President Obama promised to fight corporate concentration—and now the airline industry is dominated by four companies
Four companies is better than two (or one), but it doesn’t seem that President Obama’s efforts (whatever they were) to reduce corporate concentration have really worked. Justin Elliott reports in ProPublica:
HREE YEARS AGO, the Obama administration unleashed its might on behalf of beleaguered American air travelers, filing suit to block a mega-merger between American Airlines and US Airways. The Justice Department laid out a case that went well beyond one merger.
“Increasing consolidation among large airlines has hurt passengers,” the lawsuit said. “The major airlines have copied each other in raising fares, imposing new fees on travelers, reducing or eliminating service on a number of city pairs, and downgrading amenities.”
The Obama administration itself had helped create that reality by approving two previous mergers in the industry, which had seen nine major players shrink to five in a decade. In the lawsuit, the government was effectively admitting it had been wrong. It was now making a stand.
Then a mere three months later, the government stunned observers by backing down.
It announced a settlement that allowed American and US Airways to form the world’s largest airline in exchange for modest concessions that fell far short of addressing the concerns outlined in the lawsuit.
The Justice Department’s abrupt reversal came after the airlines tapped former Obama administration officials and other well-connected Democrats to launch an intense lobbying campaign, the full extent of which has never been reported.
They used their pull in the administration, including at the White House, and with a high-level friend at the Justice Department, going over the heads of staff prosecutors. And just days after the suit was announced, the airlines turned to Chicago Mayor Rahm Emanuel, Obama’s first White House chief of staff, to help push back against the Justice Department.
Some lawyers and officials who worked on the American-US Airways case now say they were “appalled” by the decision to settle, as one put it.
“It was a gross miscarriage of justice that that case was dropped and an outrage and an example of how our system should not work,” said Tom Horne, the former state attorney general of Arizona, one of seven states that were co-plaintiffs with the federal government.
As a candidate in 2007, President Obama pledged to “reinvigorate antitrust enforcement,” calling that the “American way to make capitalism work for consumers.” Hillary Clinton has recently made similar promises.
But the reversal in the American-US Airways case was part of what antitrust observers see as a string of disappointing decisions by the Obama administration.
“I hoped they would be much more aggressive and much more concerned about increasing concentration and ongoing predatory conduct,” said Thomas Horton, a former Justice Department antitrust attorney now at University of South Dakota law school. “Too often they really took the business side.”
Obama’s antitrust enforcers have been somewhat more aggressive than the Bush administration in challenging mergers. But that has come in the face of a record-breaking wave of often audacious deals. Nor has the Obama administration brought any major cases challenging companies that abuse their monopoly power. It approved three major airline mergers, for example, leaving four companies in control of more than 80 percent of the market.
In the American-US Airways case, Emanuel emerged as one of the deal’s biggest champions. He was in regular contact with the CEOs and lobbyists for both airlines.
“The combination of American Airlines and US Airways creates a better network than either carrier could build on its own,” Emanuel wrote in an October 2013 letter to the Justice Department that other mayors signed onto. “American’s substantial operations throughout the central United States provide critical coverage where US Airways is underdeveloped.”
The letter was an uncanny echo of the airlines’ arguments – for good reason: It wasactually written by an American Airlines lobbyist, emails obtained by ProPublica show.
The day after sending the missive, as government lawyers were racing to prepare for trial, Emanuel lunched with the CEOs of American and US Airways at a suite in the St. Regis hotel in Washington. The next stop on his schedule: the White House, for meetings with President Obama and Chief of Staff Denis McDonough. Later that day, Emanuel met with Secretary of Transportation Anthony Foxx, whose agency also hada hand in reviewing the merger. (The White House and Department of Transportation declined to comment on the meetings.)
Meanwhile, the airlines dispatched another valuable asset: An adviser on the deal, Jim Millstein, was both a former high-level Obama administration official at Treasury and a friend of Deputy Attorney General James Cole, the No. 2 at the Justice Department.
Millstein said Cole told him that the government was open to settling the case – a position at odds with the Justice Department’s public stance. The two spoke about the case on social occasions, such as “after finishing a round of golf,” Millstein said in an interview.
The five meetings and phone calls between Millstein and Cole – all within two months in late 2013 – shocked Justice Department staff attorneys who worked on the case, with one describing them as a sign of “raw pressure and political influence.” Cole declined to comment in detail, but said in a statement that “nothing inappropriate occurred.” . . .
I’m going to vote for Hillary Clinton, but I believe that she is of the same mindset as Obama in terms of accommodating whatever big corporations (and Wall Street) happen to want. Too bad Bernie Sanders did not prevail in the primaries. So I fear that this pattern of corporate takeover of government will continue, with the Department of Justice acting as a facilitator to corporate wrongdoing by (for example) settling cases for fines that are a fraction of the profits made through illegal activities.