Flights Cancelled

Three years into the current administration and an unhealthy yet consistent pattern has emerged with respect to competition policy. Lacking statutory authority but eager to implement the White House’s Executive Order on Competition, federal agencies scour U.S. code for any justification to quash mergers.  

Airline Merger Review 

In July 2022, JetBlue and Spirit Airlines agreed to merge into one company. The companies argue that their merger will allow them to better compete with national airlines and offer the flying public more options at better prices. As part of their agreement to merge, the companies have proactively begun divesting various assets to assuage concernsand even gone so far as to gain the support of their respective unions.   

The Department of Justice has filed suit to block the merger and the trial is now underway in Boston. There’s debate to be had over the merits of the DOJ’s case against the merging companies. In recent years the department has demonstrated a willingness to depart from the traditional evidence-based approach to antitrust enforcement instead focusing on arbitrary and artificial metrics of competition such as the number of competitors in a specific marketplace. Regardless of its flawed approach, DOJ is nevertheless operating within its statutory authority to go to court and challenge a merger.

Department of Transportation, Antitrust Enforcer?  

The same can’t be said for the Department of Transportation which has now signaled that it may seek to block the merger even if the airlines win in a court. Apparently responding to a letter sent by Senator Elizabeth Warren, the DOT is preparing to test the limit of a vague transportation statute under which they may attempt to take a second bite of the apple. In fact, Secretary Buttigieg claimed in a recent hearing that his department has the legal authority to apply a “public interest” test to airline mergers.   

However, the DOT does not have the authority to review mergers for competition concerns. Congress made this clear when it deregulated the industry, clearly subjecting airlines to the same application of the antitrust laws as other unregulated industries. Since then, DOT has consistently deferred to DOJ on whether to challenge a transaction between U.S. airlines on competition grounds.    

In 2015, the Obama Administration explained that “DOT's practice has been to use its expertise with respect to the airline industry to provide the Department's views and otherwise assist the [DOJ] in DOJ's analysis of airline mergers or acquisitions. The DOT will continue this practice for airline mergers and acquisitions under DOJ review.”  DOT wisely emphasized that it “will not duplicate review or enforcement activities carried out by DOJ and will not create undue expense or burdens upon parties to an airline merger or acquisition.”  As the Obama Administration explained, if DOT had other public interest concerns outside the competition review process, such as service to small communities, DOT would work with the parties to resolve those issues.   

 If a federal court, as an independent arbiter, determines that a merger will not reduce competition in violation of the antitrust laws, the DOT must follow the law, respect that decision and the sanctity of the judicial process.      

About the authors

Sean Heather

Sean Heather is Senior Vice President for International Regulatory Affairs and Antitrust.

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