DOT Brings On A New Head Of Competition To Beat Up The Airlines

Anti-trust and competition law in the United States has historically centered around consumer welfare, seeking to ensure low prices and greater innovation. President Biden appointed Lina Khan to chair the Federal Trade Commission in 2021, and her mantra is to upend the traditional consumer benefit standard. Bigness – success – is something to stand up against in its own right.

Her primary focus has been ‘big tech’ which has delivered products more easily, with greater choice and at lower cost (Amazon) or literally given away their product to consumers for free (Facebook). Also known as “hipster anti-trust” the approach eschews traditional legal standards and prefers competition for its own sake, even to the extent that it protects inferior companies and prevents successful ones from growing and being acquired, thus effectively denying investors the exits that motivate early investment (and therefore limit the potential for innovation).

Now the Department of Transportation has brought on Ms. Khan’s Chief of Staff, Jen Howard, as its new Chief Competition Officer. This appointment gives the antitrust hipsters reach not only into the FTC, the Antitrust Division of the Department of Justice (Jonathan Kanter) and the White House (where Tim Wu serves as Special Assistant to the President) but in the Department of Transportation as well.

It’s said that everything in business violates anti-trust, because standards are so vague.

  • If your prices are high, you have market power.
  • If your prices are low, that’s predatory pricing.
  • And if your prices are the same as competitors, that’s collusion.

We can expect a more aggressive approach that pulls whatever tools are convenient in pushing for greater competition in transportation policy.

New refund rules and fee disclosure rules are already pending at the Department of Transportation.

The latter would actually require online travel agencies to collect ancillary fees for airlines, and give airlines full control over which sites are allowed to display its schedules and fares, while determining how consumers must view airline search results – locking in a status quo of fees, rather than allowing for competition among travel search providers. Since innovation in search display would effectively become illegal, it would prevent anyone from ever displacing the miserable-for-consumers Expedia.

Ms. Howard is late to DOT to become involved in the case against the American Airlines-JetBlue alliance (which benefits passengers by creating a viable competitor to Delta and United in New York, where slot restrictions mean no one could grow to challenge them on their own). She could become active pushing back further against the JetBlue acquisition of Spirit (which probably will raise fares by reducing the number of planes flying under an ultra low cost model, but will mean more planes with a better passenger experience and a stronger JetBlue – also better able to challenge legacy carriers).

It’s unlikely we’ll see more airline mergers during the Biden administration, and airlines no longer have the argument they did in 2020 and 2021 that they need to combine to survive. So it’s unclear what she’ll actually change. But she may influence the direction of fee disclosure rules as those develop further into a promulgated final rule.

(HT: @crucker)

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