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In a surprise move, the Department of Justice today filed a lawsuit challenging the proposed merger between American and US Airways on antitrust grounds. Joining the DOJ in the suit are the attorneys general of Texas, Arizona, Florida, Washington, D.C., Pennsylvania, Tennessee, and Virginia. (The case is U.S. v. US Airways Group Inc., 13-cv-01236, U.S. District Court, District of Columbia.)
Summing up its objections, the department’s news release quotes Attorney General Eric Holder as follows:
Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure. By challenging this merger, the Department of Justice is saying that the American people deserve better. This transaction would result in consumers paying the price — in higher airfares, higher fees and fewer choices. Today’s action proves our determination to fight for the best interests of consumers by ensuring robust competition in the marketplace.
Earlier this month, the merger plan had been approved by American’s creditors and by European Union regulators. It was widely assumed that the Justice department would sign off on the deal as well, followed by approval by the bankruptcy court. Most industry observers, including this writer, expected the merger to take effect before the end of September.
Although the DOJ in recent years allowed the Delta-Northwest and United-Continental mergers to proceed, in the face of strong opposition from consumer advocates, in this case the department has sided with those who warned that consolidation would be anti-competitive. According to the filing, the merger “will leave three very similar legacy airlines — Delta, United and the new American — that past experience shows increasingly prefer tacit coordination over full-throated competition… By further reducing the number of legacy airlines and aligning the economic incentives of those that remain, the merger of US Airways and American would make it easier for the remaining airlines to cooperate, rather than compete, on price and service.”
In short, the DOJ has come down on the side of the argument I’ve made here many times, that American and US Airways are perfectly capable of competing as stand-alone companies. And it’s in the best interest of the traveling public that they continue doing so.
Consumers may not win in the end, but today they’ve been given a reprieve.
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