Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Antitrust Division stands by United, Delta monopolization claims, (Feb 17, 2016)

By Greg Hammond, J.D.

The Department of Justice Antitrust Division is opposing two motions to dismiss filed by United Continental Holdings, Inc. and Delta Air Lines, Inc., in an action in which the Justice Department claims that United’s efforts to increase its already dominant position at Newark Liberty International Airport, by acquiring 24 takeoff and landing slots at Newark from Delta, constitutes monopolization and conspiracy (U.S. v. United Continental Holdings, Inc., Case No. 2:15-cv-07992-WHW-CLW).

The Antitrust Division claims that (1) the proposed transaction is a contract that would unreasonably restrain interstate trade and commerce, in violation of Section 1 of the Sherman Act; and (2) United is monopolizing and/or maintaining and enhancing its current monopoly over the markets for Newark slots and for scheduled air transportation in Newark, in violation of Section 2 of the Sherman Act. In particular, the complaint alleges that United already has monopoly power over takeoff and landing slots at Newark, where it controls 73 percent of the 1,233 slots the Federal Aviation Administration (FAA) has allocated to airlines at the airport. However, through the proposed acquisition, United allegedly seeks to acquire 24 additional slots from Delta, a direct competitor.

United’s motion to dismiss. According to the Antitrust Division’s opposition to United’s motion to dismiss, United argues that: (1) the United States cannot assert a claim until United’s acquisition of Delta’s slots actually harms consumers; (2) the United States failed to adequately allege a relevant market; and (3) it should be permitted to close the proposed acquisition now.

Conversely, the Antitrust Division claims that the harm that would result from the transaction is neither hypothetical nor speculative, and would violate Sections 1 and 2 of the Sherman Act by strengthening an already formidable barrier to entry and expansion at Newark, reducing Delta’s competitive significance at Newark and entrenching United’s already dominant position at Newark. Second, the Antitrust Division asserts that it sufficiently alleged that Newark constitutes the relevant geographic market, that the Newark slots constitute a relevant product market where airlines must have slots to operate flights, and that the flights to and from Newark constitute a second relevant product market. Lastly, the Antitrust Division argues that United should not be allowed to close the proposed acquisition because the Division adequately alleged violations of the Sherman Act and United never explained why the court should grant the request when United already agreed to not close the transaction pending resolution of the case.

Delta’s motion to dismiss. The Antitrust Division also argues that Delta is not entitled to dismissal. Contrary to Delta’s arguments, the Antitrust Division claims that application of the antitrust laws does not conflict with the authority of the Department of Transportation (DOT) and the FAA. In addition, United and Delta allegedly structured the proposed acquisition to avoid regulatory scrutiny by the DOT and Delta has repeatedly argued that the DOT and FAA have no legal authority to evaluate the competitive effects of slot acquisitions. Delta has failed to point to any specific incompatibilities between the Justice Department’s law enforcement responsibilities and the DOT’s regulatory authority, according to the Antitrust Division, and has contrived a “conflict” that “simply does not exist.”

Companies: United Continental Holdings, Inc.; Delta Air Lines, Inc.

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