596 COMPETITION LAW IN TOURISM airlines and travel agents and provide their subscribers with instantaneous information about available routes and fares24. As noted above, prior to the deregulation of the air transport industry, airlines owned CRSs25. This ownership created a competitive advantage – airlines could rig CRS systems to benefit themselves over non-CRS-owning airlines, which nevertheless relied on CRS systems to distribute their product to the travel agents’ desks26. That situation changed with the deregulation of the airline industry, first in the US by the Carter Administration in the late 1970s. Airlines exploited their competitive advantage to the detriment of rival airlines and to the detriment of competition itself 27. To address the anticompetitive effect of CRS- -ownership, CRSs were treated as monopolists who possessed essential facilities and CRS regulations were put into place in 198428. These rules, however, were relatively short-lived. Three factors led to their demise. First, the cost of compliance with antitrust rules caused airlines to divest themselves of CRSs. Without airline ownership of the CRSs, the competitive advantage disappeared and so did the rationale for consumer protection regulations29. Secondly, as the world embraced the Internet, the necessary technological upgrades were going to be prohibitive for the constantly cash- -strapped airlines. That situation, coupled with the rise of direct airline distribution of tickets to passengers via the Internet prompted the DOT 24 Shawcross and Beaumont at V-429. 25 On the history of CRS regulation, see, Timothy M. Ravich, “Deregulation of the Airline Computer Reservation Systems (CRS) Industry” (2004) 69 J Air L & Com 387, 390 [hereinafter ‘Ravich’] (citing Thomas Petzinger Jr, Hard Landing 60 (1995), explaining that with the growth of civil aviation following World War II, airlines needed quicker ways to collect, organize and transmit data. A fortuitous meeting between an IBM sales representative and American Airlines’ founder C.R. Smith paved the way for the creation of the first CRS – IBM’s Semi-Automatic Business Environment Research, or SABER, later re-named ‘Sabre’. Other US air carriers soon followed suit). 26 Anita Mosner, “Codesharing and Airline Alliances” in David Heffernan and Brent Connor, Eds., Aviation Regulation in the United States (American Bar Association, 2014) 159, 179 (“Operating on a code sharing basis can bestow a substantial competitive benefit to participating carriers, because, in the U.S. CRSs, an online flight receives a higher display priority than a connecting flight, which in turn makes that flight more likely to be booked. Given this reality, the competitive impact of having an advantageous CRS display cannot be overstated”). 27 Ravich at 393 (quoting, Stephen G. Breyer, “Antitrust, Deregulation, and the Newly Liberated Marketplace” (1987) 75 Cal L Rev 1005, 1035, (“’[T]he CRS-owning airlines apply biases to the programmes and displays them in their own favour (…) [A] synergy between airline ownership and ownership of a CRS permits the CRS-owning carrier to protect its market position in both the CRS and airline industries…[A]n owner may use information stored in the CRS about each passenger’s itinerary, class of service, fare code and so forth, for anticompetitive purposes’”). 28 Ravich at 393-394, 397. 29 Ravich at 399 (quoting, DOT Final Rule, Computer Reservation System Regulations, 69 Fed. Reg. 976, 1010 (January 7, 2004) (“The major predicate for the rules has always been the systems’ control by airlines. The U.S. airlines’ divestiture of their ownership interests has eliminated that basis for the rules”).
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