APPLYING THE NEW COMPETITION LEGISLATION TO THE DEREGULATED AIRLINE INDUSTRY: THE CASE OF COMPUTER RESERVATION SYSTEMS
1990; Volume: 30; Issue: 2 Linguagem: Inglês
ISSN
1046-1469
Autores Tópico(s)Merger and Competition Analysis
ResumoOn June 1, 1987, Air Canada and Canadian Airlines International (CAIL) entered a partnership agreement to merge their computer reservation systems (CRSs). The transaction can potentially introduce elements of monopoly in the already highly concentrated industry. Under the terms of the agreement, the management of the newly created system will be the responsibility of the GEMINI Automated Distribution Systems Inc., in which Air Canada and PWA, the owner of CAIL, are to be equal partners. The proposed merger was challenged by the Director of Investigation and Research of the Development of Consumer and Corporate Affairs on the grounds that it prevents or lessens or is likely to prevent or lessen competition substantially in the provision of computer reservation systems services to airlines, travel agents and consumers in Canada within the meaning of section 64 of the Competition Act. The Director asked the Competition Tribunal to dissolve the merger. In defence of the merger, Air Canada and CAIL claim that the transaction is necessary in order to achieve the available economies of scale. Other defences used are that of import substitution and that PEGASUS was about to fail. This paper examines the positive and negative consequences of the proposed merger. The provisions of the new Competition Act are related to the economics of the CRSs and specific policies are proposed.
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