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)

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. I’m an antitrust attorney, and am impressed by how accurately you’ve depicted the context and the current enforcement trends in the US. Big kudos to you, Gary; not many journalists / bloggers make the effort of understanding the facts before (loudly) voicing an opinion.

  2. I would disagree that Facebook have given away their product for free. They do not charge cash for it, but you pay in other ways with your personal data.
    I do agree with some of what you say, but we definetly do not need any more consolidation in the airline industry.

  3. Covered all the bases. Good job with this article. I have found that as a general rule, anytime big government gets involved they find a way to screw things up. Once in a while they actually make positive changes,

  4. We all know that no substantive changes will occur. Congress gives the airlines billion$. Airlines take care of members of Congress. It’s the swamp. Never changes.

  5. In commodity markets, price is the competitive factor. In differentiated markets, quality is the competitive factor. If the mantra is only to drive prices down, you eliminate differentiated products and services. This reduces consumer choices. This is bad for consumers.

    In commodity markets, regulators might fail to recognize that the reason prices are the same is the result of price leadership as opposed to collusion.

  6. So that JetBlue can compete in NY? That’s only one market. Less competition is not the American way. Don’t listen to this nonsense. This has clearly been politicized like everything else. I don’t care what the attorney says. He’s an attorney. No to the takeover/sale of Spirit to JetBlue. This effects the entire country not just the carriers in New York.

  7. Maybe I’m poorly informed, but I thought Khan’s approach basically boiled down to nudging the standards for intervention towards a more interventionist approach. There’s nothing particularly “hipster” about that, it’s simply a more aggressive and risky (in that courts may not accept the arguments) take on antitrust.

    @Gary – Where did you find that she’s opposed to “bigness”?

    Regarding Facebook, they arguably are a monopoly (this is why so much evidence in the J6 cases is sourced from a single company!). Also arguably, they are imposing monopoly costs on the rest of us due to lack of competition; for example, it was demonstrated by Global Witness that Facebook’s ad system does not block ads in Brazil with phrases like “death to children” (no, really, it’s not an exaggeration or anything) while YouTube/Alphabet does, even though it violates Facebook’s own policies. So, as long as consumers are locked into the Facebook monopoly, they are forced to view horrible ads because there’s no competing product they can reasonably switch to. Social networking is NOT like most other businesses, and I will note that this type of analysis wouldn’t apply to, say, Amazon. Source:

  8. Yet another fumbling, bumbling, worthless, clueless and costly level of bureaucracy injected into the free enterprise system in the US. You get what you elect.

  9. Lina Khan and Jen Howard as “hipsters”? Thank you for an example of quasi-boomer schtick with an appeal to Club of Growth RINO types.

  10. @GUWonder – I am not describing them personally, the style of regulation they advocate for has been dubbed ‘hipster antitrust’ (and surely you know this and are just being disingenuous)

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