Antitrust lessons for future mergers in U.S. airline deal

Tue Nov 12, 2013 7:54pm EST
 

By David Ingram

WASHINGTON (Reuters) - Corporate deal makers who want to avoid a court showdown might learn a lesson or two from the support given by previously hostile U.S. antitrust enforcers to what will become the world's biggest airline.

The Justice Department said it would drop its lawsuit to block the merger of AMR Corp's American Airlines (AAMRQ.PK: Quote) and US Airways Group Inc LCC.N, in exchange for the new airline shedding takeoff and landing slots and airport gates at seven U.S. airports.

The compromise stood in contrast to the government's posture three months earlier, when it filed the suit and played down any possibility of a settlement.

"Unlike a private litigant, they don't really need to win at trial," antitrust lawyer Mark Ostrau said of government enforcers. "They're really just trying to get a reasonable outcome for competition. So if they can get it short of trial, they're going to take it."

The outcome for the airlines looks not very different from a settlement that had long been rumored: more competition at Reagan National Airport near Washington, D.C., plus changes at six additional airports.

The Justice Department said the settlement would have a nationwide impact favorable to consumers because low-cost carriers would assume the newly available slots and gates.

Under U.S. antitrust law, the Justice Department and other enforcers are supposed to pursue what is best for consumer welfare through lower prices, better service and higher value.

Whether the airlines could have avoided a legal fight by offering a similar deal earlier might never be known, but Ostrau, who specializes in antitrust law at Fenwick & West, said the result contains a lesson for companies planning to merge.   Continued...

 
U.S. Airways jets are seen at Reagan National Airport in Washington July 12, 2013. REUTERS/Larry Downing