The agency announced Tuesday it would probe whether the combination is in the public interest before issuing approval, rather than leaving the matter up to the Justice Department. That power, combined with the DOT’s ability to police unfair competition methods in the transportation business, is a significant hurdle that may be tougher for the companies to clear than the DOJ’s antitrust lawsuit against the deal.
“The combination of DOJ and DOT both opposing this from different angles increased the odds tremendously of the merger not being approved,” said William McGee, senior fellow for aviation and travel at the American Economic Liberties Project, a nonprofit advocacy group.
The DOT’s move follows President Joe Biden’s 2021 executive order requiring a whole-of-government approach to competition. The order had asked the Transportation and Justice departments to find ways to “ensure competition in air transportation and the ability of new entrants to gain access.”
JetBlue and Spirit applied for DOT approval to transfer their international routes under one certificate—the authorization required for air transportation. A decision denying the transfer would amount to the first time in decades the agency has used its authority to block a deal.
If the DOT decides the certificate transfer is not in the public’s interest, the companies would have to sue the agency successfully if they want to consummate the deal, said William Kovacic, a former Federal Trade Commission chairman.
“DOT can take actions that really hurt the transaction without the immediacy of judicial involvement by denying the transfer of the certificate and basically telling the parties ‘go challenge me in court,’” said Kovacic, currently a George Washington University Law School professor.
The department said it plans to deny the air carriers’ request for a waiver allowing them to operate under common ownership while it considers their bid to transfer the certificate.
The agency can weigh several factors under its public interest standard, including safety, the availability of low-cost options, the competitive environment and the risk of monopolization. The standard could also include impact on regional airports and customers’ access to consistent service regardless of the size or location of their community.
The DOT said its investigation would remain open “for the duration” of the Justice Department lawsuit challenging the merger under the Clayton Act. That potentially complicates the companies’ effort to close their deal by July 2024, as outlined in their merger agreement.
The department’s public interest authority is comparable to the Federal Communication Commission’s use of a public interest standard in evaluating the transfer of airwaves licenses in communications industry mergers, said Daniel Hanley, a senior legal analyst at the anti-monopoly Open Markets Institute.
“The DOT’s public interest standard is more powerful than the Clayton Act standard, but it’s untested,” Hanley said. “The FCC also looks at license transfers, so what the DOT is doing is very similar. License transfer is equivalent to route transfer in that regard.”
Change of Heart
The move to police an airline merger is a dramatic change for an agency that did not stand in the way of earlier airline industry consolidation.
“The Department of Transportation has generally not gotten involved in these merger cases, but that’s changing,” Transportation Secretary Pete Buttigieg said in a CNN interview Tuesday.
The DOT declined to comment about how it would examine the merger.
JetBlue promised to fight the department in court if it opposes the merger.
“There is 30-plus years of precedent for how the DOT treats mergers and international certificate transfer applications,” a JetBlue spokesperson said in a statement. “Any deviation from it would be subject to judicial challenge, which we would vigorously pursue.”
Spirit didn’t immediately respond to a request for comment.
The agency’s investigation and its denial of the waiver is “out of character” for a usually complacent department, said Diana Moss, the president of the American Antitrust Institute, a nonprofit group focusing on competition and antitrust law.
“They’re known for approving everything that comes through their doors,” Moss said. “They are not historically an agency that rigorously promotes competition and subjects various requests to intensive scrutiny.”
—With assistance from Lillianna Byington.
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