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While several studies have examined the effects of cartels, in few instances is data available that allows us to examine post-cartel behavior. In this paper, I use data on inter-island airfares to examine the effects of an antitrust immunity agreement that allowed two airlines to coordinate capacity for a limited period of time. I find not only that prices rose during the period of coordination, but that they remained high until the entry of a new competitor, two and a half years after immunity expired. That the incumbent airlines were able to sustain supracompetitive fares well past the end of immunity suggests even short-lived grants of immunity can have persistent effects. Policy makers should view even temporary grants of immunity with great skepticism, particularly in markets that already exhibit characteristics that may facilitate coordination. A previous version of this paper, "Analyzing the Impact of Antitrust Immunity: Price Effects Following the Aloha-Hawaiian Antitrust Immunity Agreement," was circulated as EAG Discussion Paper No. 05-9.
"This paper examines the impact of an agreement in which two airlines, Aloha Airlines, Inc. ("Aloha") and Hawaiian Airlines, Inc. ("Hawaiian"), were allowed to coordinate capacity, monitor each other, and punish each other for deviations from capacity and sales targets. The agreement spanned ten months and covered five Hawaiian airports, including four routes that routinely ranked among the top domestic city-pairs based on passenger traffic. The airlines maintained coordination was necessary to allow them to stem their financial losses and respond to declines in demand that had been exacerbated by the events of September 11, 2001. The U. S. Department of Justice ("DOJ") objected to the airlines' application, arguing that the agreement was unnecessary, would explicitly discourage competition, and that the airlines might find it profitable to engage in tacit collusion after it expired. Immunity was granted by the U. S. Department of Transportation ("DOT") in September 2002, and the agreement took effect between December 2002 and October 2003"
Since 1945 the McCarran-Ferguson Act has exempted the “business of insurance” from the federal antitrust laws to “the extent that such business is not regulated by State law.” This Note questions whether the ongoing attempts by members of Congress to repeal the antitrust exemption for the business of insurance is good policy. In assessing the implications of repeal, this Note analyzes whether the addition of federal antitrust enforcement would be compatible with the increasingly regulated health insurance industry. As a case study, this Note applies the implied antitrust immunity framework developed by the Supreme Court in Billing v. Credit Suisse to Massachusetts' insurance regulations. This Note argues that the implied immunity doctrine, in seeking to determine how Congress would have intended two regulatory systems to interact, can function as a prudential tool to aid Congress when it seeks to either alter the reach of the antitrust laws or create regulations that assume the function of the antitrust laws.
The most important book on antitrust ever written. It shows how antitrust suits adversely affect the consumer by encouraging a costly form of protection for inefficient and uncompetitive small businesses.
Major League Baseball (MLB) rules restrict the movement of any franchise into another's territory. These territorial rules are designed to protect each team's potential local revenue sources as well as to provide stability throughout the league. Recently, Major League Baseball approved financial compensation for the Washington Nationals move into the Baltimore Orioles' territory - primarily because it was in the best interest of MLB even though it hurt the Orioles. However, the Oakland Athletics were unable to even negotiate a potential compensation plan for a move into the San Francisco Giants territory, despite the apparent financial benefit the move could have provided for every other league franchise. The Athletics are already located within 15 miles of the Giants, and their potential 40 mile move to San Jose, California would not add a new team to the San Francisco Bay Area; rather, it would simply be a move of a current team to a different location within the metropolitan area. The refusal of the Giants or MLB to negotiate a potential compromise has kept the Oakland Athletics in a substandard facility and has led to their potential move to Fremont, CA - a less desirable location than San Jose. This paper investigates the legal, policy, and financial considerations concerning Major League Baseball's territorial rules. Specifically, it addresses antitrust law as it pertains to American professional sport, relative sport franchise relocation cases, financial arguments why leagues desire to control relocation, financial components of MLB's current Collective Bargaining Agreement, and the legal and financial impact of a challenge to MLB's territorial rules - an option the Oakland Athletic initially investigated prior to their decision to pursue a potential move to Fremont.
This paper analyzes the impact of varying degrees of airline cooperation on nonstop and connecting international traffic, using a detailed dataset of international travel between the United States and other countries for the years 1998 to 2015. We demonstrate that cooperation by airlines -- most notably, the formation of “metal neutral” joint ventures, along with grants of antitrust immunity (ATI) more generally -- generates substantial consumer benefits. Specifically, for connecting passengers, we find that ATIs generate fare reductions (relative to interline or simple codeshare itineraries), although these reductions are not significantly larger than those generated by airline alliances without immunity, while JVs lead to substantially larger fare reductions of around eight percent, nearly identical to the reductions associated with “online” travel with a single airline. For nonstop passengers, we find that ATI and JV cooperation between airlines does not, in general, generate higher nonstop fares on “overlap” routes where competing airlines are part of an ATI or JV. Finally, we find that ATIs and JVs are associated with increased segment traffic and net entry on existing and new routes. This expansion of output rounds out our results, demonstrating that, on the whole, ATI grants -- particularly when coupled with the formation of JVs -- have been strongly pro-competitive, generating lower fares on connecting routes and increased traffic on segments served by multiple alliance partners, with no associated increase in nonstop fares where partner airlines overlap.