The Department of Justice after 1988

The DOT’s jurisdiction over mergers terminated effective December 31, 1988, and the DOJ then assumed sole responsibility for airline merger
review. The DOJ now has primary authority in air carrier cases to enforce all antitrust laws. Although there were few merger proposals after 1988 (see Figure 32-1), it was clear that the days of merger accommodation were over. The Justice Department approach to antitrust activity was going to be very different from that of the Department of Transportation.

In 1998, when Northwest, then the fourth – largest carrier in the United States, proposed to acquire a controlling interest in Continental, then the fifth-largest air carrier, the DOJ opposed the action. The challenge of the DOJ was based on the fact that the two carriers are each other’s most significant competitors (or only competitors) in nonstop service between cities where they main­tain their hubs. In its complaint filed in federal court against the carriers, the DOJ asserted that the proposal would cause higher ticket prices and diminished service for millions of passengers. This proposed merger did not occur.

In 2000-2001, United proposed to acquire US Airways. The DOJ opened an investigation into the merger and concluded that it would be highly anticompetitive for a number of rea­sons. These carriers were the only competitors between the District of Columbia area and a number of cities; they were the most significant nonstop carriers in numerous hub-to-hub mar­kets; only they connected several northeastern cities; and the merger would have lessened com­petition in several transatlantic markets. When the DOJ announced that it would sue to block the transaction, the airlines abandoned their merger plans.

Proposals that have been reviewed without adverse action by the DOJ include US Airways – America West (2005), Northwest-Delta (2008), and United-Continental (2010).

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