Settlement Of The US Airways/American Airlines Merger Litigation Highlights Changing Antitrust Landscape

On November 12, 2013, US Airways, American Airlines, the U.S. Department of Justice ("DOJ"), and several state Attorneys General announced an agreement to settle the antitrust litigation challenging the merger of the two carriers. Cadwalader, Wickersham & Taft LLP acted as antitrust counsel to our long-standing client US Airways Group, Inc. in connection with the proposed merger.

Takeaways

The US Airways/American deal highlights a number of aspects of the changing antitrust landscape that parties to mergers should keep in mind:

Parties must be prepared to litigate against the government. US Airways/American continues the trend of recent cases (including Anheuser-Busch Inbev/Grupo Modelo and Pinnacle Entertainment/Ameristar Casinos) that demonstrate that litigation is not always used because enforcers believe the deal cannot be fixed and must be blocked. Rather, it appears that in some cases enforcers may believe they are in a better position to negotiate remedies by bringing suit. Parties must be alert to potential nationwide oligopoly theories. US Airways/American, Anheuser-Busch Inbev/Grupo Modelo, and AT&T/T-Mobile each involved claims by DOJ that the merger would facilitate oligopoly behavior among the leading industry players at a nationwide level. Parties cannot assume consistency with past enforcement decisions. The analysis of US Airways/American by DOJ differed from that applied in Delta/Northwest, United/Continental, and Southwest/AirTran. DOJ alleged that the deals it previously cleared had "hurt passengers." Similarly, AT&T/T-Mobile involved an industry that was long evaluated by examining competitive effects in local markets, but DOJ looked to establish a national market. Parties should be aware that enforcers will rely on contemporaneous business documents. As opposed to the agencies' historic focus on a merger's impact on market structure, DOJ in this case (and in other recent challenges) depended heavily on contemporaneous business documents from the parties, their investment bankers, and third parties to state its case. Not surprisingly, DOJ has put those statements in their worst possible light to support its allegations. Additional background on the US Airways/American merger and the settlement is provided below.

Background

On August 13, 2013, after a lengthy investigation, the DeOJ and several state Attorneys General filed suit in federal court in Washington, DC to block the US Airways/American merger.

The complaint...