By Kushal Modi
Airlines have historically been subject to close government scrutiny due to their oligopolistic nature and essential role as common carriers. Today, however, America’s dominant airlines charge exorbitant fares without meaningfully improving efficiency, service, or onboard experience. Airlines use sophisticated pricing algorithms to push these fares higher and maximize the profit per traveler.
The use of algorithms in setting prices has received antitrust scrutiny in other sectors. This Note argues that algorithmic pricing tools in the commercial aviation industry may facilitate price collusion by enabling the exchange of nonpublic fare data between competitor airlines. Although traditional antitrust tools alone fall short of fully mitigating the potential harms posed by airline pricing algorithms, the Department of Transportation possesses distinct competition regulatory authority in the Federal Aviation Act. This authority can and should serve as a powerful tool to regulate the use of pricing algorithms in setting airfares.
Part I of this Note introduces the mechanisms of airline pricing at issue and explores the limits of the traditional antitrust laws in addressing competitive harm posed by these systems. Part II details the history of the Department of Transportation’s regulatory authority and its current scope. Part III recommends that the Department of Transportation regulate the use of pricing algorithms as potential unfair methods of competition through an enforcement program under 49 U.S.C. § 41712, structured by guidance documents tailored to algorithmic pricing and reporting mechanisms under 49 U.S.C. § 41309.