The United States-Japan Gateway Awards Case of 1990: International Competition and Regulatory Theory

Competitive forces are producing changes in regulatory decision making in once highly regulated domestic industries. Where such changes have occurred, regulatory theory needs to reflect these new dynamics. To support this hypothesis, the author draws upon a major U.S. Department of Transportation airline awards case where regulatory officials had to decide which combination of new and expanded U.S. carrier service to Japan would provide "the greatest public benefit over time." The evidence suggests that the department's decision turned on a broader rather than narrower view of competition. That is, greater public benefits were to be achieved by strengthening U.S. carrier competition against foreign carriers thereby providing more competition among U.S. carriers. In making this decision, regulators also had to consider "civic support" for specific carrier awards from cities, states, and consumer stakeholders who would benefit from new and expanded service. Thus, the political competition for six awards (three of which were the Tokyo prize) pitted nine U.S. carriers and dozens of cities, states, and airport authorities against one another in one of the most celebrated route award cases in departmental memory. In an earlier period of airline regulation, the author contends that the issues and outcomes would likely have been different. However, a changed competitive arena has altered regulatory decisions. As such, the case seeks to break new ground in viewing regulatory politics.