By Luke Colomey
The History & Contemporary Landscape of Antitrust Law
Congress originally designed antitrust law to protect consumers and businesses from the dangers of anti-competitive conduct. At the turn of the century, the Sherman Act (1890) and the Clayton Act (1914) established the framework under which this system functions. Since then, the tools for protecting consumers and businesses have changed little. What has changed is how and when governments and private individuals deploy these tools.
Under § 2 of the Sherman Act it is unlawful for any person to “monopolize,” “attempt to monopolize,” or “conspire to monopolize” any market. An early and important example of a successful challenge to a monopoly under this section was the Standard Oil case in 1911, ordering the nationwide oil juggernaut to be split into separate companies. Antitrust enforcement remained relatively robust in subsequent decades, but the 1980s landmark AT&T litigation represented the start of a more “hands off” approach as the world entered the digital age. The recent Department of Justice (“DOJ”) challenge to Google and the private challenges to both Google and Apple, among other cases, seem to signal a return to a more robust stance against monopolies.
There has been a similar trend in challenging anti-competitive mergers under § 7 of the Clayton Act, which prohibits any merger or acquisition whose effect “may be substantially to lessen competition, or to tend to create a monopoly.” In 2023, the Biden Administration noted that “markets have become more concentrated” since the release of the 2010 Horizontal Merger Guidelines (created by the DOJ and the Federal Trade Commission), coinciding with “a number of concerning trends across the broader macroeconomy.” In response to these concerns, the two responsible agencies updated the guidelines, seeming to signal a shift in the federal government’s anti-competition policy. The new guidelines have lowered the legal standard for when mergers can and should be challenged, creating a much stronger enforcement policy than the previous incarnation.
The DOJ wasted little time implementing its new marching orders. In 2023, the DOJ challenged JetBlue Airways Corporation’s (“JetBlue”) “Northeast Alliance,” launched in 2021, with American Airlines (“American”), which combined the assets of the two companies in the Northeastern states. A Massachusetts District Court ruled that the alliance was anti-competitive under § 1 of the Sherman Act, which outlaws “every contract, combination, or conspiracy in restraint of trade,” because the collusion between the airlines in the form of “sharing profits or revenues and coordinating schedules and output,” posed too much danger to be permitted. The DOJ followed that victory with another, succeeding again in challenging JetBlue’s merger with Spirit Airlines (“Spirit”) in 2024, where the court held that the merger was anti-competitive under § 7 of the Clayton Act. This article aims to offer insight into the “extra-legal” negotiation strategy defendant JetBlue employed during the second case.
The JetBlue-Spirit Merger Trial
At trial, the DOJ and JetBlue both attempted to establish the foundational elements of a horizontal merger case, including: (1) defining a relevant product and geographic market (the DOJ advocated for regional markets, while JetBlue advocated for a national market); (2) the concentration of said market; (3) the potential pro-competitive effects; and (4) the potential harm to consumers. An important note is that a central argument from the DOJ was that Spirit is an “Ultra Low Cost Carrier” (ULCC) and removing its low prices from the market would not be timely and effectively replaced, thus harming consumers who rely on that service.
A particularly interesting (albeit small) argument from JetBlue involved its use of the Massachusetts District Court opinion that blocked its attempted alliance with American. In that ruling, the Court found that JetBlue qualifies as a so-called “maverick” firm–a disruptor in the relevant market. In holding that the alliance was anti-competitive, presiding Judge Sorokin noted that “by aligning its interests with a powerful [Global Network Carrier], JetBlue has sacrificed a degree of its independence and weakened its status as an important ‘maverick’ competitor in the industry.” During the second trial, defendant JetBlue pointed to this finding as a reason why the merger with Spirit should be allowed. JetBlue argued that if it is not allowed to partner with one of the leading four airlines in the country (American) because the market cannot afford to lose its “maverick” firm, then JetBlue should be allowed to merge with an airline smaller than itself (Spirit) so that it can more effectively disrupt the market, compete against the “Big Four” airlines, and benefit consumers. And indeed, Judge Young, presiding over the merger with Spirit, also recognized that JetBlue is a “maverick” in the market.
JetBlue continued this strategy by making additional arguments for not only why the merger with Spirit was generally acceptable (a standard argument in a merger case), but also, at least implicitly, why the proposed merger was more acceptable than the previous attempted alliance with American (an “extra-legal” argument that had no bearing on the relevant law, but which JetBlue thought might be persuasive). Unlike American, which projects to be a stable company well into the future, JetBlue argued that Spirit is a “failing firm” that will leave the market in short order should the proposed merger not occur. Unlike the deal with American, where JetBlue’s outlook was all gains and no losses, JetBlue offered to include divestitures in the Spirit deal, which would prop up other ULCCs such as Frontier Airlines and Allegiant Air who could replace Spirit in the long term. Defendant JetBlue did everything in its power to frame the merger with Spirit as significantly more reasonable than the failed “Northeast Alliance.”
While each antitrust horizontal merger case is insular, the surrounding facts are still practically instructive. JetBlue wanted to take advantage of this reality. Putting it simply, once the “Northeast Alliance” was struck down, JetBlue tried to make the best out of its situation and attempted a classic negotiation strategy: using a first, outrageous offer (the alliance with American) to make a second proposal seem much more reasonable in comparison (the merger with Spirit). The problem is that the goal of antitrust law is not to negotiate with corporations to find the least harmful proposal they will accept; it is to prevent conduct that unreasonably harms competition – full stop. Therefore, it does not matter that the Spirit merger is better than the alliance with American; it only matters whether the Spirit merger is anti-competitive. While it is unfortunate for JetBlue that its previous proposal failed, this fact holds no weight in the subsequent case, and JetBlue should not have expected the Court to consider it.
The JetBlue-Spirit Merger Decision
Just over a month after the trial concluded, Judge Young followed antitrust precedent to rule that the merger was anti-competitive, violated § 7 of the Clayton Act, and had to be enjoined. Putting aside JetBlue’s “maverick” firm status, Judge Young instead focused on the disruptive nature of Spirit that would be lost should the merger occur. He also found the argument that Spirit was a “failing” or “flailing” firm “lack[ed] merit” and that the offered divestitures were not enough to deflect from the fact that “those who must rely on Spirit” would be detrimentally harmed.
However, aided by the DOJ agreeing that “another deal is another case,” Judge Young ultimately thought that a general injunction “asks too much.” Instead, he held that the injunction “narrowly applies only to the proposed merger of JetBlue and Spirit as it currently stands.” This aspect of the ruling was noteworthy, as any future proposal of a JetBlue-Spirit merger would undoubtedly involve Spirit leaving the market; the very thing that Judge Young found unacceptable. With that being said, the Court could have been holding back to account for any significant change in the market that would alter the analysis. In the end, Judge Young saw through JetBlue’s “extra-legal” negotiation strategy and blocked the deal, albeit while still leaving the door open for a (probably greatly) modified proposal in the future.
On March 4, 2024, JetBlue and Spirit announced that they had agreed to terminate their proposed merger due to difficulty in “receiving necessary legal and regulatory approvals.”
Conclusion
Judge Young made sure to note that “the Court has made its best attempt” (emphasis added) to apply the law, perhaps signifying that this was a particularly difficult case. And rightfully so, as antitrust is one of the less exact areas of the law and dueling experts are required to explain complex economic concepts unique to the field. Further, antitrust cases are rarely litigated and the ones that courts do hear require judges to undertake the impossible task of “predict[ing] the future.” For these reasons, it is difficult for any judge to jump into the world of antitrust law and effectively hear a case under its purview. With all of that said, it certainly does not help if defendants employ the types of “extra-legal” negotiation strategies that JetBlue used in this case. If antitrust law is to continue its reawakening and once again fulfill its mission of protecting consumers and businesses alike from anti-competitive behavior, judges must follow in Judge Young’s footsteps, be wary of litigants repeating this strategy in the future and hold closely to the relevant law to prevent any unreasonable harm to competition.
About the Author
Luke Colomey attended high school in Cumberland, Rhode Island, and graduated with a Bachelor’s in Political Science from the University of New England in Biddeford, Maine. He is currently pursuing his J.D. at Northeastern University School of Law in Boston, Massachusetts. This summer he is a law clerk at Brody, Hardoon, Perkins & Kesten in Boston.
Acknowledgments
Thank you to Professor Gary Cooper for his instruction during his Antitrust Law class which laid the foundation for this article. Thank you to J.D. candidates Andrew Turnbull and Jack Sheehy for their edits and ideas. Thank you to the AUSAs in the ACE and CRU units of the U.S. Attorney’s Office in Boston, Massachusetts, for their facilitation of the opportunity to observe the United States v. JetBlue trial.