A Response to Commissioner Wright’s Proposed Policy Statement Regarding Unfair Methods of Competition

Maurice E. Stucke


Federal Trade Commissioner Joshua Wright recently proposed a new legal standard to evaluate “unfair methods of competition” under Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45(a) (2012). 

This essay raises several concerns. First, Wright’s proposed legal standard does not go as far as Congress intended. Moreover it conflates unfair methods of competition with acts and practices that significantly harm consumer welfare. A second concern is that the proposed legal standard goes the other direction and permits conduct that is otherwise illegal under the Sherman and Clayton Acts. Third, the proposed standard reduces accuracy, is hard to administer in connection with the traditional antitrust standards, and increases the risk of inconsistent outcomes for behavior outside the well-forged antitrust case law, but within the Sherman and Clayton Acts’ reach.

9/18/2013 Business Week: AMR-US Airways Unions Meet U.S. Official on Merger Suit

9/18/2013 Business Week: AMR-US Airways Unions Meet U.S. Official on Merger Suit


GeyerGorey LLP’s Allen Grunes quoted in Washington Post: “AMR, US Airways Attack U.S. Merger Suit as Bad for Consumers.”

AMR, US Airways Attack U.S. Merger Suit as Bad for Consumers

David McLaughlin and Sara Forden
Sep 11, 2013 11:52 am ET

Sept. 11 (Bloomberg) — American Airlines and US Airways Group Inc. defended their proposed merger against a U.S. antitrust lawsuit, saying the combination would generate more than $500 million a year in benefits to consumers.

The combined airline will create an effective competitor to Delta Air Lines Inc. and United Continental Holdings Inc., the airlines said in filings yesterday in federal court in Washington arguing that the U.S. effort to stop the deal should be denied.

“It is the complaint — by interposing the heavy hand of federal and state regulation — which will lessen competition by precluding the market from creating new and competitive flight options for passengers,” Tempe, Arizona-based US Airways said.

The U.S. Justice Department, joined by seven states and the District of Columbia, are suing American parent AMR Corp. and US Airways to block the merger, arguing the tie-up would reduce competition and hurt consumers. U.S. District Judge Colleen Kollar-Kotelly has scheduled the case to go to trial beginning Nov. 25.

The U.S. and the attorneys general argue the proposed merger, by reducing the number of legacy carriers from four to three, would increase the likelihood of coordinated behavior among the airlines, leading to higher fares and fees and diminished service. American and US Airways can compete effectively on their own, the government has said.

Service Cuts

The main issue in the case is whether the merger would lead to cuts in service and increases in domestic fares, said Allen Grunes, a lawyer with GeyerGorey LLP in Washington who formerly worked in the Justice Department’s antitrust division.

“The American and U.S. Airways answers paint a picture of the merger as some kind of silver bullet that will miraculously transform the two companies into the greatest thing since sliced bread,” he said. “That’s more than a little optimistic, and it’s going to be tough for them to prove it.”

The merger, which would create the world’s largest airline, forms the basis for American’s plan to exit bankruptcy protection and pay creditors. Fort Worth, Texas-based AMR filed for bankruptcy in November 2011 and reached the merger agreement with US Airways in February.

“We believe this merger would result in consumers paying more for airfares and receiving less service,” Gina Talamona, a spokeswoman for the Justice Department’s antitrust division, said in an e-mail. “The department’s lawsuit seeks to maintain competition in the airline industry.”

More Competition

American said in its court filing that the deal with US Airways would create a more competitive airline industry that would give passengers more choices.

The U.S. complaint “concocts an imaginary narrative where airlines tacitly collude and where prices are higher than in the past, but the real facts are just the opposite,” American said.

US Airways said the U.S. complaint improperly focuses on maintaining the number of legacy carriers, “those airlines that, prior to 1978, endured the well-documented failure of federal regulation of routes and fares.” Those carriers are by most relevant measures the least financially successful companies in the industry, US Airways said.

Low-Cost Competition

The U.S. ignores the effect on the airline industry of low- cost carriers including Southwest Airlines Co. and JetBlue Airways Corp., according to the filing. The success of those airlines is the “most meaningful competitive development” in the industry since deregulation, US Airways said.

During the past 12 years, American lost $10.3 billion and US Airways lost $3.4 billion, according to the filing by US Airways. US Airways has been in bankruptcy twice in that period.

“Blocking the merger will not sharpen competition — it will prolong this cycle of crisis to the detriment of passengers, the employees of American and US Airways, and the communities the airlines serve,” US Airways said.

The case is U.S. v. US Airways Group Inc., 13-cv-01236, U.S. District Court, District of Columbia (Washington).

Law 360: DOJ’s Airline Merger Challenge Recalls AT&T Fight

“If you think since the 1990s, what’s been popular has always been a unilateral effects theory,” said Stucke, who is also of counsel at GeyerGorey LLP. “This is almost entirely a coordinated effects theory, [and] I think it’s very strategically well thought-out, [because the airlines] can’t really now divest a few landings. The way the complaint is described, it’s hard to see any remedies short of a full-blown injunction.”

DOJ’s Airline Merger Challenge Recalls AT&T Fight



Macandrews & Forbes Holdings Inc. to Pay $720,000 Civil Penalty for Violating Antitrust Premerger Notification Requirements

MacAndrews & Forbes Holdings Inc. will pay a $720,000 civil penalty to settle charges that the company violated premerger reporting and waiting requirements when it acquired voting securities of Scientific Games Corporation, the Department of Justice announced today.

The Justice Department’s Antitrust Division, at the request of the Federal Trade Commission, filed a civil antitrust lawsuit today in U.S. District Court in Washington, D.C., against MacAndrews & Forbes for violating the notification requirements of the Hart-Scott-Rodino (HSR) Act of 1976.  At the same time, the department filed a proposed settlement that, if approved by the court, will settle the charges.

MacAndrews & Forbes is a holding company based in New York and is wholly-owned by Ronald O. Perelman.  Scientific Games is a New York-based provider of lottery and gaming services.

According to the complaint, MacAndrews & Forbes failed to comply with the antitrust premerger notification requirements of the HSR Act before acquiring voting securities of Scientific Games in June 2012.  As a result of these acquisitions, MacAndrews & Forbes held Scientific Games voting securities in excess of $68.2 million, the HSR reporting threshold then in effect.  Although certain stock acquisitions relating to a previous HSR Act notification are exempt from additional notice and waiting requirements, MacAndrews & Forbes’ June 2012 acquisitions of Scientific Games voting securities fell outside of the five-year time period for that exemption.

The Hart-Scott-Rodino Act of 1976, an amendment to the Clayton Act, imposes notification and waiting period requirements on individuals and companies over a certain size before they consummate acquisitions resulting in holding stock or assets above a certain value, which was $68.2 million in 2012 and is currently $70.9 million.

Federal courts can assess civil penalties for premerger notification violations under the HSR Act in lawsuits brought by the Department of Justice.  For a party in violation of the HSR Act the maximum civil penalty is $16,000 a day.