The Deal: Airlines Will Fight Against Antitrust Lawsuit

NEW YORK ( TheStreet) -- US Airways Group ( LCC) has hired renowned antitrust litigator Richard Parker, a partner at O'Melveny & Myers to fight the Department of Justice in court over the government's bid to stop the air carrier's $11 billion acquisition of American Airlines ( AAMRQ) and its parent.

Parker's hiring, along with comments made by him and other members of the airlines' legal team, reinforced comments from DOJ antitrust chief Bill Baer Tuesday indicating that a settlement is not likely and the DOJ's challenge will go before a federal judge.

Parker was director of the competition bureau at the Federal Trade Commission and then agency's senior deputy director from 1998 to 2001. As head of the competition bureau he led the investigations into the mergers of Exxon Mobil ( XOM), BP Amoco-ARCO, and AOL's ( AOL) merger with Time Warner ( TWX). As agency deputy director he was co-lead counsel for the FTC's successful bid for a federal court injunction against the merger of Cardinal Health ( CAH) and Bergen Brunswig and the combination of McKesson ( MCK) with AmeriSource Health. After his return to private practice at OMM, Parker successfully defended the Arch Coal ( ACI) merger with Triton Coal against an FTC suit to block the deal. Parker earned his law degree from UCLA.

The airlines' legal counsel also include Dechert partner Paul Denis, who represented US Air in the negotiations with the DOJ and Jones Day partner Joseph Sims, who represented American Airlines and its parent AMR Corp.

Parker took a combative stand against the DOJ's suit during his remarks in a conference call Wednesday, Aug. 14. "They got this one wrong, very wrong," Parker said. "Both companies are looking forward with confidence to our day in court," he said. The DOJ's case, which argues that the merger will lead to higher air fares by reducing the number of competing legacy domestic airlines from four to three and making it easier for them to coordinate on pricing, does not take into account the benefits to consumers that he said will more than offset any reduction in competition. "There will be more flights to more destinations, domestic and international. And communities, including smaller communities, will be better served."

He said joining the fourth- and fifth-largest domestic carriers will create an airline with a comparable size and network to United Air Lines Inc. and Delta Air Lines Inc. that can serve customers better than the US Air and American can do separately today. "At trial the evidence is going to show the industry is uniquely difficult, impossible, to coordinate because fares are changing every day," Parker said.

Sims added that the arguments in the DOJ's complaint, filed Tuesday, are wide ranging and unfocused, an indication that the government's case is weak. "If they are going to convince the court the sky is falling they are going to need more meat than they've shown us so far in the DOJ complaint ." He stressed that the DOJ has the burden of proving that the deal will harm competition, an obligation he predicted would be impossible for the government to meet.

"We were surprised the complaint was not stronger," Denis agreed. "We expected a better complaint from the government."

While both sides say they are willing to hear proposals to settle the challenge without a court fight, each also said they are not planning to offer up their own settlement terms. Typically the government requires the merging parties to propose settlement terms when regulators have concerns about a merger, but the companies said they have nothing in the works right now.

"We are litigating this case--period," Denis said.

Added Parker: "If the government has a creative alternative we'll certainly listen to it, but all we've been doing all day here and will be in the next few weeks, is preparing for trial."

Sims, however, said it's too early to completely rule out an agreement as discussions with DOJ over trial preparations move forward. "There will plenty of opportunity for discussion if those prove fruitful," he said.

-- Written by Bill McConnell in Washington