Air Transport World

A trust buster by any other name.... The Justice Department has been a more active enforcer of antitrust law. But results have not been much different. (includes related article)

The Justice Department has been a more active enforcer of antitrust law. But results have not been much different

On Jan. 1, 1989, three weeks before George Bush was sworn in as President, the U.S. Justice Department took charge of domestic-airline-antitrust issues. That made it the lead agency on policy as well as enforcement, rather than subordinate to the Department of Transportation. Since Justice had opposed several mergers publicly and claimed privately that it would rattle more cages if it were in charge, airlines prepared for the worst and hoped for the best.

Now, three years later, the consensus among attorneys is that Justice is a more aggressive enforcer, at least where airlines are concerned. During the Reagan administration, the antitrust division barely took action. The consent decree against AMR Chairman Robert Crandall--for his attempt to raise prices by telephone--was the notable exception.

Since 1989, Justice has taken action several times. Because of its new authority, it has considered all major airline actions for their effect on competition. The debate is whether the results are more than marginal. At a time of failing airlines, Justice has few alternatives when it comes to passing bankrupt airlines' assets around.

One point is certain. Bush's Antitrust Division has made sure that when it acts, people know about it through the vehicle of press releases. Some snipe at the apparent desire for publicity but in fact, the snipers cannot measure the number of anticompetitive practices forestalled by that publicity.

Six weeks after Bush's inauguration, Eastern filed for bankruptcy. In June, 1989, Justice told USAir, Eastern and the bankruptcy court it would sue if the airlines proceeded with a deal allowing USAir to buy Eastern's Philadelphia gates and Philadelphia-Toronto route. DOJ said USAir already provided 56% of the departures and controlled the largest block of gates. USAir also was Eastern's No. 1 competitor on the Canada route. In the same time period, DOT wrote to the heads of 28 airlines with international operations, warning against the anticompetitive potential of route sales.

The airlines canceled the deal and Eastern sold the assets to Midway instead. Two years later, Midway was bankrupt, because of the drain that the Philadelphia takeover made on its resources. Score: Battle, won, war lost.

No legislation give either Justice or DOT a specific right to participate in bankruptcy deliberations. Likewise, they are not required to participate. They may to do if they think competition is at stake or if the court admits them as interested parties. …

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