The Justice Department Antitrust Division said in a filing to the Transportation Department Friday that it strongly opposes wide-ranging antitrust immunity for Continental Airlines to join members of the Star alliance group of carriers.
The Transportation Department gave temporary approval to the Continental application this April. Senate Judiciary Committee members led by antitrust subcommittee Chairman Sen. Herb Kohl (D-Wisc.) repeatedly asked DOT to give DOJ “substantial deference” in decisions regarding antitrust immunity for international airline alliances. Read previous letters from the panel here and here.
Antitrust immunity would allow Continental and the nine members of the Star alliance — including United Airlines, Lufthansa and Air Canada — to share scheduling, pricing and other information. The Antitrust Division led by Assistant Attorney General Christine Varney wrote that the alliance did not justify its “extraordinary” request and antitrust immunity would likely cause “substantial consumer harm.”
The Antitrust Division wrote:
“The DOJ believes the Joint Applicants have failed to demonstrate the required elements for the broad immunity sought — immunity encompassing transborder, transatlantic and transpacific markets without regard to the planned level of integration among Applicants — and that DOT should deny the broad requested immunity and instead grant a more limited immunity.”
Here’s the DOJ’s reasons:
-The Applicants’ proposed elimination of competition between United and Continental for transpacific and Latin American service threatens competitive harm in markets where entry is limited by restrictive bilateral agreements. It will, for example, substantially lessen competition in city pairs between the U.S. and Beijing, where United and Continental provide substantial connecting service. The Applicants have provided no concrete plans for cooperation in non-transatlantic markets, let alone established that immunity is necessary for cooperation in non-transatlantic markets, let alone established that immunity that is necessary to achieve specific benefits. A DOT grant of immunity for two U.S. carriers to coordinate their international operations outside of an explicit joint venture with foreign carriers would be unprecedented.
-The Applicants’ proposed elimination of competition between Continental and Air Canada on U.S.-Canada routes (“transborder routes”) will substantially limit competitive alternatives on certain transborder routes where entry is unlikely. Applicants have provided no plan detailing future integration between the parties and hence no justification for this immunity request.
-The Applicants’ proposed elimination of competition between Continental and Scandinavian Airlines System, Swiss International Air Lines and Air Portugal (as a function of Continental joining the Star ATI Alliance) will likely result in competitive harm for consumers in several transatlantic markets, including New York – Stockholm, New York – Copenhagen, New York – Geneva, New York – Zurich and New York – Lisbon. The Applicants have offered little, if any, evidence to show that immunity between Continental and the nine Star ATI alliance members is necessary to achieve any benefits, or to support their failure to carve out these particular markets from their immunity request.
-The Applicants’ proposed elimination of competition between United and Lufthansa in the Dulles-Frankfurt and Chicago-Frankfurt markets (by removing the existing carve outs to immunity) will likely lead to higher fares. Applicants have offered no evidence show (1) that they need to remove the carve outs to achieve specific benefits and (2) that the value to consumers of those benefits outweighs the likely competitive harm.
-Because the Applicants include two large, domestic competitors, a sweeping grant of immunity raise significant concerns about harm to domestic competition, a risk that cannot be completely mitigated through confidentiality guidelines. Thus, the request for immunity should be viewed with enhanced skepticism.
Continental told Reuters that the airline expects the DOJ filing will not quash their application.
“We remain confident that DOT will approve our application,” the company told Reuters. “That action is necessary to correct the competitive imbalance that now exists and safeguard our future.”
