Making a guest appearance before a Senate subcommittee on antitrust and competition, Grassley said he wants to make sure that the Department of Transportation (DoT) and the Justice Department take seriously their responsibilities to enforce the law in this area, especially concerning air fares.
Grassley said that under the Federal Aviation Act, DoT has authority to investigate and determine whether an air carrier has engaged in unfair competition. The Act states that if DoT finds an air carrier to have engaged in anti-competitive activity, DoT should order the practice stopped. However, Grassley said, "DoT has never exercised this cease and desist authority. Rather, it has resorted to jawboning informally with carriers when such violations occur."
Grassley said during the hearing on Thursday afternoon that DoT is "finally moving in the right direction" with its imminent release of a new enforcement policy on unfair exclusionary practices. Yet, he stressed that DoT must still take disciplinary action when it determines that there have been violations. "Just because we'll have guidelines, that doesn't mean DoT should shirk its statutory responsibility to investigate allegations and take strong enforcement action. If a violation is found, DoT has to impose penalties on the violators now so we can stop anti-competitive activity," Grassley said.
Grassley also said that under the Sherman Act, the Justice Department must take "aggressive enforcement action" when it finds antitrust violations. "Not imposing serious enforcement sanctions on air carriers who engage in unfair and predatory behavior has too great a negative impact on our smaller communities, businesses and airline passengers," Grassley said.
Inordinately high air fares, infrequent flights and connections have resulted in reduced ridership in and out of Iowa communities. Grassley said the result is diminished economic development opportunities and a drain on established businesses. "I receive an increasing number of complaints about this from air travelers and businesses. Furthermore, some small and mid-sized airports and smaller independent carriers allege that start-up airlines and other low-cost carriers are being driven from the marketplace because of predatory behavior on the part of more established airlines," Grassley said. "Unfair air fares drain the pocketbooks of Iowa residents and disadvantage their communities. If predatory pricing practices are driving away fair air competition in Iowa, it's nothing less than skyway robbery."
During the hearing, Grassley specifically asked the Assistant Secretary for DoT how the anticipated competition policy would clarify what constitutes predatory behavior by the airlines, and what enforcement mechanisms would be established by the guidelines.
Grassley asked the Assistant Attorney General for Antitrust for the Justice Department for a status report regarding its investigation into possible predatory pricing and the impact on communities such as Des Moines. Grassley submitted additional questions to the agency officials about enforcement of antitrust laws, sanctions against predatory pricing and coordination between the departments. He requested responses in writing. A follow-up hearing of the antitrust subcommittee to consider these issues is scheduled for April 1.
Grassley first urged the Justice Department to make the ongoing investigation a high priority last December, following investigative reports in The Des Moines Register about disparities in air fares for travel in and out of Des Moines as compared to other nearby urban areas, as well as the limited service provided in Des Moines by the various airlines.
In a February letter to the Secretary of Transportation, Grassley expressed his frustration that DoT has not used its statutory authority to maintain airline competition by taking action if it finds anti-competitive activity in the airline industry. He said he was troubled that DoT has been at odds with antitrust recommendations submitted by the Justice Department concerning airline competition, citing two specific cases in which DoT ignored the Justice Department antitrust analysis. Grassley said the Justice Department has substantial expertise, experience and resources to investigate and analyze antitrust violations, and the two agencies should work together to effectively enforce the antitrust laws regarding the airline industry. "Fairness to the traveling public and economic opportunities for rural America rest in the balance," Grassley said.
Grassley serves as a senior member of the Senate Judiciary Committee, which has responsibility for oversight of the Justice Department. The hearing this week was conducted by the Senate Judiciary Subcommittee on Antitrust, Business Rights, and Competition.