The Justice Department, along with the attorneys general of six states and the District of Columbia, filed a lawsuit on Tuesday seeking to block the proposed merger of American Airlines and US Airways.
The Justice Department, in announcing the suit, said that if the deal went forward it would substantially reduce competition for “commercial air travel in local markets throughout the United States and result in passengers paying higher air fares and receiving less service.â€
The $11 billion merger, announced in February, took American out of bankruptcy. The combination of the two carriers would create the nation’s biggest airline, a company with the size and breadth to compete against United Airlines and Delta Air Lines, which have grown through mergers of their own in recent years and are currently the biggest domestic carriers.
But in the complaint filed on Tuesday in Federal District Court in the District of Columbia, the Justice Department said the merger “will leave three very similar legacy airlines - Delta, United and the new American â€" that past experience shows increasingly prefer tacit coordination over full-throated competition.â€
The complaint goes on, “By further reducing the number of legacy airlines and aligning the economic incentives of those that remain, the merger of US Airways and American would make it easier for the remaining airlines to cooperate, rather than compete, on price and service.â€
US Airways stock was down 7 percent in trading after the suit was filed.
“Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure,†Attorney General Eric H. Holder Jr. said in a statement. “By challenging this merger, the Department of Justice is saying that the American people deserve better. This transaction would result in consumers paying the price â€" in higher airfares, higher fees and fewer choices. Today’s action proves our determination to fight for the best interests of consumers by ensuring robust competition in the marketplace.â€
The action is the latest in a series of prominent antitrust moves by the Obama administration Justice Department. In January, the agency sought to block Anheuser-Busch InBev’s $20.1 billion acquisition of Grupo Modelo, the Mexican maker of Corona beer (that deal was later modified to win approval), and in 2011 it thwarted AT&T’s proposed $39 billion takeover of T-Mobile USA. (Those companies abandoned the merger.)
The Justice Department’s lawsuit against the merger of American Airlines and USAirways
