I smell Carl's hand in this!
S.F. suit seeks to halt Delta-Northwest merger
Bob Egelko, Chronicle Staff Writer
Thursday, June 19, 2008
A group of passengers sued Wednesday in San Francisco to challenge the planned $17.7 billion merger of Delta and Northwest airlines, saying the resulting mega-carrier would raise prices, cut service and damage competition in an already-shrinking market.
Consumers will pay more for less airline service if the deal goes through, lawyers for the 28 passengers said in papers filed in U.S. District Court. The suit, which seeks an injunction against the companies, is the first in the nation to contest the merger, said attorney Joseph Alioto.
Northwest spokeswoman Tammy Lee called the lawsuit frivolous. She said the merger is "pro-competitive and pro-consumer, because our networks have little overlap," and the company is confident it will win Justice Department approval by the end of the year.
Delta did not respond to a request for comment.
Atlanta-based Delta, the nation's third-largest passenger airline, and Minnesota-based Northwest, the fifth-largest, announced an all-stock transaction in April that would create the nation's largest passenger airline. The merged company, called Delta, would be headed by Delta's chief executive, Richard Anderson.
In their announcement, the two companies said the merger would increase their ability to withstand volatile fuel prices and create a more resilient and efficient company in an industry that has eliminated more than 150,000 jobs since 2001.
The deal has been criticized, however, by two of Northwest's labor unions and by the chairman of the House Transportation and Infrastructure Committee, Rep. James Oberstar, D-Minn. He said the merger was likely to hurt customers and could lead to further consolidations, and he urged the Justice Department's antitrust division to conduct a thorough review.
But Alioto said Congress has no power, and the Justice Department has no inclination, to prevent such combinations.
The suit relies on Section 7 of the Clayton Antitrust Act, which prohibits mergers and acquisitions that might substantially lessen competition. According to the legal filing, the merged airline would have 24 percent of the domestic market and would increase the combined market share of the four largest companies from 60 to 70 percent.
The merger will harm consumers "by charging higher prices, reducing the number of flights, eliminating air service to smaller communities, charging for services otherwise part of normal service, crowding more people into existing airplanes, and other anti-competitive and anti-consumer welfare practices,"' the suit alleges.