Airlines have a responsibility to keep airfares low and affordable

Three weeks ago, the National Asian American Coalition (NAAC) was among the first, if not the very first minority organization in the nation, to protest the proposed merger of American Airlines and US Airways before the antitrust division of the U.S. Department of Justice.

Last week, the Department of Justice employed many of our arguments opposing the merger and filed a lawsuit under the Clayton Antitrust Act to block a merger that would have created the world’s largest airline.

Our complaint to the Department of Justice on behalf of Asian Americans, the middle class and low-income families argued that the merger would substantially decrease competition, and that decreased competition would cause substantial fare and baggage fee increases, as well as having the potential to produce a monopoly environment. This would allow airlines to create “nuisance” fees, such as a fee for drinking water and use of restrooms.

We also contended that the only affordable airport in the Washington, D.C. region, Ronald Reagan National Airport, would see monopoly conditions develop if this merger were allowed to go through.

To our great pleasure, the Department of Justice, under its new Antitrust Chief, William Baer, took a very pro-consumer approach in seeking to block this merger. Many state attorneys general joined in this suit. (California’s Attorney General, Kamala Harris, has not yet joined, though California has the largest number of Asian Americans and the largest number of minorities.)

This lawsuit will not only prevent higher prices in the airline industry, but could affect the future of all major mergers, including telecommunications and energy mergers that are likely to raise prices for consumers.

In the Department of Justice’s press release, Assistant Attorney General William Baer (with whom we first met on March 4, 2013 to discuss the Asian American perspective on mergers) stated that:

The merger “threatens substantial harm to consumers” and that “even a small increase in the price of airline tickets, checked bags, or flight change fees, would cost hundreds of millions of dollars to American consumers annually.”  The lawsuit demonstrates that mergers allow the industry to “raise prices, impose new or higher baggage and other ancillary fees, and reduce capacity and service.”

The lawsuit argued, for example, that the merger would allow just one airline to have a near monopoly on non-stop routes from Ronald Reagan National Airport, the only affordable airport in the Washington, D.C. region.

Assistant Attorney General William Baer also raised the issue that we stressed in our objections that air travel was now a necessity, since driving between cities took far too long and train service, formerly the “poor man’s” alternative, was no longer feasible. The lawsuit pointed out, for example, that a typical flight of one hour required eight hours in an auto and fifteen hours by train. That is, in the modern era, neither a car, bus nor train were adequate substitutes for affordable air service.

The Department of Justice’s lawsuit offered many examples to show that a lack of competition could double the costs of certain flights and substantially raise fees. For example, due to a lack of competition, “ticket change” fees on the “Big Four” airlines were recently raised by 33%, solely due to the lack of competition. Most importantly, the complaint argues that competition from low cost airlines, such as JetBlue, had caused travel costs from Ronald Reagan National Airport to Boston to drop by over $700 per passenger.

Future Impact

The NAAC, which has lodged protests against mergers that harm Asian Americans and the public at large (and has also filed in favor of mergers that benefit consumers, such as Southwest’s acquisition of AirTran), will, through its Washington, D.C. office and its legal team, remain vigilant by continuing to work closely with the Department of Justice’s Antitrust Division and the California Attorney General’s Antitrust Law Section.

As in the airline industry, there are just four major competitors in the accounting field (the “Big Four” CPA firms). These firms audit virtually all of America’s five hundred largest corporations. As we have informed the Department of the Treasury, the Federal Reserve and the primary regulator for the CPA firms, the Public Company Accounting Oversight Board, we will oppose any reduction in competition among the Big Four CPA firms. We generally support competition that would allow at least twenty-five or more CPA firms to compete for business that affects the financial health of all Americans. For example, the Big Four audit all of California’s major utilities. These audits justify numbers that often lead to major price increases that fall heavily on California ratepayers.

Besides continuing to work closely with federal and state regulators on antitrust matters, the NAAC is committed to meeting with corporations before they seek to merge to help develop pro-consumer policies that will enable the merger to benefit consumers and lower prices.

(By Faith Bautista and Mia Martinez)
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Mia Martinez is the Chief Deputy for the National Asian American Coalition’s Washington, D.C. office.