198 COMPETITION LAW IN TOURISM The theory of contestable market remains valuable, especially as regards the assessment by the EU Commission and EU General Court of potential competition. When entry faces no barriers, aircraft can be easily re-allocated to different routes according to the expectation of traffic and profit, a view confirmed by a variety of investigation tools and potential competitors feedback used by the EU Commission60. The natural monopoly theory and the trend of the industry towards oligopoly could be partially recognised to the extent that it explains cost efficiencies and especially economies of scale, density and scope that require a certain level of concentration at the airport bases and hubs. Operating a network of routes from large airport bases is a keystone in airline economics. The EU Commission recognises that reaching a certain level of concentration gains play a major role in the competitiveness of the industry. The theory of mutual forbearance highlights the fact that dominance, combined with significant barriers to entry, could deter potential competitors and increase the assumption of mutual restraint. Moreover, the theory of mutual forbearance and the theory of contestable markets face the same difficult empirical evidence within the framework of EU antitrust law enforcement. The assessment of potential competition is not more than an imperfect prospective view of what could be actual competition in the future. Both theories rely on the potential belief that a carrier will enter or will not enter a market in the future. In the presence of barriers to entry, potential competitors would rather seek to consolidate their own position and mutual restraint hypothesis could be relevant. In the absence of strong barriers to entry, potential competitors would exercise on each other a competitive pressure on quality, price and costs and these markets could be seen as contestable. As a consequence, the question of barriers to entry remains the essential question of the EU antitrust law enforcement in the airline industry. The assessment of barriers to entry is indeed a key point in assessing competition: “A correct analysis of entry or barriers to entry lies at the heart of an assessment of monopoly power. [This is] the single most misunderstood topic in the analysis of competition and monopoly”61. This statement remains valuable, 60 Questionnaires are sent to competing carriers, airports and corporate customers. Written and oral exchanges are made with third parties and authorities (slot coordination, civil aviation authorities and transport authorities). These feedbacks could, however, remain general if the respondents do not show an actual and effective willingness to enter the assessed markets. 61 Fisher, 1979, “Diagnosing Monopoly”, Quarterly Review of Economics and Business, Vol. 19, No. 2, Summer 1979; The Journal of Reprints for Antitrust Law and Economics, Vol. 14, No. 2, 1984, pp. 7–33.
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