Promotional Pricing of Airlines, ¿Do They Constitute Predatory Pricing?

Aerolane Líneas Aéreas Nacionales del Ecuador S.A. "LAN Ecuador" Case

Abstract

The process of competition between operators seeking to gain customers over time and the rivalry between market operators in simple words is what surrounds competition. However, there are several practices that affect competition, to mention some: exclusory and exploitative practices, predatory pricing, excessive pricing, price discrimination, unjustified negative to sell, and others. This article focuses in predation as an illegitimate practice, in contrast to one of its most common justification: promotional pricing. Predatory practices are those that attempt against competition, where one of the operators lowers its prices with the aim of eradicating its competition. Airlines operate in a very particular market, which cannot be analyzed under generalized parameters. Transposing all of this to the Ecuadorian aeronautical market, the Resolution of the former Industries and Productivity Ministry: MIPRO-COMP-002-2010 is analyzed, who ruled that LAN did not engage in predatory practices when entering the Ecuadorian market. Through the analysis and exposition of emblematic cases of predatory pricing in the United States and the European Union, the reader will learn about the different tests and criteria taken for each decision in order to determine the existence or not of the unlawful practice of competition. The objective is centered as such to demonstrate that the criteria followed in the Resolution of the MIPRO were mistaken. The taken decision was founded in a limited analysis of what "market participation" means, all which was a determining factor, and is considered incorrect for the final decision, finally configuring a sort of abuse of rights for the infringer.