April 30, 2010
Continental/United Merger to be Announced
The Wall Street Journal is reporting that Continental and United Airlines will announce their decision to merge on Monday. See Gina Chon & Susan Carey, Airlines Approach Final Deal to Merge, Wall St. J., Apr. 30, 2010 (available here). The merger is expected to create the world's largest air carrier.
The merger will likely prove to be a major test for the Department of Justice Antitrust Division's promise of "vigorous antitrust enforcement." See generally Christine A. Varney, Assistant Attorney General, U.S. DOJ Antitrust Division, Vigorous Antitrust Enforcement in This Challenging Era, Remarks to the U.S. Chamber of Commerce (May 12, 2009) (available here). Does this mean the DOJ will stand in the way of a Continental/United merger solely on the ground it increases market concentration? Or will the Justice Department continue to abide by the propositions that "[m]ere size . . . is not illegal," Baileys Bakery v. Cont'l Baking Co., 235 F. Supp. 705, 718 (D. Haw. 1964), aff'd, 401 F.2d 182 (9th Cir. 1968), and "[b]igness is no crime," U.S. v. N.Y. Great Atl. & Pac. Tea Co., 173 F.2d 79, 87 (7th Cir. 1949)? The tenor of antitrust law and policy in the United States for the past three decades has been to promote economic welfare by maximizing allocative efficiency. See generally Richard A. Posner, Antitrust Law (2d ed. Univ. Chi. Press, 2001). It is not the duty of the Justice Department nor, since the 1978 Airline Deregulation Act, any administrative agency to "plan" the U.S. air transport market.
Given the weakened state of the industry over the past decade, many air carriers are in desperate need of the operating efficiencies and cost rationalizations mergers can facilitate. Now is surely not the time for the DOJ to make "an example" out of these carriers in order to deter would-be oligopolists.
April 30, 2010 | Permalink
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