Consumers Seek to Block Continental-United Merger
On June 29, a group of 49 individual airline ticket purchasers filed suit to enjoin the proposed merger between Continental Airlines, Inc. and United Air Lines Inc., alleging that the deal would harm competition in the airline industry. The suit claims that the companies’ CEOs held “secret and private meetings” at which they discussed potential increases in prices and fares, charging of fees for previously free services, eliminating or curtailing services, and reducing the frequency of flights and number of available seats. The complaint claims that the merger, which would combine the third and fourth largest domestic carriers, will create a monopoly in ten U.S. airports, leave just two competitors in 120 U.S. airports, and create more concentrated markets in Washington, D.C., San Diego, Seattle, and New Orleans.
The deal is currently under review by the U.S. Department of Justice Antitrust Division, which in May announced that “it would go over the merger with a fine-tooth comb to make sure it wouldn’t hurt competition.” The deal has also drawn scrutiny from Congress. In June, the U.S. House of Representatives held hearings regarding the merger’s potential effect on competition. United States Representative James Oberstar (D. Minn.), chairman of the Transportation Committee, opined that the merger would harm competition, and noted that he would “explore legislation to stiffen regulation if the deal is approved.” The Consumer Travel Alliance testified that the merger would create a market with just three dominant airlines, which would be “a consumer nightmare.” In defense of the deal, the airlines’ CEOs expressed the view that the merger would not harm consumers because competition in the airline industry has heated up in recent years due in part to competition from new carriers such as Southwest Airlines, and since it has become easy for consumers to compare prices via online search portals like Expedia and Orbitz.
A case management conference has been set for October 14, 2010.