Last March, the DOJ filed a lawsuit in federal court seeking to block the proposed merger between JetBlue & Spirit Airlines. As we blogged at the time, although the DOJ & FTC have peddled some novel theories in merger challenges, this challenge was more conventional. Yesterday, in a 109-page opinion, Judge William Young agreed with the DOJ’s position that the deal would substantially lessen competition and permanently enjoined it. Here’s an excerpt from his decision:
The Clayton Act was designed to prevent anticompetitive harms for consumers by preventing mergers or acquisitions the effect of which “may be substantially to lessen competition, or tend to create a monopoly.” 15 U.S.C. § 18. Summing it up, if JetBlue were permitted to gobble up Spirit -– at least as proposed — it would eliminate one of the airline industry’s few primary competitors that provides unique innovation and price discipline. It would further consolidate an oligopoly by immediately doubling JetBlue’s stakeholder size in the industry.
Worse yet, the merger would likely incentivize JetBlue further to abandon its roots as a maverick, low-cost carrier. While it is understandable that JetBlue seeks inorganic growth through acquisition of aircraft that would eliminate one of its primary competitors, the proposed acquisition, in this Court’s attempt to predict the future in murky times, does violence to the core principle of antitrust law: to protect the United States’ markets –- and its market participants — from anticompetitive harm.
The opinion included one small consolation prize for the two airlines. In its amended complaint, the DOJ sought an injunction that would have applied to “this acquisition, or any other transaction in any form that would combine JetBlue and Spirit.” The Court wasn’t willing to go that far, and Judge Young made it clear that his ruling applied only to the proposed combination on the terms set forth in the July 2022 merger agreement.
Judge Young’s opinion is well written and engaging, but it ends with a somewhat odd coda that I’ll repeat here in the same format in which it appears in the original:
Spirit is a small airline.
But there are those who love it.
To those dedicated customers of Spirit, this one’s for you.
Because the Clayton Act, a 109-year-old statute requires this result –- a statute that continues to deliver for the American people.
Spirit’s customers may be heartened by the ruling and appreciate the judge’s ode to the Clayton Act, but let’s spare a thought for Spirit’s stockholders, because they got annihilated after the judge’s decision was announced.
– John Jenkins