Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Supreme Court asked to consider Southwest/AirTran combination, (Jul 23, 2014)

By Jeffrey May, J.D.

Airline customers recently asked the U.S. Supreme Court to weigh in on the appropriate standard for reviewing mergers and acquisitions under the antitrust laws. The underlying dispute revolves around the now-consummated $1.4 billion merger of Southwest Airlines and AirTran Airways. Direct purchasers of airline tickets from these low-cost carriers filed a petition for certiorari on July 18, seeking review of a decision of the U.S. Court of Appeals in San Francisco that rejected their merger challenge (Taleff v. Southwest Airlines Co., Dkt. No. 14-69).

The action was brought by Wayne Taleff on behalf of 43 purchasers of airline tickets from either Southwest or AirTran, or from both carriers. The suit alleged that the 2011 combination of Southwest and AirTran violated Sec. 7 of the Clayton Act. The action, which was brought the day after Southwest acquired AirTran, sought divestiture relief.

The district court dismissed the plaintiffs’ claims in November 2011, ruling that the plaintiffs were not entitled to the “extreme remedy of divestiture.” It noted that the plaintiffs delayed filing their suit until after defendants’ merger had already been consummated.

The appellate court affirmed, noting that that there was no evidence of threatened or actual specific injuries to the plaintiffs themselves and there was no support for the generalized claims of injury to consumers and competition. The appellate court also pointed to the plaintiffs’ decision to delay filing suit until roughly seven months after learning of the proposed merger as support for dismissal.

According to the petition, the Ninth Circuit's decision “simply ignored” the binding decisions of the U.S. Supreme Court in Sec. 7 cases. “There is little question that, under the authority of these cases, an order of divestiture should ultimately be mandated in this case,” the petition asserts.

The petitioners ask specifically whether U.S. Supreme Court decisions enjoining mergers under Sec. 7 of the Clayton Act are still binding and viable, since many of the lower courts have either ignored them completely or overruled them de facto. These decisions have never been overruled and have been interpreted by the Seventh Circuit to hold presumptively illegal any nontrivial acquisition of a significant rival in an industry with a trend towards concentration.

This is the second airline merger case that the High Court has been asked to take up recently. The Court also was asked to consider a rejected consumer challenge to the 2010 combination of UAL Corporation's United Airlines and Continental Airlines. That pending petition for certiorari, filed in June, seeks review of another Ninth Circuit decision affirming dismissal of the merger challenge. The petition questioned the continuing validity of Supreme Court precedents in the merger area, as well as the Ninth Circuit's relevant market analysis based on demand considerations and the use of standards for preliminary injunctive relief under Sec. 16 of the Clayton Act to subsequently bind a litigant in a claim for damages under Sec. 4 of the Clayton Act.

Attorneys: Joseph M. Alioto (Alioto Law Firm) for Wayne Taleff. James A. Keyte (Skadden, Arps, Slate, Meagher & Flom LLP) for Southwest Airlines Co.

Companies: Southwest Airlines Co.; UAL Corp.

News: AcquisitionsMergers Antitrust