Timing of antitrust trial appears to favor airlines, but U.S. may come prepared

McClatchy Washington BureauAugust 30, 2013 

— A decision Friday by a federal district judge to schedule a November trial could work in favor of American Airlines and US Airways in their quest to fend off a government lawsuit and create the world’s largest airline by year’s end, according to a range of industry experts.

In a courtroom conference at the U.S. District Court for the District of Columbia, Judge Colleen Kollar-Kotelly seemed skeptical of the Justice Department’s request for a March trial date, calling it “too far off.”

Speaking outside the courthouse Friday, lawyers for the airlines confidently predicted victory.

“We’re going to win,” said Rich Parker, an attorney for US Airways.

However, antitrust experts say the airlines shouldn’t dismiss the ability of the Justice Department to flex its muscles in its attempt to block the $11 billion deal – nor should they underestimate a “tough-minded” judge with a deep background in antitrust cases, including a government lawsuit against Microsoft. That case ultimately ended in a settlement.

“She’ll put the government through its paces, as well as the industry,” said Carl Tobias, a law professor at the University of Richmond. “She’s certainly seen a lot of assistant U.S. attorneys in her courtroom.”

“She will encourage them to try to settle it, if possible,” Tobias added.

The airlines and many industry observers reacted with surprise earlier this month when the Justice Department’s Antitrust Division filed suit against the merger; six states and the District of Columbia joined the lawsuit. The department had approved three large airline mergers in recent years: Delta-Northwest, United-Continental and Southwest-AirTran.

But the department successfully blocked AT&T’s attempt to purchase rival T-Mobile in 2011, a $39 billion deal that would’ve created the nation’s largest cellphone provider. After the Senate in December confirmed William Baer as the Justice Department’s antitrust chief, the department sued to block a merger of two larger beer makers. It later reached a settlement with the companies.

Some saw it as a welcome sign of renewed vigor in the department.

“If people take antitrust laws seriously, they should not be surprised to see them being enforced,” said Bert Foer, president of the American Antitrust Institute, which opposes the merger.

Parker accused the government of trying to change the rules.

“They approved other mergers,” he said. “Our merger passes muster by 10 miles.”

But Mark Ryan, the director of litigation in the Justice Department’s Antitrust Division, said that the Justice Department’s approval of past mergers was “not a defense” for this one.

Ryan cited a number of concerns outlined in the government’s Aug. 13 complaint, including the transparency of pricing, higher ticket prices and checked-baggage fees, the possibility of anticompetitive coordination with other airlines, the end of head-to-head competition for numerous city pairs, the end of a popular discount program and the combined airline’s dominance at Washington’s Reagan National Airport.

Critics of airline industry consolidation said the move was long overdue.

“They brought this case three mergers too late,” said Joseph Bauer, a law professor at the University of Notre Dame.

Meanwhile, a federal bankruptcy judge in New York is expected to rule on the merger in September. The merger is American’s plan to exit from Chapter 11 bankruptcy, and Judge Sean Lane indicated Thursday that he’s inclined to approve it on Sept. 12, but he wants to hear more about the airlines’ response to the government’s case.

Ryan said Friday that American could stand on its own.

“We think American was poised to come out of bankruptcy as a vigorous competitor,” he said.

After meeting with the two sides behind closed doors Friday, Kollar-Kotelly scheduled the trial for the week of Thanksgiving. The trial could last from 10 to 15 days, with both sides seeking testimony from airline executives and economists, among others.

“That is a pretty accelerated timeframe,” Bauer said. “To do it within a two- to three-month timeframe would be pretty quick.”

Email: ctate@mcclatchydc.com; Twitter: @tatecurtis

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