Tuesday, December 30, 2003

Antitrust News: The Atlantic Divide

Earlier this month the European Court of First Instance—the rough equivalent of the U.S. Court of Appeals for the D.C. Circuit—upheld a $8.4 million fine imposed in 1999 against British Airways. The European Commission found the airline guilty of antitrust violations, specifically that the company “abused its dominant position” by offering rebates to travel agents that sold the most British Airways tickets. Under European antitrust theory, such rebates are illegal because it’s just too darn hard for other airlines to compete against the dominant firm.

This case exposes a key difference between European and American antitrust theory. In the U.S., regulators focus on short-term consumer prices. If a particular action doesn’t substantially raise prices, the FTC and DOJ will usually let a company be. Europe, in contrast, considers any dominant firm to be inherently suspect, and thus any action they take to assert their economic dominance—regardless of impact on prices—is an antitrust violation. Put another way, U.S. regulators consider their mission to protect the competitive process, while European officials want to protect specific competitors from dominant firms. That’s precisely what happened to British Airways, as the case against them was brought by rival Virgin Atlantic.

The European antitrust view will become more problematic for the U.S., as American firms are targeted with greater frequency by Brussels. Microsoft is one such target. Another is Coca-Cola, which runs a rebate program similar to the one that got British Airways in trouble. The Bush administration has made a priority of increasing international antitrust cooperation. But will this cooperation force U.S. officials to adopt the more rigid, anti-capitalist stance of European antitrust regulators? Recent history suggests it will. The White House has allowed its own antitrust regulators to expand their scope and authority without oversight, and there is little indication the administration will stand up against European aggression in this area.

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