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Federal judge says American Airlines and JetBlue must end alliance

The two airlines had agreed to operate as one for most of their flights in and out of New York City and Boston.

(CN) — American Airlines and JetBlue must end their partnership, a federal judge in Massachusetts ruled Friday, finding their Northeast Alliance violates federal antitrust law. 

After considering evidence presented during a month-long bench trial last fall — which U.S. District Judge Leo Sorokin pointed out in his ruling featured testimony from two dozen witnesses and resulted in a 3,600-page trial transcript, 50 exhibit binders, and more than 2,700 pages of deposition excerpts from 17 additional witnesses — the Barack Obama appointee said the Northeast Alliance plainly violates the Sherman Act.

“This case turns on what ‘competition’ means. To the defendants, competition is enhanced if they join forces to unseal a powerful rival. The Sherman Act, however, has a different focus. Federal antitrust law is not concerned with making individual competitors larger or more powerful. It aims to preserve the free functioning of markets and foster participation by a diverse array of competitors. Those principles are generally undermined, rather than promoted, by agreements among horizontal competitors to dispense with competition and cooperate instead,” Sorokin wrote in his 94-page ruling

“That is precisely what happened here,” Sorokin added. 

The agreement originating in early 2020 allowed the two carriers to coordinate schedules, share revenue and offer reciprocal frequent-flyer benefits on flights to and from New York City and Boston. The U.S. Department of Transportation approved the deal after a six-month review, and it took effect in February 2021, but the Department of Justice said it was illegal

An economist who testified during the trial said that partnership between the two airlines would have saved flyers more than $500 million a year. 

But Sorokin said the defendants offered only minimal evidence of procompetitive effects arising from the alliance.

“Whatever the benefits to American and JetBlue of becoming more powerful — in the northeast generally or in their shared rivalry with Delta — such benefits arise from a naked agreement not to compete with one another. Such a pact is just the sort of ‘unreasonable restraint on trade’ the Sherman Act was designed to prevent,” Sorokin wrote. 

The ruling was a significant win for the Biden administration, which has called on the Department of Justice and Federal Trade Commision to vigorously enforce antitrust laws and challenge “bad mergers.”

“Today’s decision is a win for Americans who rely on competition between airlines to travel affordably,” said Attorney General Merrick B. Garland in a statement. “The Justice Department will continue to protect competition and enforce our antitrust laws in the heavily consolidated airline industry and across every industry.”

JetBlue and American were disappointed with the ruling. 

“We believe the decision is wrong and are considering next steps,” American spokesman Matt Miller told the Associated Press. “The court’s legal analysis is plainly incorrect and unprecedented for a joint venture like the Northeast Alliance. There was no evidence in the record of any consumer harm from the partnership.”

JetBlue spokeswoman Emily Martin also told the AP that they had “made it clear at trial that the Northeast Alliance has been a huge win for customers.”

Per the terms of the ruling, the airlines must cease the Northeast Alliance within the next 30 days.

Categories / Business, Consumers, Government, Law

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