On Air Now

Current Show

Coast to Coast AM   12:00 AM - 5:00 AM

Contact Coast to Coast AM at 1-800-825-5033

Show Info »

Upcoming Shows

Program Schedule »

Listen

Listen Live Now » 550 AM Wausau, WI 99.9 FM Stevens Point, WI

Weather

Current Conditions(Wausau,WI 54403)

More Weather »
58° Feels Like: 58°
Wind: SE 3 mph Past 24 hrs - Precip: 0”
Current Radar for Zip

Tonight

Mostly Clear 51°

Tomorrow

Mostly Cloudy 73°

Fri Night

Thunderstorms 57°

Alerts

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

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

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 and US Airways Group Inc , 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.

"If you're going to make a deal, you can save yourself a lot of time by giving your best offer early," he said.

The Justice Department emphasized the importance of driving a hard bargain to get what it wanted from the airlines.

HARD BARGAIN

On a conference call with reporters on Tuesday, the antitrust chief, Assistant Attorney General Bill Baer, said the department had no choice but to sue in August because the airlines had held back in negotiations.

"There was nothing close to this that was ever on the table until recently. There just was not," he said.

But he also said the department never lost sight of a possible solution short of going ahead with a trial in U.S. District Court on November 25.

"We have always been open in merger challenges to structural settlements that take care of our competition concerns," Baer said. "This particular structural settlement I think fairly can be characterized as improving the situation confronting consumers traveling nationally."

In August, Baer said: "Our view, looking at the evidence before us, is that the right outcome here is a full-stop injunction."

American Airlines chief executive Tom Horton told Reuters on Tuesday the airlines had been talking to the Justice Department "for some time now" and negotiations picked up once they agreed to give up space at Reagan.

The Justice Department's willingness to deal, and end up so far from a permanent injunction, struck others as confounding.

"I think it's sad to see that the DOJ failed to read its complaint," said Darren Bush, a law professor at the University of Houston Law Center.

He said the settlement would leave in place systemic problems in the airline industry, but allow the department to notch up a win while avoiding litigating complex legal issues such as whether connecting services might substitute for non-stop service.

Others said the Justice Department fared well under the settlement by extracting changes from an industry that had come to expect that its mergers would never be challenged.

"It's clearly more than what the airlines were ever expecting to give up, because they were expecting to give up nothing," said Jonathan Lewis, an antitrust lawyer at Baker & Hostetler in Washington, D.C.

(Additional reporting by Andrew Longstreth and Diane Bartz; Editing by Howard Goller and Andre Grenon)

Comments