Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The U.S. Department of Justice appears to have a new problem with UAL Corp.’s acquisition of US Airways Group Inc. that is not addressed by the carrier’s plan to divest assets at Washington National Airport. At issue is whether the elimination of US Airways would make it easier for the remaining large carriers to impose systemwide fare increases. Such increases typically are imposed by a single carrier, which then usually rescinds the fare hike unless other major airlines follow suit. Robert L. McGeorge, a staff lawyer in the section of the antitrust division at the Department of Justice that examines transportation mergers, focused on systemwide fare hikes as a problem with airline mergers in general. His remarks came at the American Bar Association’s antitrust meeting and were part of an overview of how the Justice Department is evaluating big airline mergers. Asked if creation of a new carrier would restore the competitive balance that keeps systemwide fare hikes in check, McGeorge said new entrants are incapable of stopping such price increases. “Only major carriers can block systemwide fare hikes from going through,” McGeorge said. In principle, such an approach to airline mergers presents an additional hurdle for the United-US Airways deal. That’s because the creation of DC Air from assets at Washington National Airport is intended to re-create competition lost on routes now served by both United and US Airways. DC Air, however, would be a regional carrier and, as such, hard-pressed to stop nationwide fare hikes. Joel Mitnick, a partner in the New York office of the Brown & Wood law firm, said a Justice Department focus on systemwide fare hikes would represent a change in policy. The agency typically concentrates on an airline industry merger’s impact on flights between select cities. “The analysis would represent a shift in the analysis of airline mergers from local markets to the national market, which would ignore the strategic incentives for selective pricing in city pairs,” he said. One antitrust lawyer said this is a natural extension of the government’s belief that a reduction in the number of competitors encourages collusion. Thus, it should not come as a shock that regulators would examine fare issues in the context of the United-US Airways merger, the lawyer said. Despite the look at systemwide fare hikes, McGeorge said the agency will continue to scrutinize any deal that reduces competition at an airline hub. He also said the department will look at what a deal will do for competition on city pairs served by nearby hubs. McGeorge also expressed doubts that the entry of new carriers to the marketplace is a reliable litmus test for assessing airline mergers, noting the recent prosecution of carriers for predatory pricing aimed at bankrupting start-up airlines. “We have seen it is not easy for new entrants to come in,” he said. Related chart: New grounds Copyright (c)2001 TDD, LLC. All rights reserved.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.