December Antitrust Bulletin

December 18, 2013

DOJ Settlement Clears Path for American Airlines/U.S. Airways Merger

On Nov. 27, 2013, U.S. Bankruptcy Judge Sean H. Lane, overseeing the bankruptcy of AMR Corporation, American Airlines’ parent company, approved a settlement that resolved regulatory objections and paved the way for the merger between AMR and U.S. Airways. The settlement is between the two airlines and the Department of Justice, as well as Arizona, Florida, Michigan, Tennessee, Pennsylvania, Virginia and the District of Columbia, all of which had submitted challenges to the merger. Under the terms of the settlement, the airlines agreed to divest 52 slot pairs at Washington Reagan National Airport (DCA) and 17 slot pairs at New York LaGuardia Airport (LGA) along with other concessions at those airports, and to divest two gates and related support facilities at Boston Logan International Airport, Chicago O’Hare International Airport, Dallas Love Field, Los Angeles International Airport and Miami International Airport.

On Dec. 4, customers who also had attempted to block the merger filed a motion with the bankruptcy judge requesting a stay of his order consummating the merger while the customers appealed the decision to the district court. The customers argued that the merger was anticompetitive because, among other things, it would result in a reduction of capacity, availability and service. The request for a stay was immediately denied, and on Dec. 5, U.S. District Judge Loretta A. Preska rejected the appeal and confirmed Judge Lane’s decision to approve the settlement and allow the merger to proceed. The merger between the two airlines became official on Monday, Dec. 9, 2013, making it the world’s largest airline.

Apple Avoids App Monopoly Suit

On Dec. 2, 2013, U.S. District Judge Yvonne Gonzalez Rogers of the Northern District of California tossed a monopolization suit against Apple Inc. that accused it of attempting to corner the market on iPhone apps. The plaintiffs complained about Apple’s practice of requiring app developers to pay Apple a 30 percent commission on their app sales, which they claimed unfairly drove up the prices of apps and reduced competition. Judge Rogers found, however, that while plaintiffs may have attempted to frame the issue as if the consumer was paying a 30 percent fee directly to Apple, with Apple taking 30 percent off the top and remitting the remaining 70 percent to the developer, in reality Apple had already charged the 30 percent fee to the developer, which the developer passed through to the consumer.

In reaching its decision to dismiss the case, the court was guided by Illinois Brick Co. v. Illinois and In re ATM Fee Antitrust Litig., which teach that, in order to qualify as a direct purchaser who can meet the “injury” requirements of § 4 of the Clayton Act, a plaintiff must show that they paid the set price for the product. Because the iPhone consumers did not pay the set price, but rather an ultimate price that they allege was 30 percent higher than it would have been in the absence of Apple’s commission, the court held that the “alleged conduct does not equate to price fixing.” And, because the fee was borne by the developers who must pay the fee out of their proceeds, not by the consumers, the consumers could not be direct purchasers and, thus, lacked antitrust standing.

Brent Snyder Appointed as New DOJ Criminal Enforcement Deputy Assistant Attorney General

On Nov. 23, 2013, the Department of Justice Antitrust Division announced that it had named Brent Snyder as the new deputy assistant attorney general for criminal enforcement, replacing Scott Hammond, who left the department in October. Snyder has been a criminal trial attorney for the DOJ since 2003, where his most notable matters have included investigations into the LCD industry and the cabotage shipping industry, including acting as the lead prosecutor in U.S. v. Frank Peake. As previously reported, on Friday, Dec. 6, Snyder’s team obtained the longest-ever prison sentence for an antitrust violation when Judge Daniel R. Dominguez sentenced Peake, the former president of Sea Star Line LLC, to five years in prison. Snyder had pushed for an 87-month sentence for Peake, arguing that “[perhaps] it will get the attention of companies and executives around the world.”

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