COROPRATE CRIME REPORTER
Antitrust
Group Wants Delta/Northwest Merger Blocked
22 Corporate Crime Reporter 28, July 11, 2008
The American Antitrust Institute (AAI) is calling on the federal government
to block the proposed merger between Delta and Northwest Airlines.
The group released a white paper analyzing how the proposed merger of Delta Air Lines and Northwest Airlines could harm competition and consumers.
“The dismal airline industry climate does not establish a good case for haste or exception in reviewing the Delta/Northwest merger application,” said AAI president Bert Foer. “We think pressure on the airlines to downsize, when paired up with eliminating rivals through merger, does a disservice to consumers.”
The $3.1 billion deal would create the single largest airline in the U.S. and worldwide.
The white paper lists a variety of potential adverse competitive effects that could flow from the merger, any – or all – of which could result in restricted seat availability, higher fares, degraded service quality, and less choice for consumers.
The group said that the efficiencies claimed by Delta and Northwest are likely to be defeated by larger network size.
In addition, entry by legacy networks and low-cost carriers cannot be counted on to discipline postmerger price increases.
The Department of Justice is currently in the process of investigating the merger.
The paper’s author, Diana Moss, noted that while the AAI does not have access to the quality of data and information that the Department of Justice does in a merger investigation, “our analysis of public information shows that there are too many indicators that the merger would harm competition and consumers and should therefore be blocked.”
The white paper argues that both city-pair and system-based markets would be adversely affected by the proposed merger.
“City-pair analysis is the backbone of Department of Justice airline merger review,” Moss said. “But we also believe that the merger would eliminate head-to-head competition between the Northwest and Delta systems in the broader, system-based market for air travel, something that isn’t typically considered.”
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