Monday, May 17, 2010

Continental/United's Pending Antitrust Battle

The Wall Street Journal just released a story discussing the antitrust scrutiny the proposed Continental/United Airlines merger is likely to receive from both the Justice Department's Antitrust Division and the House Judiciary Committee.  See Susan Carey, Airline Deal Faces Tough Review, Wall St. J., May 17, 2010 (available here).  While the story largely repeats observations made on the blog two weeks ago, see here and here, it does provide an interesting comparison to the 2008 Delta/Northwest merger.  Specifically, on the question over whether or not Continental and United would be required to divest gates or slots at airports where the two carriers have a significant presence, the story notes:

United and Continental say their planned union would have no overlapping international flights and only 14 nonstop domestic-route overlaps, mostly between the carriers' hubs.

A person close to the airlines' planning said the pair have 114 overlapping connecting flights and serve four small endpoint airports, or spoke airports that aren't hubs, where each has more than 10% of the passenger share. In the Delta-Northwest case, this person said, the two had 12 overlapping nonstop routes, 597 overlapping connecting routes and 44 endpoint airports where both sides had more than 10% of the passengers. No divestitures were required in that merger.

Whether this existential facts will sway the United/Continental review is not easy to prophesy.  After all,  with a new set of flexible horizontal merger guidelines in hand, see FTC & DOJ, Horizontal Merger Guidelines For Public Comment: Released on April 20, 2010 (2010) (available here), the Department of Justice is free to try and strongarm concessions from the carriers in the name 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).  Indeed, before approving a merger between concert promoter Live Nation Inc. and entertainment giant Ticketmaster earlier this year, the DOJ mandated Ticketmaster share its ticketing software with competitors and sell its college sports ticketing division to a major rival.  See Ethan Smith & Thomas Catan, Concert Deal Wins Antitrust Approval, Wall St. J., Jan. 26, 2010 (available here).  Apparently "vigorous antitrust enforcement" means administrative illuminati, not consumer choice and potential efficiency gains, will determine the contours of the market.

Of course, this footnote in antitrust history has yet to be written and so outright despair remains uncalled for.   As Steven Horwitz, Professor of Economics at St. Lawrence University, observed earlier this month, "Whether the United-Continental merger is a good thing or not remains to be seen. We can only hope that regulators will use forbearance and let consumers decide through the market whether what would be the new world's largest airline better meets their demands."  See Steven Horwitz, Mergers Are Not Monopolies, PBS Nightly Business Report Blog, May 4, 2010 (available here).

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