It appears that I was wrong.  Today, the Department of Justice announced that it is filing suit to challenge US Airway’s proposed acquisition of American Airlines.  At least I didn’t say that there was “little chance” of this outcome twice, or anything.

As the DOJ press release makes very clear, this seems to be another example where saying publicly (or even in company documents) that industry consolidation has allowed you to increase prices is rather unhelpful if you ever want to merge.  There are also hints that DOJ may actually have data to contradict my notion that flights with a connection are not a competitively significant restraint on pricing of non-stop flights.  Or at least they have some American documents that suggest that and that the deal will lead to higher prices.  Bad documents kill deals, people.

In my partial defense, I said all along that I assumed that the major horizontal overlaps would be dealt with via a divestiture. It seems that either DOJ was sufficiently concerned about coordinated effects that a divestiture could not solve the problem, or the parties were not willing to agree to divest as much as DOJ wanted (yet).

I’ll probably have more to say after a closer review of the complaint.