592 COMPETITION LAW IN TOURISM offer seat selection across legacy carriers – something the legacy carriers’ internal and direct-sale-via-their-website systems cannot. The GDS are very profitable but the airlines, for which distribution costs are about 25% of their total costs, are not happy about that fact. The airlines have pushed back. That was the start of IATA’s NDC initiative. What role competition law will play in this evolving market is unclear. Before speculating on that, we will first describe the development of the competition law vis-à-vis the air transport industry and the (de)regulation of GDSs. 2. COMPETITION LAWS AND AIR TRANSPORT 2.1. The situation in the USA Healthy competition will inevitably restrain the trade of a competitor. Competition laws – or antitrust laws, as they are known in the US – address unreasonable restraints on trade. Some agreements that restrain trade might be reasonable, while other agreements, such as price fixing, are always unreasonable. That is, unless you are in the air transport industry, mostly prior to its deregulation. The air transport industry has always held a special place in US competition law. The Sherman Act of 1890 and the Clayton Antitrust Act of 1914 have always applied to the aviation industry, but airlines were granted immunity from antitrust scrutiny as schedules and fares were set by the Civil Aeronautics Board (CAB) and agreed upon in advance at an international level in the Tariff Conferences of IATA6. Other antitrust laws, such as the Federal Trade Commission Act of 1914, however, did not apply because similar provisions were incorporated into and pre-empted by the Civil Aviation Act of 1938. Thus, antitrust scrutiny for air transport agreements and anticompetitive practices was conducted by the CAB7. 6 For an overview of rate-making and tariff coordination, including antitrust immunity extended to IATA, see Michael Gill and Auguste Hocking, “The International Air Transport Association” in David Heffernan and Brent Connor, Eds., Aviation Regulation in the United States (American Bar Association, 2014) 55, 63-69. 7 The US Department of Justice and Federal Trade Commission investigate antitrust criminal and civil matters, respectively, that touch and concern the aviation industry. See, Roger Fones, “Antitrust Law and Aviation in David Heffernan and Brent Connor, Eds., Aviation Regulation in the United States (American Bar Association, 2014) 491, 492. However, many practices that differentiate the air transport industry from other industries, such as direct cooperation through alliances and metal neutral joint-ventures, are carried out through grants of antitrust immunity from the US Department of Transportation – a power inherited from the CAB. See, Brian F. Havel and Gabriel S. Sanchez, The Principles and Practices of International Aviation (Cambridge U. Press, 2014) 148 [Hereinafter, Havel & Sanchez].
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