Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Groups voice objections to settlement in U.S. challenge to American Airlines/U.S. Airways merger, (Feb 10, 2014)

The American Antitrust Institute (AAI) and several consumer groups have filed comments with the Department of Justice objecting to government’s settlement in its challenge to the merger of U.S. Airways and American Airlines.

The Justice Department and a number of states had moved to enjoin the merger last year. The government’s complaint alleged that reducing the number of major domestic “legacy” airlines from four to three would harm consumers by (1) entrenching US Airways’ dominance at Reagan National Airport; (2) increasing concentration in over 1,000 highly concentrated city-pair markets; (3) eliminating head-to-head competition between US Airways and American on 17 nonstop routes; (4) increasing the likelihood of coordinated interaction among the three remaining legacy airlines; (5) eliminating US Airways’ Advantage Fares program; (6) reducing capacity and growth; (7) increasing baggage and ancillary fees and reducing quality and variety of ancillary services; and (8) thwarting American’s aggressive standalone expansion plans.

In November 2013, the Department of Justice reached a proposed settlement allowing the merger to proceed as long as certain slots at Reagan National Airport, LaGuardia Airport, and five other airports were divested. Although the Justice Department has settled, and the merger has already been consummated, the AAI notes, during the Tunney Act review period, public comment must be accepted and a court must determine whether the settlement is in the public interest.

The AAI and several consumer groups, including AirlinePassengers.org, Association for Airline Passenger Rights, Business Travel Coalition, Consumer Travel Alliance, and FlyersRights.org, argue that the settlement is not in the public interest because it does not prevent or even address the bulk of the anticompetitive effects detailed in the government’s complaint. The settlement addresses the market for slots at Reagan National Airport, the commenters state, but does little to resolve the harm to the approximately 1,000 highly concentrated city-pair routes set forth as relevant markets in the complaint. The commenters argue that it is implausible that the modest divestitures at a few airports will address the problem of increased coordinated effects among the remaining three legacy airlines nationwide.

The commenters complain that the government’s settlement sacrifices the ever-dwindling national legacy-airline competition in favor of improved local competition on routes at a handful of airports, “a tradeoff that on its face makes no sense for consumers overall, let alone for those who benefited from head-to-head competition.” They urge the DOJ to renegotiate the settlement or take the case to trial.

Companies: U.S. Airways, Inc.; American Airlines, AirlinePassengers.org, Association for Airline Passenger Rights, Business Travel Coalition, Consumer Travel Alliance, FlyersRights.org

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