Airline competitive conduct in a less regulated environment: Implications for antitrust

• Author: George C. Eads
• Date: 01 March 1983
• DOI: 10.1177/0003603X8302800106
• Published date: 01 March 1983
• Subject Matter: Article

The Antitrust Bulletin/Spring 1983

Airline competitive conduct

in a less regulated environment:

implications for antitrust

BY

GEORGE

C. EADS*

159

Prior to the passage

of

the Airline Deregulation Act

of

1978,J

competitive conduct in the airline industry was governed not so

much by the antitrust laws as by the Federal Aviation Act

of

1958. This Act, the successor to the legislation that created the

regulatory regime for the airline industry in 1938, did not grant

the airlines blanket immunity from antitrust. But it provided the

Civil Aeronautics Board (CAB) with such broad authority to

immunize certain activities

that

the Board, and not the courts,

effectively established the competitive "rules

of

the game."

Both the 1938 and 1958 statutes gave little weight to the

promotion

of

competition. Competition was,

of

course, to be

•School

of

Public Affairs, University

of

Maryland, College Park.

AUTHOR'S

NOTE: This article is drawn entirely

from

public sources.

Although the author has participated in several regulatory proceedings

and antitrust cases involving airlines and has been a consultant to two

airlines on strategic planning issues, he was not so engaged while this

article was being written.

I

Pub.

L. No. 95-504 (Oct. 24, 1978). The 1978 Act is framed as a

series

of

amendments to the 1958 Act. Unless otherwise specified,

section references are to the 1958 Act as amended.

(OJ1983by Federal Legal Publications, Inc.

160 The antitrust bulletin

encouraged, but

only"

...

to the extent necessary to assure the

sound development of an air transportation system properly

adapted to the needs

of

the foreign and domestic commerce

of

the United States,

of

the Postal Service, and

of

the national

defense."? This was further qualified by the requirement that the

Board promote the development

of

civil aeronautics] and that it

prevent".

. . unfair or destructive competitive practices.?" Given

this legal environment, it is little wonder that Edwin M. Zimmer-

man, formerly the Assistant U.S. Attorney General in charge

of

the Antitrust Division, could warn in the early 1970s against

expecting too much help from the antitrust laws in promoting

competition in regulated industries like the airlines.' Increased

competition would instead depend upon statutory change.

Such change has now occurred. In contrast to the second-class

status afforded competition in the earlier statute, the 1978 Act is

unabashedly procompetitive. For example, the new Declaration

of

Policy status that the Board should consider as being in the

public interest:

. . . the placement of maximum reliance on competitive market

forces and on actual and potential competition (A) to provide the

needed air transportation system, and (B) to encourage efficient and

well-managed air carriers to earn adequate profits and to attract

capital. 6

and:

. the encouragement, development and maintenance

of

an air

transportation system relying on actual and potential competition to

272 Stat. 731 (1958), §102(b).

3Sec. 102(f).

4Sec. 102(c).

5Edwin A. Zimmerman, The Legal Framework

of

Competitive

Policies Toward Regulated Industries, in

PROMOTING

COMPETITION

IN

REGULATED

MARKETS

378-80 (Almarin Phillips ed. 1975).

6Pub. L. No. 95-904, §102(a)(4).