their anti-Open Skies partner the Air Line Pilots Association (ALPA), engage in collusive joint action to attempt to deny consumers competitive choice in the US-Europe market, which is over 80 percent controlled by the Big Three and their antitrust immunized alliance and joint venture partners. 

Just like the Gulf Carrier matter, the Big Three and ALPA made totally frivolous objections to Norwegian’s foreign carrier permit applications. However, there too, their cynical calculation was that political muscle is more important than legal merit and fact-based claims. This is yet another example of the Big Three colluding to restrict consumer choice and line their pockets. Are you noticing a pattern? 

It will be very interesting to see exactly what beans Southwest has to spill. Even though the Big Three continue to deny the domestic collusion allegations, they have proven themselves to be adept at making ridiculous denials such as they actually support Open Skies policy while they are actively spending tens of millions of dollars to undermine it. 

Given the blatant anti-consumer motivation of their joint anti-Open Skies and anti-Norwegian campaigns, it is hardly a leap to think that the Big Three got a taste of collusion results in the US domestic market and found it to be so profitably intoxicating that they decided to export it to international markets.

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