WASHINGTON Nov 12 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
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.
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 Nov. 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
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
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)