Antitrust Division chief William Baer explained to sometimes skeptical lawmakers today the Justice Department’s rationale for settling its antitrust lawsuit to block a merger between US Airways and American Airlines.
Rep. Spencer Bachus (R-Ala.), chairman of the House Judiciary Committee’s subcommittee on regulatory reform, commercial and antitrust law, asked Baer why the department decided to file the lawsuit at all when DOJ “has approved several similar or even more problematic mergers in the past.”
“It appears to me to be a case of overcompensating for past omissions,” he said.
In announcing the lawsuit in August, Baer said the proposed deal would cost consumers hundreds of millions of dollars because it would give the combined airline a monopoly on certain important air routes and decrease incentives for competition. His move dismayed industry observers, who had expected few hurdles.
This is the first time the Justice Department has tried to block an airline merger since 2001, when United Airlines tried to combine with U.S. Airways. That deal was called off hours after the Justice Department threatened to file a lawsuit to stop it. Since then, Delta acquired Northwest in 2008; United merged with Continental in 2010; and Southwest bought AirTran in 2011.
But Baer defended the settlement, arguing that it would be “better than a full-stop injunction. Why would I say such a thing? It’s because a full-stop injunction would have kept the legacy carriers in their current position, which was already pretty cozy. We did not see lots of meaningful competition on price, on service, on ancillary fares like baggage fees.”
On Thursday, Baer fielded similar questions from senators on the Senate Judiciary Committee. Sen. Amy Klobuchar (D-Minn.) worried about low-cost carriers limiting consumer options.
“They don’t always serve some of those small and medium sized cities like we have in my state,” she said.
“We don’t know that anyone is going to lose service,” Baer said. “In fact we are not a regulator. We don’t decide where people fly and where they don’t fly.”
Rep. John Conyers (D-Mich.) also asked Baer about the sequestration and its impact on his division.
“We are down from about 125 criminal prosecutors to 85 right now,” he told the congressman. “It the budget situation resolves itself, the Justice Department is going to hire those people again.”