20 Jul 2010 Cases

Approval of oneworld Alliance

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On July 20, 2010, the U.S. Department of Transportation issued an order approving “an alliance among five members of ‘oneworld’ – American Airlines, British Airways, Iberia, Finnair, and Royal Jordanian” and granting them “antitrust immunity to implement those agreements.” This broad grant of antitrust immunity had been opposed by the U.S. Department of Justice, which submitted comments in the DOT docket arguing that “DOT should deny the broad requested immunity and instead grant a more limited immunity,” including the “carve-out” of several major routes out from the immunity grant. DOJ based its argument in large part on econometric studies that purported to demonstrate competitive harm and lack of competitive benefit from antitrust immunity. Compass Lexecon was retained by Roger Fones of Morrison & Foerster LLP on behalf of American Airlines, as well as counsel for American, to evaluate and respond to the DOJ studies. Compass Lexecon’s Professor Robert Willig, Mark Israel, and Bryan Keating submitted two econometric studies which refuted DOJ’s studies and demonstrated that oneworld antitrust immunity would, on balance, generate substantial pro-competitive benefits that would be largely undone if particular routes were carved out from the immunity grant. In its ruling, DOT “concluded that the joint venture, as well as the overall alliance, is, on balance, pro-competitive and that it is likely to generate substantial public benefits to the traveling and shipping public.” Based on this finding, DOT approved the request for antitrust immunity on all routes, with no carve-outs, subject only to a requirement that the parties transfer four takeoff and landing “slot pairs” to other airlines.

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