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It’s been a bad week for proponents of the American-US Airways merger.
On Monday, a group of 19 state attorneys general joined in the Justice department’s investigation of the merger’s potential to harm consumers.
Then, on Tuesday, antitrust lawyer Joseph Alioto filed a suit on behalf of almost 40 consumers in San Francisco federal district court seeking to block the merger, alleging that it would indeed harm consumers.
According to Alioto:
This merger will result in nothing more than skyway robbery. It would complete the airline cartel, giving the top four airlines over 90% control of the airline industry in the US. They have already shown their willingness and cupidity by raising prices in lockstep, cutting services, eliminating capacity, which will require the American public to pay more for less and to accept discomfort and inconvenience as a regular routine. Furthermore, American Airlines has spent $40 billion on a brand new fleet of 500 aircraft and new logos. The American Airlines CEO Horton was critical of US Airways routes and was the only one against the merger according to US Airways CEO Parker. That all changed when Horton was offered $20 million dollars to approve the merger and get out of the business. And that in my opinion is a straight bribe.
In addition to the specific issues raised by merger, the suit (CAROLYN FJORD ET AL-V-US AIRWAYS GROUP INC ET AL – CV 13-3041) dwells at considerable length on industry consolidation in general, citing the established intent and practice of both Congress and the Supreme Court in “arresting a trend towards concentration in its incipiency.” From the Supreme Court decision in U.S. v. Von’s:
The dominant theme pervading congressional consideration of the 1950 amendments was a fear of what was considered to be a rising tide of economic concentration in the American economy. To arrest this ‘rising tide’ towards concentration into too few hands and to halt the gradual demise of the small businessman, Congress decided to clamp down with vigor on mergers … Thus, where concentration is gaining momentum in a market, we must be alert to carry out Congress’ intent to protect competition against ever increasing concentration through mergers.
The issues raised by the suit are a pretty fair summary of the concerns voiced by many on the consumer-advocacy side of the debate, myself included.
None of these hurdles to the merger’s forward momentum is insurmountable. The current political and economic climate favors mergers, and the two companies have the will and the resources to pursue their plan through all but the staunchest opposition.
But at the very least, they may slow the headlong rush to consolidation and provoke a reasoned discussion of the drawbacks and benefits of an airline industry dominated by very few mega-carriers.
The traveling public deserves no less.
Reader Reality Check
If it were up to you, would you approve the merger?
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