The degree of head-to-head competition proved critical to the analysis, with the Court receiving the government’s HHI analysis cooly and declining to apply a presumption of illegality for the “183 relevant routes” where the market share analysis would have made out a prima facie case under the 2010 HMG, noting the rapid churn rate in the industry, with ever shifting routes, and the staleness of some of the government’s market share data. But direct evidence, e.g., executive testimony, demonstrated strong head-to-head competitive pressure and led the Court to conclude that “the loss of Spirit’s influence on JetBlue as a head-to-head competitor would likely result in less competition to both discipline the prices and spur the innovation of JetBlue.”
Not unlike Judge Sorokin in the government’s recent “Northeast Alliance” litigation—also involving JetBlue in the same District Court—Judge Young strongly emphasized the value of the Court’s “in-person evaluation” of the four testifying experts, with the assessments of credibility strongly—but not perfectly—predicting the weight assigned to each of their testimonies. The Court deemed each side’s main economist credible and assigned “significant weight” to their testimonies even while identifying some specific limitations with each. It assigned “due weight” to a portion of another’s analysis deemed “most useful” to the Court in spite of complaints about her testimony and assigned “no weight” to the final expert for a perceived lack of evidentiary support without specific reference to credibility.
The Court was unpersuaded by the merging parties’ account that the combination would ultimately be a boon for competition by enabling the combined firm to compete more effectively with the largest airlines. Indeed, the Court even specifically credited that factual possibility but found it insufficient to overcome the harm of lost price competition from a uniquely aggressive pre-merger Spirit: a “combined firm of JetBlue and Spirit would likely place stronger competitive pressure on the larger airlines in the country,” but “consumers that rely on Spirit’s unique, low-price model would likely be harmed.” And consumers would lose the benefit not only of Spirit’s very low prices but also of the downward pressure Spirit exerts on both the largest airlines and on JetBlue, evidenced by specific examples of competitors lowering fares in response to Spirit. The defendants’ evidence of pro-competitive effects thus “faile[d] to establish that the proposed merger would not substantially lessen competition in at least some of the relevant markets.” This point was strongly emphasized in the government’s case:
Throughout trial, the Government invoked the experience of the average Spirit consumer: a college student in Boston hoping to visit her parents in San Juan, Puerto Rico; a large Boston family planning a vacation to Miami that can only afford the trip at Spirit’s prices. It is this large category consumers, those who must rely on Spirit, that this merger would harm
This simple theme clearly resonated with the Court, and expert testimony supported the Court’s conclusion that timely entry or expansion by other ULCCs sufficient to protect “every consumer, in every relevant market from harm” from the loss of Spirit’s capacity was improbable.
