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Why is the Department of Justice trying to block the American-US Airways merger from takeoff?

August 13, 2013

​Mark Ostrau, co-chair of Fenwick & West’s antitrust group, is interviewed by MarketPlace for a segment titled “Why is the Department of Justice trying to block the American-US Airways merger from takeoff?” on the antitrust lawsuit filed by the United States Department of Justice and several states to block the proposed $11 billion merger of American Airlines and US Airways, which would create the world’s largest airline.

A DOJ spokesman said that the merger would “eliminate competition” and “put consumers at risk of higher prices and reduced service.” According to MarketPlace, “the combined American-US Airways would control 69 percent of takeoff and landing slots at Reagan National Airport in Arlington, Virgina.”

However, Marketplace points out that many of these same issues also came up when other airlines like United and Continental, and Delta and Northwest merged.

“You just don’t want to be the last one” to merge, Ostrau told MarketPlace.

“The agencies count the number of significant competitors,” he said. “And when the number gets too small, that’s when they step in.” Ostrau identified three or four major competitors in a national networked market as “too small,” and, as MarketPlace points out, that is where the U.S. airline industry is right now.

He said that late-comers have also been blocked on anticompetitive grounds in other industries like the wireless telecommunications and computer disk-drive industries.