A relevant question may not be why the Justice Department moved to block the American-US Airways deal, but why it approved the United-Continental merger â a move it now seems to regret.  Shareholders and employees of American Airlines and US Airways may well be wondering: why us?  William Baer, the head of the Justice Departmentâs antitrust division, in 1998. Mr. Baer said this week that the department might have sued to block US Airwaysâ 2006 hostile bid for Delta if US Airways hadnât abandoned the takeover.  Until this week, when the Justice Department filed suit to block the proposed merger of the airlinesâ parent companies, it had been notably lax on airline mergers. What the antitrust division deemed acceptable â even beneficial â for Delta Air Lines and Northwest Airlines (in 2008), and Continental and United Airlines (2010), and Southwest Airlines and AirTran Airways (2011) now âthreatens substantial harm to consumers,â the complaint says.  US Airways has been doubly unlucky. United abandoned a merger deal with US Air in 2001 after the Bush administration said it would file an antitrust suit. And the head of the Justice Departmentâs antitrust division, William Baer, said this week that the department might have sued to block US Airwaysâ 2006 hostile bid for Delta if US Airways hadnât abandoned the takeover. (US Airways did get approval to acquire America West in 2005.)  The government âabandoned the framework it used in approving the last three airline mergers,â said Paul T. Denis, a partner at Dechert LLP, which is representing US Airways. âIn some ways, the complaint is a throwback to the 1970s,â before market-oriented economic analysis led to a broad revision in antitrust policy. âNow theyâre saying those prior mergers were anticompetitive. Thatâs surprising. But even if they believe that, itâs not relevant to whether this merger will have an adverse effect.â  US Airways and American have come out fighting. The government âgot this one wrong, very wrong,â said Richard Parker, an antitrust litigator at OâMelveny & Myers and former director of the Federal Trade Commission's antitrust arm, the Bureau of Competition, at a news conference on Wednesday. He stressed that only a judge can block the merger and vowed to take the case to trial. But perhaps the airlines shouldnât have been so surprised by the lawsuit â and shouldnât be quite so eager for a courtroom showdown.  âItâs a different regime, different standards and a different time,â said Herbert Hovenkamp, professor of law at the University of Iowa and widely regarded as a dean of the antitrust bar. The relevant question may not be why the department moved to block the American-US Airways deal, but why it approved the United-Continental merger â a move it now seems to regret.  William J. Baer, the associate attorney general in charge of the antitrust division, told me this week: âWe consider every merger one at a time. Here, we had a proposed merger that would reduce the legacy carriers from four to three. Thatâs not the same as six to five, or five to four. That logic would get you from two to one pretty quickly.â  And while he said he couldnât comment on the earlier airline mergers, since heâs been the antitrust chief for just seven months, âif you look at the net effects, what weâve seen is a reduction in capacity and higher prices, and not the benefits that were promised.â  Whatever the recent precedents, the proposed American-US Airways merger violates the Justice Departmentâs merger guidelines, which the Obama administration finally seems to be taking seriously. The merger would substantially reduce competition because âthere are too many routes that would create a monopoly or oligopoly,â Professor Hovenkamp said.  According to the Justice Department, the American-US Airways merger would substantially reduce competition in over 1,000 city pairs served by the two airlines. Among the more egregious examples it cited are Charlotte, N.C.-Dallas; Charlotte-Durango, Colo.; Dallas-Philadelphia; and Kahului, Hawaii- Tampa, Fla. It said the merger would create four out-and-out monopolies, albeit on secondary routes, including three that serve St. Croix in the Virgin Islands. And it said the merger would reduce competition on more than 1,000 routes.
Three airline mergers had gained approval since 2008, but the Justice Department has hardened its stance with a proposed union between American and US Airways.