Blawgletter has lately started scanning news reports about the U.S. Justice Department Antitrust Division's bid to block the minnow-eats-whale merger of U.S. Airways and American Airlines. Wowsers.
Let's start by saying we've found that the biz reporters have a not-very-good grasp of antitrust law. A terrible one in fact. They seem to think that whatever business wants, business ought to get. If it makes business sense, antitrust law should promote it, not try to stop it. Which fact we suppose shouldn't surprise anyone.
Just yesterday, the local paper here issued a paean in favor of the pending hook-up. The ink-stained wretch who wrote the item praised U.S. Air's CEO Doug Parker for making "the right call" by over and over again calling for . . . less competition — or, in the item's telling, "industry consolidation".
The piece deems Parker "visionary" for wanting to cut the number of carriers and reduce airline capacity. It also credits Parker for wanting to gobble up Delta in 2007 — in spite of the fact that the deal would have happened just in time for the Great Recession, whose onset swung Delta itself from a $1.6 billion profit to an $8.9 billion loss in the year after its 2008 merger with Northwest Airlines. Parker dodged a bullet, if you ask us.
The author even dismisses as merely "embarassing" and "bone-headed" an email that Parker sent the Delta CEO to complain about a "triple miles" offer that the rival carrier had made. He says "most other" moves that Parker tried, by contrast, "made business sense". See Complaint ¶ 45.
Illegally buying up the competition to gain market power also makes "business sense" — ask John D. Rockefeller. Also inquire of AT&T, which tried to snag rival T-Mobile but failed after the DOJ moved to block the deal in court.
(The same newspaper, by the way, predicted Dire Consequences for T-Mobile if AT&T's bid failed — a forecast that has proved dismally wrong.)
Thwarting competition almost always makes terrific business sense. That explains why it happens so often. As Adam Smith wrote:
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
Antitrust laws exist to protect competition from conspiracy, to purge markets of unfair monopolies, and shield the public from bad service and high prices. Who cares about airline passengers? Reading the pro-merger, pro-CEO item we just went through, you'd think The Dallas Morning News does not.