WASHINGTON Aug 13 AMR Corp's American Airlines
and US Airways Group Inc could be in for a
long and bruising courtroom battle against seasoned lawyers if
they choose to keep fighting the U.S. Justice Department's
objection to their merger.
Several experts in antitrust law said in interviews that the
aggressive stance taken by the Justice Department in the suit it
filed in U.S. District Court in Washington signals a sincere
intention to block the deal, not just a mere negotiating ploy to
get concessions before possible future approval.
If the Justice Department persuades a judge to agree, it
will have scuttled an $11 billion deal intended to create the
world's largest airline. The government argued that the merger
would reduce competition for commercial air travel in local
markets throughout the United States and cause passengers to pay
higher airfares and receive less service.
The department's Antitrust Division has been picking and
winning some big fights in recent years. In July, it won a trial
over e-book price-fixing against Apple Inc. In 2011, it
successfully blocked a proposed $39 billion merger between AT&T
and T-Mobile USA.
One sign that government lawyers are dead set on blocking
the deal can be found in an appendix to its lawsuit, said Mark
Ostrau, an antitrust lawyer in Mountain View, California.
The appendix lists 1,043 airline routes between cities
where, according to the Justice Department, the combined company
would have a presumptively illegal monopoly or near monopoly.
The routes between two cities - for example, Charlotte and
Dallas - are known in the industry as "city pairs." There may be
too many troublesome pairs for AMR and US Airways to resolve in
a settlement, and that is something government lawyers must have
known when they put the list in their suit, Ostrau said.
"If you wanted something to resolve, you would not have
listed more than 1,000 problematic city pairs," he said.
Jonathan Lewis, an antitrust lawyer in Washington, called
the Justice Department's suit "very powerful" because it quotes
company documents and executives anticipating higher prices
"If there were going to be a settlement, it probably would
have happened already," Lewis said, adding that the outcome was
still difficult to predict.
AMR and US Airways said they would launch a "vigorous and
strong defense" and called the Justice Department "wrong in its
assessment of our merger."
"Blocking this pro-competitive merger will deny customers
access to a broader airline network that gives them more
choices," the companies said in a joint statement.
'FULL-STOP INJUNCTION' SOUGHT
Assistant Attorney General Bill Baer, the head of the
Justice Department's Antitrust Division, on Tuesday outlined
broad objections to the deal based on competition in the
"We learned during our investigation about what happened to
competition from prior acquisitions, and as we look at the
market today, it's not functioning as competitively as it ought
to be," Baer told reporters on a conference call.
Baer said he wanted nothing short of a "full-stop
injunction" - meaning a court order preventing the merger - even
if it means his staff spending months in court.
"We don't file lawsuits unless we're prepared vigorously to
defend them, and that's what we're doing right now," he said.
The Justice Department gives parties to a merger several
opportunities to respond to likely government objections,
allowing them to submit documents and sit down with top
department lawyers. The department followed that process in this
case, Baer said.
"I don't think it was a surprise to the parties," Baer said
of the lawsuit.
U.S. District Judge Colleen Kollar-Kotelly was assigned to
oversee the case. In 2001, she was assigned to oversee the
penalty phase of the landmark U.S. antitrust case against
An appointee of Democratic President Barack Obama, Baer
joined the Antitrust Division in January from the Washington law
firm Arnold & Porter. Private antitrust lawyers describe him as
a self-assured leader in the field who does not shy from
Under Baer and his predecessors, the division has coined a
term - "litigation-ready" - to represent a new willingness to go
to court, and it has built up its courtroom experience with the
hiring of its first director of litigation, Mark Ryan.
Although there is no hearing date set for the airline case,
let alone a Justice Department trial team named, the
government's courtroom lawyers are likely to include people like
Ryan, who successfully argued the Apple trial last month.
The efforts are designed to help the Antitrust Division
avoid any repeat of a major loss in 2004, when it tried but
failed to block Oracle Corp's takeover of PeopleSoft.
AMR and US Airways will need to think hard if they are
committed to following through on pledges to fight, said Evan
Stewart, an antitrust lawyer in New York.
"Time is not the friend of these merging companies.
Litigation as a playing-out-the-clock process is something that
helps the government," he said.