Competition Is Dying, and Taking Capitalism With It

We need a revolution to cast off monopolies and restore entrepreneurial freedom.

By Jonathan Tepper and cross-posted from Bloomberg

On April 9, 2017, police officers from Chicago’s O’Hare Airport removed Dr. David Dao from United Express Flight 3411. The flight was overbooked, but he refused to give up his seat. He had patients to treat the next day.

Fellow passengers recorded a video of him being dragged off the plane. You could hear gasps of disbelief from fellow passengers: “Oh, my god!” “No! This is wrong.” “Look at what you did to him.” No one could believe what they were seeing. In the video he could be seen bleeding from the mouth as police dragged him down the aisle. The video quickly went viral.

United’s CEO, however, did not apologize and instead blamed the passenger for being belligerent. Eventually, the outrage was so great that the CEO apologized and the airline reached an undisclosed settlement with Dr. Dao. Dr. Dao’s lawyer Thomas Demetrio told journalists that Dr. Dao “left Vietnam in 1975 when Saigon fell and he was on a boat and he said he was terrified. He said that being dragged down the aisle was more horrifying and harrowing than what he experienced when leaving Vietnam.”

Years ago, such a public relations disaster would have caused United’s stock to stumble, but it quickly recovered. Financial analysts agreed that it would have no effect on the airline. For all of 2016, the company reported full-year net income of $2.3 billion.

The results were so good that in 2016 United’s board approved a stock buyback of $2 billion, which is the financial equivalent of spraying yourself with champagne. Research analysts dismissed the incident, saying “consumers might not have much choice but to fly UAL due to airline consolidation, which has reduced competition over most routes.”

Online news sites helpfully explained what had happened with headlines like, “Airlines Can Treat You Like Garbage Because They Are an Oligopoly.” Once investors started focusing on United’s dominant market position, the stock price in fact went up.

The analysts were right. The American skies have gone from an open market with many competing airlines to a cozy oligopoly with four major airlines.

To say that there are four major airlines overstates the true level of competition. Most U.S. airlines dominate a local hub, unironically known as “fortress hubs,” where they face little competition and have a near monopoly

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