Petition for Writ of Certiorari — American Airlines Group Inc., Petitioner v. United States, et al.
Supreme Court briefFeb 27, 2025
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No. ______
In the
Supreme Court of the United States
AMERICAN AIRLINES GROUP INC.,
Petitioner,
V.
UNITED STATES, ET AL.,
Respondents.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
DANIEL M. WALL
ALFRED C. PFEIFFER, JR.
CHRISTOPHER S. YATES
LATHAM & WATKINS LLP
505 Montgomery Street
Suite 2000
San Francisco, CA 94111
SAMIR DEGER-SEN
LATHAM & WATKINS LLP
1271 Avenue of the
Americas
New York, NY 10020
GREGORY G. GARRE
Counsel of Record
PETER E. DAVIS
CHRISTINE C. SMITH
JOSEPH E. SITZMANN
LATHAM & WATKINS LLP
555 11th Street, NW
Suite 1000
Washington, DC 20004
(202) 637-2207
gregory.garre@lw.com
Counsel for Petitioner
i
QUESTIONS PRESENTED
Section 1 of the Sherman Act prohibits
“unreasonable restraint[s] on competition.” Leegin
Creative Leather Prods, Inc. v. PSKS, Inc., 551 U.S.
877, 885 (2007) (citation omitted). Because courts
have long recognized their procompetitive potential,
joint ventures are subject to antitrust law’s “rule of
reason.” National Collegiate Athletic Ass’n v. Alston,
594 U.S. 69, 96-97 (2021). Under this three-step
framework, (1) a plaintiff must first prove “‘the
challenged
restraint
has
a
substantial
anticompetitive effect’”; (2) if the plaintiff carries that
initial burden, “the burden then ‘shifts to the
defendant to show a procompetitive rationale for the
restraint’”; and (3) if the defendant “make[s] that
showing, ‘the burden shifts back to the plaintiff to
demonstrate that the procompetitive efficiencies
could be reasonably achieved through less
anticompetitive means.’”
Id. (quoting Ohio v.
American Express Co., 585 U.S. 529, 541-42 (2018)).
This inquiry aims to ensure that courts prohibit only
agreements “that are harmful to the consumer.” Id.
at 96 (citation omitted). The questions presented are:
1. Whether, absent evidence of a marketwide
price increase or output reduction, a reduction in
competition between two members to a joint venture
is sufficient to prove a substantial anticompetitive
effect at step one of the rule of reason.
2. Whether, to meet its burden at step two of the
rule of reason, a defendant must disprove other
potential causes for the asserted procompetitive
benefits and prove that the asserted procompetitive
benefits were not offset by out-of-market
anticompetitive effects.
ii
PARTIES TO THE PROCEEDINGS BELOW
Petitioner American Airlines Group Inc.
(“American”) was defendant-appellant in the First
Circuit below.
Respondents United States, State of Arizona;
State of California; District of Columbia; State of
Florida;
Commonwealth
of
Massachusetts;
Commonwealth of Pennsylvania; and Commonwealth
of Virginia were plaintiffs-appellees in the First
Circuit below.
JetBlue Airways Corporation (“JetBlue”) was a
defendant in the United States District Court for the
District of Massachusetts, but did not participate in
the First Circuit appeal.
RULE 29.6 STATEMENT
Pursuant to Rule 29.6 of the Rules of this Court,
Petitioner American Airlines Group Inc. states that it
has no parent corporations and no publicly held
corporation owns 10% or more of its stock.
RELATED PROCEEDINGS
There are no proceedings directly related to this
case within the meaning of Rule 14.1(b)(iii).
iii
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED ....................................... i
PARTIES TO THE PROCEEDINGS BELOW .......... ii
RULE 29.6 STATEMENT.......................................... ii
RELATED PROCEEDINGS ...................................... ii
TABLE OF AUTHORITIES ..................................... vi
OPINIONS BELOW ....................................................1
JURISDICTION ..........................................................1
STATUTORY PROVISIONS INVOLVED .................1
INTRODUCTION .......................................................2
STATEMENT OF THE CASE ....................................6
A. Factual Background .....................................6
B. Procedural Background ..............................11
REASONS FOR GRANTING THE WRIT................16
I.
THE
FIRST
CIRCUIT’S
STEP-ONE
ANALYSIS WARRANTS CERTIORARI .........17
A. The Circuits Are Divided Over Whether
A Reduction Of Competition Between
Members Of A Joint Venture Alone
Satisfies Step One Absent Evidence Of A
Marketwide Reduction In Output .............17
B. The First Circuit’s Step-One Analysis Is
Wrong ..........................................................21
iv
TABLE OF CONTENTS—Continued
Page
II.
1.
The First Circuit’s Decision Is
Inconsistent With Antitrust Law’s
Approach To Joint Ventures ...............21
2.
The First Circuit’s References To
“Reduced Output” Are Strictly About
American And JetBlue’s Output, Not
Marketwide Output .............................25
3.
The First Circuit’s Step-One Error Is
Further Reinforced By Its Blatant
Misconception
Of
Ancillary
Restraints.............................................27
THE FIRST CIRCUIT’S STEP-TWO
ANALYSIS WARRANTS CERTIORARI .........29
A. The Circuits Are Divided Over The
Defendant’s Burden At Step Two Of The
Rule Of Reason ...........................................30
B. The Court’s Step-Two Analysis Is
Wrong ..........................................................33
III. THE QUESTIONS PRESENTED ARE
IMPORTANT, AND THIS CASE IS THE
RIGHT VEHICLE TO RESOLVE THEM ........35
CONCLUSION ..........................................................37
v
TABLE OF CONTENTS—Continued
Page
APPENDIX
Opinion of the United States Court of Appeals
for the First Circuit, United States v.
American Airlines Group Inc., 121 F.4th
209 (1st Cir. 2024) ..............................................1a
Findings of Fact and Conclusions of Law of the
United States District Court for the
District of Massachusetts, United States v.
American Airlines Group Inc., 675 F. Supp.
3d 65 (D. Mass. 2023) .......................................30a
15 U.S.C. § 1 ..........................................................150a
vi
TABLE OF AUTHORITIES
Page(s)
CASES
California Dental Association v. FTC,
526 U.S. 756 (1999) ..............................................27
Care Heating & Cooling, Inc. v. American
Standard, Inc.,
427 F.3d 1008 (6th Cir. 2005)..............................20
Dagher v. Saudi Refining, Inc.,
369 F.3d 1108 (9th Cir. 2004), rev’d sub
nom. Texaco Inc. v. Dagher, 547 U.S. 1
(2006) ....................................................................22
E & L Consulting, Ltd. v. Doman Industries
Ltd.,
472 F.3d 23 (2d Cir. 2006), cert. denied,
552 U.S. 816 (2007) ..............................................19
Epic Games, Inc. v. Apple, Inc.,
67 F.4th 946 (9th Cir. 2023) .................... 30, 31, 33
FTC v. Qualcomm, Inc.,
969 F.3d 974 (9th Cir. 2020)..........................32, 33
Guzman v. Robinhood Markets, Inc. (In re
January 2021 Short Squeeze Trading
Litigation),
105 F.4th 1346 (11th Cir. 2024) ..........................19
K.M.B. Warehouse Distributors, Inc. v.
Walker Manufacturing Co.,
61 F.3d 123 (2d Cir. 1995) ...................................19
vii
TABLE OF AUTHORITIES—Continued
Page(s)
National Collegiate Athletic Association v.
Alston,
594 U.S. 69 (2021) ...................... 2, 4, 21, 23, 24, 33
Northrop Corp. v. McDonnell Douglas
Corp.,
705 F.2d 1030 (9th Cir.), cert. denied,
464 U.S. 849 (1983) ..............................................20
Ohio v. American Express Co.,
585 U.S. 529 (2018) ...................... 22, 23, 33, 34, 35
Polk Bros. v. Forest City Enterprises, Inc.,
776 F.2d 185 (7th Cir. 1985).................... 27, 28, 29
Procaps S.A. v. Patheon, Inc.,
845 F.3d 1072 (11th Cir. 2016)......................18, 19
Rothery Storage & Van Co. v. Atlas Van
Lines, Inc.,
792 F.2d 210 (D.C. Cir. 1986), cert.
denied, 479 U.S. 1033 (1987) ...............................24
Sanofi-Aventis U.S., LLC v. Mylan, Inc. (In
re EpiPen (Epinephrine Injection, USP),
Marketing, Sales Practices & Antitrust
Litigation),
44 F.4th 959 (10th Cir. 2022), cert.
denied, 143 S. Ct. 1748 (2023) .............................24
SCFC ILC, Inc. v. Visa USA, Inc.,
36 F.3d 958 (10th Cir. 1994)................................18
Texaco Inc. v. Dagher,
547 U.S. 1 (2006) .................................. 2, 21, 28, 29
viii
TABLE OF AUTHORITIES—Continued
Page(s)
Tops Markets, Inc. v. Quality Markets, Inc.,
142 F.3d 90 (2d Cir. 1998) ...................................19
United States v. Brown University,
5 F.3d 658 (3d Cir. 1993) ......................... 30, 31, 33
United States v. Topco Associates, Inc.,
405 U.S. 596 (1972) ..............................................24
STATUTES
15 U.S.C. § 1 ................................................................3
28 U.S.C. § 1254(1)......................................................1
OTHER AUTHORITIES
Philip E. Areeda & Herbert Hovenkamp,
Antitrust Law: An Analysis of
Antitrust Principles and Their
Application (Sept. 2024 online) ............... 23, 24, 27
Assistant Attorney General Jonathan
Kanter Delivers Remarks at New York
City Bar Association's Milton Handler
Lecture, Dep’t of Justice (May 18,
2022), https://www.justice.gov/opa/
speech/assistant-attorney-generaljonathan-kanter-delivers-remarksnew-york-city-bar-association .............................35
Hon. Douglas H. Ginsburg, Wither The
Consumer Welfare Standard?, 46 Harv.
J. of L. & Pub. Pol’y 69 (2023) .............................35
ix
TABLE OF AUTHORITIES—Continued
Page(s)
Herbert Hovenkamp, The Antitrust Text, 99
Ind. L.J. 1063 (2024) ........................................2, 23
Thomas A. Lambert, The Essence of an
Antitrust Violation, Univ. of Missouri
Legal Studies Rsch. Paper No. 2024-34
(2024). ...................................................................24
1
PETITION FOR A WRIT OF CERTIORARI
American respectfully petitions this Court for a
writ of certiorari to review the judgment of the United
States Court of Appeals for the First Circuit in this
case.
OPINIONS BELOW
The decision of the court of appeals (App. 1a-29a)
is published at 121 F.4th 209. The decision of the
district court (App. 30a-149a) is published at 675 F.
Supp. 3d 65.
JURISDICTION
The court of appeals entered judgment on
November 8, 2024 (App. 1a).
This Court has
jurisdiction under 28 U.S.C. § 1254(1).
STATUTORY PROVISIONS INVOLVED
Relevant statutory provisions are reproduced in
the petition appendix. App. 150a.
2
INTRODUCTION
The First Circuit invalidated a joint venture
between American Airlines and JetBlue Airways that
increased marketwide competition among all airlines
in the congested Northeast without any price
increases solely because it reduced competition
between the two joint venture partners. That holding
flouts basic antitrust principles, creates two circuit
splits, and threatens to wreak havoc on productive
collaborations of all shapes and sizes.
This Court has consistently held that there is
nothing inherently, or per se, unlawful about two
competitors collaborating to “pool their resources”
and “share the risks of and profits from” the joint
venture’s activities. Texaco Inc. v. Dagher, 547 U.S.
1, 4 (2006). This Court has likewise recognized that
joint ventures are frequently procompetitive because
they “enable firms to do something more cheaply or
better” than they can alone. National Collegiate
Athletic Ass’n v. Alston, 594 U.S. 69, 88 (2021). The
touchstone for evaluating a joint venture is its effect
on consumers in the relevant market: A joint venture
that harms consumers by raising prices, reducing
output, or decreasing quality marketwide will be
invalidated; a joint venture that benefits consumers
marketwide will not.
Id.; see also Herbert
Hovenkamp, The Antitrust Text, 99 Ind. L.J. 1063,
1077 (2024) (the core inquiry is “whether a particular
practice decreased marketwide output and raised
prices, pure and simple” (emphasis added)).
In this case, the First Circuit invalidated a joint
venture between American and JetBlue (“the
Airlines”) that pooled their assets to overcome
limitations on gates and slots in the congested
3
Northeast and make—in the words of a rival airline—
“one relevant competitor out of two weak ones.”
2-JA1268.1 The result—a collaboration called the
Northeast Alliance (“NEA”)—optimized schedules to
offer consumers collectively more flights, and more
seats, to more destinations than the Airlines would
otherwise offer on their own. The NEA’s flight
network allowed the Airlines to compete with the
entrenched market leaders, Delta Air Lines, Inc.
(“Delta”) and United Airlines, Inc. (“United”), which
controlled access to crucial gates and slots.
And the NEA worked: in the 20 months it was in
effect before trial, output increased at NEA airports
without any increase in price relative to routes
outside the NEA. Indeed, the Government’s own
experts admitted that output at NEA airports
increased without any price increase relative to nonNEA airports, and that they observed no changes
“adverse to consumers.”
2-JA699; see 1-JA601;
2-JA717. However, the joint network planning that
increased output also led to a handful of cases in
which, because aircraft were moved to a higher and
better use within the NEA region, there was less
American or JetBlue service on a route. Focusing on
these decisions—and declaring that collaboration
between the Airlines “in and of itself” violated Section
1 of the Sherman Act, 15 U.S.C. § 1—the district court
permanently enjoined the NEA. App. 116a.
The First Circuit’s decision affirming that
injunction embraces the same hostility to
collaboration and splits with other circuits in two
1
“JA” refers to the Joint Appendix filed in the Court of
Appeals for the First Circuit. The initial number refers to the
volume number of the Joint Appendix.
4
fundamental respects. First, the First Circuit held
that Plaintiffs had established direct evidence of
anticompetitive effects at step one based solely on the
fact that American and JetBlue had coordinated their
schedules to produce a broader network in the
Northeast, which resulted in the loss of a few flight
frequencies or change in certain flight times by
American and JetBlue on a small number of routes.
The First Circuit called this evidence of “reduced
output.” But it is at most an observation about how
the NEA impacted American and Jet Blue’s output in
a few NEA markets. It does not address the relevant
benchmark under Section 1—marketwide output, or
whether output among all airlines in the relevant
market fell or increased due to the competitive
reactions of other carriers to the NEA.
This was clear legal error.
Intra-venture
reductions in competition (and consequently in the
joint venturers’ output) often occur in joint ventures
precisely because such collaboration makes the joint
venture work in the first place. Joint ventures
typically present a tradeoff: while collaboration
necessarily reduces to some degree the preexisting
competition between the parties to the joint venture,
the fact of collaboration holds the promise of
improving products, increasing competitive pressure
in the market as a whole, and ultimately leaving
consumers better off. See Alston, 594 U.S. at 88.
Recognizing as much, other circuits analyze step
one of the rule of reason by asking what happens at
the market level as a result of the collaboration. They
require evidence of actual harm to consumers—in the
form of increased prices, reduced output, or lowerquality products in the market as a whole—before
finding direct evidence of anticompetitive effects.
5
Specifically, the Second, Sixth, Ninth, Tenth, and
Eleventh Circuits have all recognized that
collaboration alone (and attendant changes in output
between the collaborators) is not sufficient to prove
anticompetitive effects because it says nothing about
a collaboration’s effect on the market as a whole. The
First Circuit erred in finding anticompetitive effects
at step one based solely on the Airlines’ schedule
coordination—the core feature of the NEA responsible
for unlocking significant consumer benefits by
allowing the Airlines to more efficiently use their
limited resources.
Second, the First Circuit created a circuit split
with the Third and Ninth Circuits by rejecting as noncognizable and insufficient at step two undisputed
evidence that flight output and schedule quality had
improved after the NEA’s implementation. It reached
that remarkable result by altering and ramping up
the defendant’s step two burden: American was
supposedly required to prove that the NEA was the
only way to achieve the observed increases, and that
those gains were not counterbalanced by any
reductions in output anywhere else in the world. App.
27a (concluding that the district court did not err in
“consider[ing] ‘out-of-market effects’” and whether
the growth in the Northeast “came ‘at the expense of
resources and output by the defendants elsewhere’”
(citation omitted)). Few antitrust defendants could
meet that impossible burden, which conflicts with the
Third and Ninth Circuit’s holding that the defendant
need only muster a procompetitive rationale
connected to the restraint. The First Circuit thus
erred in its step two analysis as well.
This Court’s intervention is needed to resolve
these conflicts and ensure that the interests of
6
consumers—not a hostility to collaboration among
competitors—governs in Sherman Act cases. Indeed,
this is not the only case in which the Government’s
distortion of the antitrust laws and overly aggressive
enforcement has seriously harmed consumers. In
recent years, antitrust enforcers have set their sights
on one deal after another—all as part of a broader
move away from the consumer-welfare standard that
has long governed antitrust law.
This Court’s
intervention is warranted to correct the First Circuit’s
fundamental misunderstanding of this Court’s joint
venture case law and ensure that pro-consumer joint
ventures can continue to flourish.
STATEMENT OF THE CASE
A. Factual Background
1. The Northeast is one of the most congested airtravel regions in the country. Delta and United are
“[b]y far” the “largest and strongest” airlines.
1-JA448; see also 1-JA153; 1-JA522-23. In the New
York City area, Delta and United occupy 26 and 25
percent of seat share, respectively.
2-JA1298.
American and JetBlue account for only about half as
much—14 and 13 percent each. Id.; see also 2-JA991;
2-JA1297; 1-JA153; 1-JA317-18.
In New York, Delta’s and United’s dominance is
protected by fixed infrastructure limitations at
LaGuardia (“LGA”), John F. Kennedy International
(“JFK”), and Newark Liberty International (“EWR”)
airports. E.g., 2-JA1297. LGA and JFK both have
restrictions
on
“slots,”
Federal
Aviation
Administration (“FAA”) authorizations to take off or
land at certain times.
2-JA1297; 2-JA801-02;
1-JA159; 1-JA183-84; 1-JA317. EWR has similar
7
rules that restrict takeoff and landing frequencies to
specific times of the day. See 1-JA317.
The result: carriers can fly only as much as their
slot holdings or other infrastructure limitations allow.
As the largest slot holders, Delta and United benefit
immensely from this feature of the market. In 2019,
for instance, Delta held 44.8% of LGA’s slots,
compared to American and JetBlue’s combined share
of 31.4%, allowing Delta to offer a significantly wider
range of destinations and flight times than American
or JetBlue could. 1-JA257-58; 5-JA3250. Delta also
holds the greatest number of slots at JFK, controlling
nearly half of domestic departures and a commanding
share of international travel. 5-JA3250; 1-JA363-64;
1-JA231; 1-JA258; 2-JA1158. United, for its part,
controls most of the takeoff and landing rights at
EWR, where it operates 70% of all flights. 1-JA23031; 1-JA317-19; 2-JA1359.
In Boston, growth is likewise limited by resource
constraints—there, access to gates. In 2015, Delta
began growing rapidly at Logan International Airport
(“Logan”), which became one of its hubs. 2-JA1159; 1JA630-31. This expansion, fueled by Delta’s growing
control over Logan’s gates, threatened other airlines,
especially JetBlue, which suffered a declining share
of Boston business travelers. 2-JA1159; 1-JA156-57;
1-JA636-37; see also 1-JA324-25.
2. These
fixed
infrastructure
limitations
inhibited American’s and JetBlue’s ability to grow in
the Northeast. See, e.g., 1-JA155; 1-JA317-18; 2JA802-03; 2-JA808. American’s comparative slot
disadvantage in New York prevented it from offering
the slate of nonstop routes and departure times
provided by Delta and United, rendering American
unable to compete with the breadth and depth of
8
service those airlines could offer.
1-JA293-94;
2-JA801-02; 2-JA808. Meanwhile, a lack of access to
slots prevented JetBlue from scheduling flights at
convenient times for business travelers or introducing
new routes. 1-JA411-12. Faced with these resource
constraints, JetBlue had no effective path to grow and
optimize service to its customers.
Similar problems plagued the Airlines’ efforts to
grow in Boston. JetBlue found it increasingly difficult
to compete with Delta’s growing presence because
Delta’s larger, hub-and-spoke network was more
attractive to business customers and frequent fliers
than JetBlue’s smaller, point-to-point network.
1-JA176-77; 1-JA156-57; 1-JA636-37. American, too,
struggled to expand in Logan due to gate constraints
that functioned “effectively” as slot constraints,
preventing it from adding new flights. 1-JA324-25;
see 1-JA357; App. 41a-42a & n.10, 117a-18a.
3. In light of these competitive challenges, the
Airlines formed the NEA in July 2020. The purpose
of the NEA was to pool the Airlines’ scarce
resources—including slots and gates—to create a
broader, more competitive network with a greater
total number of flights, destinations, and departure
times than the Airlines could offer individually
or collectively without collaboration.
1-JA263;
1-JA329-30.
By combining resources and
coordinating schedules, the Airlines were able to use
those resources more efficiently, to serve a wider
range of customers, at a wider range of times.
Coordinating schedules allowed the Airlines to fly
larger planes at better times and reduce wait time on
connecting flights, while avoiding inefficient overlaps
that had reduced consumer choice in terms of the
times of day that particular routes were offered.
9
The agreements comprising the NEA principally
provided for infrastructure pooling, code sharing (i.e.,
allowing passengers to book a flight operated by one
carrier on the other carrier’s website), schedule
optimization, reciprocal loyalty benefits, and revenuesharing.
See App. 48a-49a, 56a-57a, 71a-72a;
1-JA304-05;
1-JA341;
1-JA348;
2-JA1224-25;
1-SJA3881-82. They did not include coordination on
fares; each airline continued to price flights
independently, and JetBlue did not change its lowfare business model. 1-JA304-05; 1-JA227.
For the 20 months of the NEA’s operation prior to
trial, it is undisputed that the Airlines’ flight output
increased substantially at NEA airports. See App.
71a-72a; 1-JA601. This growth occurred because the
NEA allowed the Airlines to deploy their resources
more efficiently. See 2-JA1182; 2-JA1225-26; see also
1-JA161. For instance, before the NEA, American
had used 50-seat jets on most of its LGA flights, but
after the NEA, JetBlue used many of those slots to fly
its standard aircraft, with well over 100 seats. 1JA480-81. This “upgauging” generated a capacity
increase of 3,000 more seats per day. Id.; 1-JA412.
The NEA’s joint scheduling also unlocked new flight
options, allowing the Airlines to offer broad and deep
schedules comparable to those offered by competitors
like Delta and United. 1-JA155-61; 2-JA753-56.
Growth was so significant that by the time trial
commenced, the NEA had substantially exceeded
certain growth commitments that the Airlines had
made to the Department of Transportation (“DOT”)
before the NEA took effect. 2-JA821 (American was
“roughly . . . five million seats above our commitment
10
for 2022,” and about “2 million seats above our
commitment [for] 2025”); see App. 62a-63a.2
Critical to the Airlines’ new network was the
combination of JetBlue’s low-cost, point-to-point
flying and American’s global service, as well as the
complementary nature of the Airlines’ pre-NEA
networks. For the majority of routes in the NEA, the
Airlines had not been directly competing on those
routes before the NEA. 2-JA755-56; 2-JA772-74. The
NEA therefore allowed the Airlines to offer consumers
a better, more “relevant” network, covering a broader
range of desired destinations, which enabled them to
compete more effectively for business travelers and
frequent fliers who select airlines based on their
network and loyalty benefits. 1-JA319-20; see
1-JA157; 1-JA159-61; 1-JA642-44.
In the end, American and JetBlue increased their
capacity at NEA airports by over 200%. 2-JA1293.
They offered approximately 50 new nonstop routes,
increased frequencies on more than 130 routes,
increased capacity on 45 New York City flights, and
materially enhanced frequent flyer benefits. See 2JA1367-68; 2-JA1011. Growth from American and
JetBlue in the form of additional seats and flights
substantially outpaced growth at the NEA airports
from all other carriers. See 2-JA1293; 2-JA1010.
2 The Airlines proactively approached the Government
about the NEA, and DOT terminated its review after the Airlines
agreed to certain slot divestitures and aggregate growth targets.
2-JA1023-28; 2-JA1021-31 (agreement with DOT); App. 62a-63a.
11
2-JA1293.
This
unprecedented
growth
invigorated
competition in the Northeast. Delta described the
NEA as a “seismic change[] that will reshape the
[New York City] competitive landscape” by “creating
one relevant competitor out of two weak ones.”
2-JA1268; see 2-JA1265 (similar assessment from
Alaska Airlines); 1-JA195-96 (Southwest Airlines);
1-JA245 (Spirit). Internally, Delta executives urged
that a “commercial response” to the NEA “[wa]s
imperative.” 2-JA1268 (emphasis added).
And then the antitrust enforcers set in.
B. Procedural Background
1. The United States, joined by several states
(collectively, the “Government”), brought suit in
September 2021 against the Airlines under Section 1
of the Sherman Act to kill the NEA.
At trial the Government’s experts did not present
any evidence of actual consumer harm from the NEA,
whether through decreased output, increased prices,
or otherwise. The Government’s lead expert, Dr.
Nathan Miller, agreed that he did not find any
12
“observed post[-]NEA price increases or other changes
adverse to customers.” 2-JA699; see also 2-JA895-96;
2-JA900-01. He further testified that he did not
analyze any “actual NEA schedules” and did not find
any “reductions of output” caused by those schedules.
2-JA717. The Government’s other expert, Dr. Robert
Town, likewise testified expressly that he was “not
offering the opinion that the Northeast Alliance has
caused consumer harm.” 1-JA599. In fact, when
asked if he was saying that the NEA produced “zero
or anywhere close to zero” benefits, he responded, “Oh
no, not at all.” 2-JA870 (emphasis added).
Instead, the Government based its Section 1 case
on a forward-looking merger simulation predicting
that prices would increase—in time.
The
Government’s plan was to prove that future harms in
the form of increased prices would exceed benefits.
2. The district court declined to accept the
Government’s central theory that prices would
increase based on the merger simulation, but
nevertheless permanently enjoined the NEA under
Section 1 of the Sherman Act. App. 147a-48a; see
App. 89a; cf. App. 136a n.98 (noting that court was
more concerned with “actual, short-term impacts”
than “speculative,” “future” effects). The court stated
at the outset that the NEA was so “obviously
anticompetitive” that it could be invalidated in the
“‘twinkling of an eye’” without any “deep and
searching analysis.”
App. 112a-14a, 127a-28a
(citation omitted). Nonetheless, it purported to
conduct the three-step rule of reason analysis.
At step one of that analysis, the district court did
not find increased prices or decreased output in the
Northeast. To the contrary, it acknowledged that
“since the NEA was announced, American’s slots at
13
JFK and [LGA] have been used more heavily and
efficiently” by JetBlue, daily flights from Boston to
LGA increased, and the NEA created “broader access”
to frequent flyer benefits and discounts. App. 71a,
74a, 137a n.99 (emphases added). Rejecting the
central plank of the Government’s case at trial, the
court also declined to find “proof of price increases”
associated with the Airlines’ growth, reasoning that
such proof was not “require[d]” at step one. App. 128a
n.89. Rather, the district court found only that the
NEA created “upward pricing pressure”—which is the
underlying assumption of merger simulations and in
no way equivalent to a finding of anticompetitive
effects. App. 89a (emphasis added).
The district court stated that the NEA “ha[d] led
to decreased capacity, lower frequencies, or reduced
consumer choices on multiple routes.” App. 72a-73a.
But the only evidence the court referenced was that
American exited some routes JetBlue operated and
the Airlines coordinated their schedules to offer
flights at more times of the day (instead of offering
multiple flights at the same time of day). Id. The
court did not identify any evidence showing that
American’s exit reduced the total number of seats
offered by the two Airlines together on those routes.
More important, the district court never addressed,
let alone made findings, about marketwide output in
any relevant market, i.e., that the NEA led to any
reduction in output as to the market as a whole when
Delta’s, United’s, and other airlines’ competitive
responses to the NEA were taken into account.
The district court nevertheless held the
Government had met its step-one burden based on
three supposed anticompetitive effects. First, the
NEA “eliminated the once vigorous competition”
14
between American and JetBlue in the Northeast.
App. 115a-19a.
Second, the NEA “weakened
[JetBlue’s] status as an important ‘maverick’
competitor.” App. 119a-22a (emphasis added). And,
third, the NEA caused American to exit thirteen
routes that the Airlines “assign[ed]” to JetBlue.
App. 122a-23a. But each of these supposed harms
reflects a reduction of competition between the
Airlines themselves within the NEA that allowed the
Airlines to offer a better network.
Proceeding to step two of the rule of reason, the
district court rejected the NEA’s demonstrated
procompetitive benefits because they “ar[o]se only if
the defendants . . . cooperate[d] in ways that
horizontal coopetitors normally would not.”
App. 138a. In other words, the district court held that
a procompetitive rationale is invalid as a matter of
law if it stems from an agreement with some
anticompetitive effects. See App. 130a-43a. Given its
conclusion that the NEA failed at the first two steps,
the district court did not address the third step “in
detail.” App. 144a. The court entered a permanent
injunction invalidating the NEA.
After the district court’s decision, JetBlue notified
American that it was terminating the NEA “as a
result of” the district court’s decision, as permitted
under the Airlines’ agreement. See 2-JA1233 (NEA
Agreement § 5.9); JetBlue Airways Corp., Form 8-K
at PDF 2, 6 (July 5, 2023).3 Although the NEA is no
longer in force, the district court’s permanent
injunction restrains American’s conduct by barring
American and JetBlue from entering into any
3
https://d18rn0p25nwr6d.cloudfront.net/CIK-0001158463/
bf7f2d30-b3d9-4482-a613-ccae4da192f0.pdf.
15
arrangement with each other that “provides for
revenue sharing, or for coordination of routes or
capacity, in a manner substantially similar to the
NEA” for ten years. CA1 Appellant Br. ADD1, 6.
3. The First Circuit affirmed.
At step one of the rule of reason, the First Circuit
disclaimed reliance on two of the district court’s three
rationales for finding a substantial anticompetitive
effect: (1) the “NEA’s reduction in the number of
competitors itself,” and (2) purported loss of
“JetBlue’s ‘maverick’ status.” App. 22a n.8. Instead,
the court relied on the district court’s remaining
rationale: that “the NEA’s feature of schedule/route
‘optimization’ (including assigning routes to either
American or JetBlue) closely resembled per se illegal
market allocation.” App. 13a.
The First Circuit repeated the district court’s
statement that “the NEA ‘led to decreased capacity,
lower frequencies, or reduced consumer choices on
multiple routes.’” App. 18a (quoting App. 72a). It did
not identify any actual evidence of “decreased
capacity” underlying this disjunctive statement.
Instead, it noted that (1) the Airlines “allocated”
thirteen routes to JetBlue, causing American to exit
those routes; (2) the Airlines coordinated schedules to
offer flights at more times throughout the day, rather
than competing flights at the same times; and (3) the
“NEA’s ‘spirit of partnership’ undermined any claim
that the [Airlines] would continue to compete on the
routes the NEA ‘carve[d][ ]out’ from its joint
schedule.” App. 18a (alterations in original) (citation
omitted). But these all concerned a reduction of
competition between the Airlines within the NEA.
The First Circuit did not identify a single piece of
evidence of decreased output—marketwide.
16
At step two, the First Circuit agreed with the
district court’s conclusion that American had failed to
meet its burden of establishing that any consumer
benefits from the NEA were “‘because of’ the NEA
itself.” App. 26a-27a. The court restated the district
court’s factual findings that acknowledged the
undisputed increases in output in the form of more
routes, seats, and overall capacity. See id. But it
faulted American for failing to dispute the district
court’s findings regarding causation and failing to
prove that these benefits were achieved without
reducing output in other markets. Id. The First
Circuit also agreed with the district court’s holding
that there was no cognizable “procompetitive benefit
for the purposes of step two” insofar as the NEA
“better allowed the carriers to compete with”
dominant rivals like Delta. App. 24a.
Having ruled in favor of the Government on steps
one and two, the First Circuit’s step-three analysis
was a conclusory paragraph. App. 27a-28a.
REASONS FOR GRANTING THE WRIT
The First Circuit’s decision in this case raises
important and recurring questions on the
requirements for proving a Section 1 claim in the
context of a joint venture or similar collaboration.
Those questions implicate two separate circuit splits
and are increasingly important as antitrust enforcers
and courts like the First Circuit have transformed the
Sherman Act from an engine for enhancing consumer
welfare into a sword for invalidating pro-consumer
collaborations based solely on reductions in rivalry
that do not harm consumers and are inherent in such
collaborations. Certiorari is warranted.
17
I. THE
FIRST
CIRCUIT’S
STEP-ONE
ANALYSIS WARRANTS CERTIORARI
The First Circuit started from a place of
antiquated hostility toward collaborations among
competitors before it even got to step one. Despite
proceeding through each step of the rule of reason, it
appeared to embrace the District Court’s statement
that the NEA was so “obviously anticompetitive” that
it could be invalidated in the “‘twinkling of an eye.’”
App. 112a-14a, 127a-28a (citation omitted); see App.
22a (concluding that the “district court’s finding” that
the NEA “resides near the anticompetitive end of the
spectrum,” along with other “per se unlawful”
restraints, “rests on stable footing”). In doing so, the
First Circuit misunderstood and misapplied basic
antitrust principles, including the ancillary restraints
doctrine, and stacked the deck against the NEA. The
First Circuit’s errors all flowed from this outdated
antagonism to joint ventures—which is diametrically
opposed to this Court’s and other circuits’ case law.
A. The Circuits Are Divided Over Whether A
Reduction Of Competition Between
Members Of A Joint Venture Alone
Satisfies Step One Absent Evidence Of A
Marketwide Reduction In Output
The First Circuit rested its step-one analysis on
one—and only one—consideration: a reduction in
competition between JetBlue and American
themselves on a few routes within the NEA, due to
efforts to optimize schedules and promote efficiencies.
That decision conflicts with decisions of the Second,
Sixth, Ninth, Tenth, and Eleventh Circuits, which
recognize that a reduction in competition between
members of a collaboration alone is not sufficient to
18
prove direct anticompetitive effects at step one.
Instead, in those circuits, the plaintiff must show
evidence of reduced output, increased prices, or
decreased quality in the market as a whole. That
conflict is outcome determinative here.
1. In SCFC ILC, Inc. v. Visa USA, Inc., 36 F.3d
958 (10th Cir. 1994), the Tenth Circuit set aside a
district court decision finding anticompetitive effects
under Section 1 based solely on the collaboration of
participants in a joint venture. As the Tenth Circuit
explained, “[t]he very existence of a joint venture in
the first instance is premised on a pooling of resources
to affect competition in some manner and is made
functional through some form of cooperative behavior
or rule-making.” Id. at 968. That “cooperative
conduct alone is not prohibited.” Id. The step-one
analysis therefore must focus not on the cooperative
conduct itself but on “the effect” of that conduct—
specifically,
“whether
[it]
increase[s]
price,
decrease[s] output,” or otherwise harms consumers in
the market as a whole. Id. (emphasis added).
The Eleventh Circuit has likewise rejected
antitrust claims premised on the removal of a
competitor from the market when the plaintiff failed
to show actual or potential harm to consumers in the
market. See Procaps S.A. v. Patheon, Inc., 845 F.3d
1072, 1085 (11th Cir. 2016). In Procaps, the plaintiff’s
experts testified that any “horizontal market sharing
agreement” that led to a competitor’s exit from the
market was likely “to raise price, reduce quantity, and
reduce consumer welfare.” Id. But the experts failed
to cite “any specific examples of such effects.” Id.
Instead, they relied only on hypothetical predictions.
Absent real-world evidence “that prices were actually
higher,” “quality was actually worse,” or “output was
19
actually decreased” in the market as a whole, the
plaintiff failed to show anticompetitive effects. Id.;
see also Guzman v. Robinhood Mkts., Inc. (In re
January 2021 Short Squeeze Trading Litig.), 105
F.4th 1346, 1356-57 (11th Cir. 2024) (dismissing
Section 1 claim due to absence of allegations that
restraint “collectively restrict[e]d . . . output” or
harmed quality marketwide).
The Second Circuit reached the same conclusion in
Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d
90 (2d Cir. 1998). There, the Second Circuit held that
the plaintiff, a competing grocery store, had “failed to
demonstrate an actual detrimental effect on
competition,” because it failed to show that its
exclusion from the market had resulted in “prices
[that] were actually higher” or in “any decrease in the
quality of service” in the market. Id. at 96.
The Second Circuit is also clear that marketwide
effects are required.
In K.M.B. Warehouse
Distributors, Inc. v. Walker Manufacturing Co., the
Second Circuit explained that at step one of the rule
of reason, the “[p]laintiff bears the initial burden of
showing that the challenged action has had an actual
adverse effect on competition as a whole in the
relevant market.” 61 F.3d 123, 127 (2d Cir. 1995)
(emphasis altered) (citation omitted). Because the
plaintiff had “offered no evidence of an adverse effect
on the whole [regional] interbrand . . . product
market,” the Second Circuit held that the plaintiff
had not established an anticompetitive effect. Id. at
128; see also E & L Consulting, Ltd. v. Doman Indus.
Ltd., 472 F.3d 23, 29 (2d Cir. 2006) (emphasizing the
need for “a showing of actual adverse effect on
competition market-wide” (citation omitted)), cert.
denied, 552 U.S. 816 (2007).
20
The Sixth Circuit, too, has emphasized the
importance of marketwide impact. In Care Heating &
Cooling, Inc. v. American Standard, Inc., for instance,
the Sixth Circuit explained that “because the
Sherman Act was intended to protect competition and
the market as a whole, not individual competitors, the
foundation of an antitrust claim is the alleged adverse
effect on the market.” 427 F.3d 1008, 1014 (6th Cir.
2005) (emphasis added) (citation omitted). Because
the plaintiff in that case was “unable to establish any
adverse effect on the market as a whole,” the court
held that the plaintiff failed to state a claim. Id.
Finally, the Ninth Circuit has repeatedly
emphasized that market allocation within the scope of
a venture is not in itself sufficient to condemn the
venture under Section 1. In Northrop Corp. v.
McDonnell Douglas Corp., the Ninth Circuit upheld
an agreement between two defense contractors to
jointly develop military aircraft. 705 F.2d 1030, 103638 (9th Cir.), cert. denied, 464 U.S. 849 (1983). The
contractors agreed to divide responsibility for selling
the land-based aircraft and the carrier-suitable
aircraft they developed between themselves. The
Ninth Circuit concluded that this agreement to “split
the market into product categories” was not a per se
violation of Section 1. Id. at 1052. On the contrary,
the court held, the overall agreement “actually
foster[ed] competition” by helping the parties develop
new technology and allowing them to “compete in a
market from which they were otherwise foreclosed.”
Id. at 1052-53.
2. The First Circuit’s decision below conflicts with
the decisions of these circuits. It could not find any
marketwide output reductions, nor resulting price
increases, because the Government never claimed
21
any and conceded it had no such evidence. So, the
First Circuit concluded that a small reduction in the
number of routes or flight times between American
and JetBlue themselves was direct evidence of
anticompetitive
effects—without
considering
marketwide effects on consumers.
The First Circuit’s conclusion that the Airlines’
allocation between themselves of routes or flight
times alone was direct evidence of anticompetitive
effects stands in direct contrast to the Second, Sixth,
Ninth, Tenth, and Eleventh Circuit’s conclusions that
such collaboration alone is not enough and that
evidence of actual consumer harm in the market as a
whole is needed. Those circuits accordingly would
have found no direct evidence of anticompetitive
effects at step one and allowed the NEA to survive.
B. The First Circuit’s Step-One Analysis Is
Wrong
1. The First Circuit’s Decision Is
Inconsistent With Antitrust Law’s
Approach To Joint Ventures
This Court has consistently held that joint
ventures may “enable firms to do something more
cheaply or better” than they can alone, and therefore
cannot be “condemn[ed]” “too reflexively.” Alston, 594
U.S. at 88. Indeed, joint venturers can engage in
activities that would otherwise be illegal per se so
long as they are reasonably related to generating
consumer benefits. See Dagher, 547 U.S. at 3.
In Dagher—a case the First Circuit scarcely
mentioned—this Court addressed a joint venture that
“end[ed] competition” between two major oil
companies by consolidating their operations in the
western United States, pooling their revenues, and
22
even setting joint prices. Id. at 3-5. The Ninth Circuit
had held that the plaintiffs had raised a triable issue
as to whether this venture was per se unlawful
because it eliminated competition between “two
former (and potentially future) competitors.” Dagher
v. Saudi Refin., Inc., 369 F.3d 1108, 1124 (9th Cir.
2004), rev’d sub nom. Texaco Inc. v. Dagher, 547 U.S.
1 (2006). This Court unanimously reversed, holding
that the joint venture was subject to review under the
full rule of reason, rather than any per se or
abbreviated quick-look rule. 547 U.S. at 7 & nn.2-3.
As Dagher makes clear, the elimination of
competition between two competitors through market
allocation (as the Government alleged occurred
through the Airlines’ schedule coordination) is not
sufficient to declare a joint venture unlawful. Indeed,
if it were, nearly all joint ventures would be per se
unlawful. What matters is the impact of that
allocation on the market as a whole.
This Court’s decision in Ohio v. American Express
Co. (Amex), 585 U.S. 529 (2018), emphasized the
importance of the marketwide perspective. The
Government had claimed that “antisteering”
provisions in American Express’s contracts with
merchants were anticompetitive because they led to
higher merchant fees. Id. at 533. But that was only
part of the marketwide picture. Id. at 540-47. Similar
to this case, the evidence showed that overall output
increased and “the plaintiffs did not show that Amex
charged more than its competitors.” Id. at 549. The
Court held that because the Government had not
shown “that Amex’s antisteering provisions gave it
the power to charge anticompetitive prices” by
“‘restricting output’” in the two-sided credit-card
23
transactions market, its Section 1 claim failed. Id.
(emphasis and citation omitted).
Decisions such as Amex reflect that the focus of
antitrust law is marketwide consumer harm. The
“goal” of antitrust law is “to ‘distinguis[h] between
restraints with anticompetitive effect that are
harmful to the consumer and restraints stimulating
competition that are in the consumer’s best interest.’”
Id. at 541 (alteration in original) (citation omitted);
see also Alston, 594 U.S. at 96 (reiterating this point).
The First Circuit’s decision is fundamentally at
odds with this Court’s decisions in Dagher, Amex, and
Alston, among others. Contrary to Dagher, the First
Circuit concluded that the mere fact that American
and JetBlue allocated routes between themselves
within the NEA was sufficient to find direct
anticompetitive effects at step one—and ultimately
declare the NEA invalid. The First Circuit did not
meaningfully analyze, as Amex requires, whether
that collaboration harmed, or even had the serious
potential to harm, consumers through higher
marketwide prices, lower marketwide output, or
reduced marketwide quality.
This Court’s case law also tracks the longstanding
recognition of antitrust treatises and scholars that
the core inquiry is “whether a particular practice
decreased marketwide output and raised prices, pure
and simple.” Herbert Hovenkamp, The Antitrust
Text, 99 Ind. L.J. 1063, 1077 (2024) (emphasis added).
While a “layperson[]” may view competition as “a
market containing numerous firms—the more
numerous, the more ‘competitive,’” the Sherman Act
does not fixate on that notion of competition. Philip
E. Areeda & Herbert Hovenkamp, Antitrust Law: An
Analysis of Antitrust Principles and Their Application
24
¶ 100a (Sept. 2024 online) (“Areeda & Hovenkamp”).
Instead, it seeks “to maximize consumer welfare by
encouraging firms to behave competitively while yet
permitting them to take advantage of every available
economy that comes from internal or jointly created
production efficiencies.” Id. (emphasis added).
In other words, “relevant output is marketwide
output, not merely the output of the participants to
the restraint.” Id. ¶ 1914b; see also Alston, 594 U.S.
at 88-89 (collecting cases). In Alston, the Court thus
explained that a reduction in output by two joint
venturers does not constitute anticompetitive harm
where other firms in the market “would simply take
over the abandoned business.” 594 U.S. at 89
(citation omitted). Here, the fact that American
exited a handful of routes to optimize schedules with
JetBlue does not show a marketwide reduction of
output. Indeed, if JetBlue, Delta, United, or other
airlines increased their flights on those routes in
response, marketwide output would increase.
The First Circuit’s decision turns back the clock on
antitrust law to a time when antitrust law was
concerned with the protection of “rivalry” for its own
sake, rather than rivalry for the sake of the consumer.
United States v. Topco Associates, Inc., 405 U.S. 596
(1972), exemplifies that view. But this Court has long
since jettisoned that understanding of antitrust law,
as courts and commenters have recognized. See, e.g.,
Sanofi-Aventis U.S., LLC v. Mylan, Inc. (In re EpiPen
(Epinephrine Injection, USP), Mktg., Sales Pracs. &
Antitrust Litig.), 44 F.4th 959, 984-85 (10th Cir.
2022), cert. denied, 143 S. Ct. 1748 (2023); Rothery
Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d
210, 229 (D.C. Cir. 1986), cert. denied, 479 U.S. 1033
(1987); Areeda & Hovenkamp ¶ 1511d2-d3; Thomas
25
A. Lambert, The Essence of an Antitrust Violation,
Univ. of Missouri Legal Studies Rsch. Paper No. 202434, at 8-20 (2024).
2. The First Circuit’s References To
“Reduced Output” Are Strictly About
American And JetBlue’s Output, Not
Marketwide Output
The First Circuit repeatedly invoked what it called
the district court’s finding of “reduced output.” App.
16a-17a. But this was a Trojan horse. The district
court never found any reduced marketwide output,
and, as discussed, the Government’s own experts
conceded that they had shown no evidence of
marketwide output reductions. See supra at 11-12.
To be clear, the fight at this point is not about the
sufficiency of the evidence or a challenge to the
district court’s findings; it is about whether the First
Circuit’s holding that a reduction in competition
between the joint venture participants doomed the
joint venture was wrong as a matter of law.
Specifically, the First Circuit cited to three
findings as support for its conclusion that the NEA
“reduced output”: (1) the Airlines “allocated” thirteen
routes to JetBlue; (2) the Airlines coordinated takeoff
and landing times to offer flights at more times
throughout the day rather than offering competing
flights at the same time of day; and (3) the “NEA’s
‘spirit of partnership’ undermined any claim that the
[Airlines] would continue to compete on the routes the
NEA ‘carve[d][ ]out’ from its joint schedule.” App. 18a
(alterations in original) (citation omitted). All of these
findings relate to schedule optimization between
American and JetBlue. None shows that marketwide
26
output—output that accounts for other airlines’
competitive response to the NEA—decreased.
And even if American and JetBlue’s combined
output alone were dispositive, the district court still
found no reduction of the Airlines’ collective output on
the vast majority of routes, including the thirteen
routes that American exited in light of JetBlue’s
increased flying. On the contrary, because JetBlue
was able to use American’s slots more efficiently by
flying larger planes under the NEA, the Airlines’
collective output in the Northeast increased—as the
Government’s own experts conceded. See, e.g., App.
71a-72a; 1-JA601 (conceding that “total capacity
growth of JetBlue and American ha[d] exceeded
the[ir] competitors” at NEA airports); supra at 11
(chart showing Airlines’ growth exceeded others).4
The district court and the First Circuit identified
just two of the over 175 nonstop routes within the
NEA as routes on which the Airlines’ collective output
allegedly decreased. See App. 18a n.5. In fact, the
Government’s own public database showed that
capacity actually grew on those routes. See CA1
28(j) Letter Response (May 1, 2024) (Doc.
No. 118139553). But again, even if output decreased
between the Airlines on those two routes, that by no
means shows a reduction in marketwide output—i.e.,
output among all airlines. Cf. 2-JA1268 (internal
Delta slide deck stating that a “commercial response”
4 The First Circuit dismissed this evidence because it was
contained in a “slide deck,” but the same evidence was presented
through fact and expert testimony. See 2-JA1367-68; 2-JA1011;
2-JA1293; Dist. Ct. Dkt. 307 (Tr. 211:21-212:2). This is why the
output increases were undisputed.
27
to the NEA “[wa]s imperative”).
Indeed, the
Government never even tried to make that showing.
3. The First Circuit’s Step-One Error Is
Further Reinforced By Its Blatant
Misconception Of Ancillary Restraints
To support its finding of anticompetitive effect in
the absence of any reduction in marketwide output,
the First Circuit invoked the ancillary-restraints
doctrine—a tool for determining whether a particular
restraint can be condemned as per se unlawful or
should instead be evaluated under the rule of reason.
See Areeda & Hovenkamp ¶ 1906. That was error.
A restraint is generally understood as ancillary—
and therefore not per se unlawful—if it supports a
productive venture with the potential to lower prices
or increase output. Id.; Polk Bros. v. Forest City
Enters., Inc., 776 F.2d 185, 188-89 (7th Cir. 1985) (“A
court must distinguish between ‘naked’ restraints,
those in which the restriction on competition is
unaccompanied by new production or products, and
‘ancillary’ restraints, those that are part of a larger
endeavor whose success they promote.”). By contrast,
if the restraint is wholly unconnected to any such
venture, it may be condemned as per se unlawful
without proceeding through the three-step, rule-ofreason analysis. See California Dental Ass’n v. FTC,
526 U.S. 756, 770, 774-76 (1999).
The First Circuit got this backwards. It invoked
the ancillary restraints doctrine to hold that because
“JetBlue and American’s agreement to ‘optimiz[e]’
their route schedules and thereby allocate markets
within the NEA region was central . . . to the NEA,” it
did not qualify as an “ancillary” restraint and could
be treated like a naked restraint on trade. App. 21a-
28
22a (alteration in original) (citation omitted); see App.
13a (“NEA’s anticompetitive features were ‘at its
core.’” (citation omitted)); App. 21a (NEA’s
coordination could be “treated as per se illegal”).
This is exactly the error addressed in Dagher. The
Ninth Circuit had invalidated a joint venture “by
invoking the ancillary restraints doctrine” in a similar
fashion. 547 U.S. at 7. But as this Court explained
in reversing, there is no need to determine whether
“the core activity of the joint venture” is ancillary and
therefore subject to the full rule of reason. Id. at 7-8.
Where “the business practice being challenged”—
here, the optimization of routes and schedules within
the NEA—“involves the core activity of the joint
venture itself,” it is inherently and “clearly ancillary”
to such collaboration. Id. The doctrine by no means
allows courts to find that joint schedule optimization,
because it was “central” to realizing NEA benefits,
“resides near the anticompetitive end of the
spectrum.” App. 22a.
The First Circuit’s misunderstanding of the
ancillary-restraints doctrine and suggestion that the
NEA could have been condemned as per se unlawful
creates yet another circuit split. As the Seventh
Circuit has correctly explained, ancillary restraints
can be—and often are—central to the underlying joint
venture. Polk, 776 F.2d at 188-91. After all, the
purpose of the ancillary-restraints doctrine is “to
determine whether the agreement is part of a
cooperative venture with prospects for increasing
output.” Id. at 190. “If it is, it should not be
condemned per se.” Id. For that reason, it is error for
a district court to conclude that a particular restraint
is “not ‘ancillary’ because it [is] so important to the
productive undertaking,” id.—exactly what the First
29
Circuit did here. Instead, the Seventh Circuit has
explained, “[a] restraint is ancillary when it may
contribute to the success of a cooperative venture that
promises greater productivity and output.” Id. at 189;
cf. Dagher, 547 U.S. at 8 (joint venture’s “pricing
policy is clearly ancillary to sale of its own products”).
The First Circuit’s contortion of this important
antitrust doctrine underscores the need for review.
II. THE
FIRST
CIRCUIT’S
STEP-TWO
ANALYSIS WARRANTS CERTIORARI
The First Circuit created further division with
respect to step two of the rule of reason. The
Government’s experts did not dispute that the
Airlines’ collective output grew in the Northeast
under the NEA without any price increases relative
to routes outside the NEA, creating significant
benefits for consumers. See, e.g., 2-JA870; 2-JA699;
2-JA895-96; 2-JA900-01. Conceding these benefits,
the Government disputed only whether they were
attributable to the NEA or could have instead arisen
from other causes and courses of action.
The First Circuit nevertheless held that the
Airlines failed step two of the rule of reason—a
remarkable result when the Government’s own expert
conceded that the NEA led to consumer benefits that
were not “anywhere close to zero.” 2-JA870. In part,
this was because it embraced the district court’s
holding that there was no cognizable “procompetitive
benefit for the purposes of step two” in becoming a
stronger competitor. App. 24a. But of more lasting
importance, it changed the defendants’ burden of
proof, requiring the Airlines to conclusively refute
every possible alternative cause for the Airlines’
growth under the NEA and the possibility that
30
benefits
in
the
relevant
markets
were
counterbalanced by out-of-market adverse effects.
That holding conflicts with the decisions of other
circuits and, if adopted, would make it virtually
impossible for defendants to prevail.
Properly
understood, legitimate questions about causation or
balancing are to be addressed at step three of the rule
reason.
A. The Circuits Are Divided Over The
Defendant’s Burden At Step Two Of The
Rule Of Reason
The circuits sharply disagree over the extent of the
defendant’s burden at step two of the rule of reason.
Whereas the First Circuit demanded a heavy showing
that the undisputed benefits of a collaboration are
directly caused by the restraint alone and do not
entail reduced output outside the relevant markets,
the Third and Ninth Circuits follow this Court’s
precedent requiring only a valid procompetitive
rationale at this step, without these added burdens.
In Epic Games, Inc. v. Apple, Inc., the Ninth
Circuit rejected the plaintiff’s argument that the
defendant lost at step two because it failed to
establish a causal connection between any
procompetitive benefits and the restraint in question.
67 F.4th 946, 986 (9th Cir. 2023). As the court
explained, the defendant’s burden at step two was
relatively light—to show a “procompetitive rationale”
connected to the venture; it had no obligation to
affirmatively disprove the plaintiff’s argument that
the rationale was merely a “pretext.” Id.
The
Third
Circuit
adopted
the
same
understanding in United States v. Brown University,
5 F.3d 658 (3d Cir. 1993). There, the district court
31
believed that the defendant lost for failure to offer a
“persuasive procompetitive justification, or a showing
of necessity” for that justification—i.e., that the
restraint was in fact necessary or the only way to
achieve the procompetitive rationale. Id. at 676. This
was too high a burden, so the Court of Appeals
remanded for more careful consideration of the facts
and evidence by the district court. Id. at 676, 679.
The First Circuit’s decision is irreconcilable with
these principles. The court held that American failed
even to pass step two because it did not establish as a
factual matter that the NEA’s benefits were “because
of” the NEA and were not offset by (unproven) out-ofmarket anticompetitive effects. The court even went
so far as to call the NEA’s benefits “not cognizable”
because American had failed to show that they could
not “‘be achieved through practical, significantly less
restrictive means’” and because they were in part
motivated by the Airlines’ desire to compete more
effectively against Delta and United. App. 23a-26a
(citation omitted).
This approach conflicts with the Third and Ninth
Circuit’s rules. As the Ninth Circuit recognized in
Epic, to the extent causation is important to the
analysis, it enters at step three where the burden
shifts back to the plaintiff to establish alternatives
that could have achieved the same procompetitive
ends identified at step two. Indeed, Epic rejected
almost the exact same reading of Alston that the
Government advanced below and that the First
Circuit implicitly adopted. 67 F.4th at 986.
Making matters worse, the First Circuit further
split with the Ninth Circuit in rejecting the NEA’s
procompetitive benefits because of a concern that
“growth within the NEA came ‘at the expense of
32
resources and output by the defendants elsewhere.’”
App. 27a (citation omitted). The Ninth Circuit has
rejected the idea that antitrust plaintiffs can meet
their rule-of-reason burden based on out-of-market
effects.
Instead, “courts must focus on
anticompetitive effects ‘in the market where
competition is [allegedly] being restrained.’” FTC v.
Qualcomm, Inc., 969 F.3d 974, 992 (9th Cir. 2020)
(alteration in original) (citation omitted). The First
Circuit’s outlier conclusion is especially concerning
because it effectively required American to prove the
absence of out-of-market harms, which the
Government never even attempted to substantiate.
American is aware of no court (other than the ones
below) that has ever imposed such a burden on a
defendant as part of the rule of reason, let alone as
part of step two of that analysis.
The First Circuit’s heightened step-two burden
conflicts with the Ninth and Third Circuits in one
final respect: the First Circuit appeared to reject as
non-cognizable one of the most basic procompetitive
rationales there is—a joint venture’s prospect for
expanding output and therefore becoming more
competitive through more efficient production. The
First Circuit starkly held that seeking to enhance
competition with dominant market players is
illegitimate. See App. 23a-26a (concluding that
American’s argument that the NEA allowed the
Airlines to better compete with Delta and United was
“not cognizable”); see also App. 131a (“The problem for
the defendants is that this purpose—strengthening
their own position against one or two rivals—is not a
valid justification . . . .”). But every legitimate joint
venture is designed to compete more effectively and
“maximize profits”; this is not the same as an “intent
33
to ‘destroy competition itself.’” Qualcomm, 969 F.3d
at 994 n.15 (citation omitted).
In holding to the contrary, the First Circuit again
lost sight of the market as a whole—which is always
the focus of antitrust analysis. As Brown teaches,
when an agreement holds the prospect of helping
consumers in the market as a whole, it may well be
procompetitive. That is quite different from an
illegitimate agreement that seeks to suppress
marketwide competition solely in service of the
defendants’ own interests. See 5 F.3d at 677.
B. The Court’s Step-Two Analysis Is Wrong
The First Circuit’s step two holding conflicts with
this Court’s precedents and would have damaging
consequences for other productive ventures.
This Court has repeatedly held that the plaintiff
has the ultimate “burden” to establish the restraint
has anticompetitive effects that are “‘harmful to the
consumer.’” Amex, 585 U.S. at 541 (citation omitted).
Thus, it has described the defendant’s burden at step
two as a light one: to “muster a procompetitive
rationale” for the “restraint[].” Alston, 594 U.S. at 98.
As the Ninth Circuit held in Epic, the key step is
ultimately the last one, where the plaintiff has the
burden of showing that the procompetitive objectives
could be achieved using a less restrictive means. 67
F.4th at 986. Yet the First Circuit’s decision renders
the third step meaningless, since a collaboration will
invariably flunk the first two steps under the
decision. After all, many joint ventures result in some
reduction in competition between the venturers
themselves in order to create a better or more efficient
product, and most, if not all, joint venturers are
partially motivated by a desire to compete more
34
effectively with others in the market. Thus, under the
First Circuit’s decision, the third step of the rule of
reason will rarely, if ever, be reached.
The First Circuit’s reliance on out-of-market
effects to negate American’s benefits is particularly
troubling—and wrong. It is a cardinal principle of
antitrust that any balancing of harms and benefits in
a rule of reason analysis occurs within the bounds of
the relevant markets at issue. See, e.g., Amex, 585
U.S. at 541 (focus is on whether challenged restraint
helps or “harms consumers in the relevant market”).
While the Government and courts below made
much of the fact that the NEA “caused both American
and JetBlue to adjust their overall network priorities”
and concentrate on the Northeast, App. 68a; see App.
9a, they never identified a single non-NEA market
that was harmed as a result of less service or anything
else. Conceded in-market benefits were therefore
nullified by rank speculation about out-of-market
harms. The First Circuit cited no precedent for its
view that in-market benefits can be disregarded in
this manner.5
The First Circuit’s invocation of out-of-market
harms also underscores the fundamental problem
with its step-two analysis—the heightened burden it
places on antitrust defendants that few would be able
to meet. In so holding, the decision below allows
regulators to avoid their burden of ultimately proving
“‘anticompetitive effect[s] that are harmful to the
5 Shifting resources from one route to another is not
inherently problematic. Airlines make decisions like that every
day—for example because there is excess capacity on one route
or because shifting resources allows the airline to more
effectively and efficiently serve a particular group of customers.
35
consumers’” in a properly defined “market.” Amex,
585 U.S. at 541 (citation omitted).
That puts
numerous productive joint ventures on the chopping
block for aggressive regulators and private plaintiffs.
III. THE QUESTIONS PRESENTED ARE
IMPORTANT, AND THIS CASE IS THE
RIGHT VEHICLE TO RESOLVE THEM
The First Circuit’s decision killed a valuable
collaboration that benefitted air travelers in the
congested Northeast. The decision, not the NEA,
reduced output to the detriment of consumers. But it
will also chill other collaborations benefitting
consumers, including future efforts by airlines to
engage in productive collaborations in the notoriously
slot-and-gate-constrained
Northeast—and
will
threaten procompetitive joint ventures outside of the
transportation industry more generally.
The real losers are consumers. The First Circuit
embraced a naked hostility toward collaboration that
invalidates joint ventures regardless of whether they
help or harm consumers. But this is emblematic of a
broader trend. In recent years, the Government has
strived to replace antitrust law’s consumer-welfare
standard with a more sweeping standard that would
invalidate pro-consumer collaborations in pursuit of
non-economic goals not previously served by antitrust
regulators, such as reducing corporations’ size and
thus their influence or countering income inequality.
See, e.g., Hon. Douglas H. Ginsburg, Wither The
Consumer Welfare Standard?, 46 Harv. J. of L. & Pub.
Pol’y 69, 72-81 (2023) (noting this shift); Assistant
Attorney General Jonathan Kanter Delivers Remarks
at New York City Bar Association’s Milton Handler
36
Lecture, Dep’t of Justice (May 18, 2022) (criticizing
consumer welfare standard).6
This case presents a clean vehicle for resolving
whether those efforts—and others like them—can
lawfully move forward. The First Circuit fully
ventilated the issues. Its decision ultimately is based
solely on findings concerning a supposed reduction in
competition between the members of the joint venture
themselves. And the First Circuit’s decision, like the
district court’s, exudes an outdated hostility to
collaborations that make this case an ideal vehicle to
clarify that the rule of reason cannot be invoked to
erect the very barriers this Court rejected in Dagher.
6
https://www.justice.gov/opa/speech/assistant-attorneygeneral-jonathan-kanter-delivers-remarks-new-york-city-barassociation.
37
CONCLUSION
The petition for a writ of certiorari should be
granted.
DANIEL M. WALL
ALFRED C. PFEIFFER, JR.
CHRISTOPHER S. YATES
LATHAM & WATKINS LLP
505 Montgomery Street
Suite 2000
San Francisco, CA 94111
SAMIR DEGER-SEN
LATHAM & WATKINS LLP
1271 Avenue of the
Americas
New York, NY 10020
Respectfully submitted,
GREGORY G. GARRE
Counsel of Record
PETER E. DAVIS
CHRISTINE C. SMITH
JOSEPH E. SITZMANN
LATHAM & WATKINS LLP
555 11th Street, NW
Suite 1000
Washington, DC 20004
(202) 637-2207
gregory.garre@lw.com
Counsel for Petitioner
February 27, 2025
APPENDIX
TABLE OF CONTENTS
Page
Opinion of the United States Court of Appeals
for the First Circuit, United States v.
American Airlines Group Inc., 121 F.4th
209 (1st Cir. 2024) ..............................................1a
Findings of Fact and Conclusions of Law of the
United States District Court for the
District of Massachusetts, United States v.
American Airlines Group Inc., 675 F. Supp.
3d 65 (D. Mass. 2023) .......................................30a
15 U.S.C. § 1 ..........................................................150a
1a
[121 F.4th 209]
UNITED STATES COURT OF APPEALS,
FIRST CIRCUIT
UNITED STATES; State of Arizona; State of
California; District of Columbia; State of
Florida; Commonwealth of Massachusetts;
Commonwealth of Pennsylvania;
Commonwealth of Virginia, Plaintiffs,
Appellees,
v.
AMERICAN AIRLINES GROUP INC.,
Defendant, Appellant,
JetBlue Airways Corporation, Defendant.
No. 23-1802
November 8, 2024
Before Barron, Chief Judge, Kayatta and Gelpí,
Circuit Judges.
KAYATTA, Circuit Judge.
In 2020, American Airlines and JetBlue entered
into a joint venture called the Northeast Alliance
(“NEA”), under which the carriers effectively agreed
to operate as a single airline with respect to most of
their routes in and out of Boston and New York City.
The U.S. Department of Justice (“DOJ”), joined by
several states, filed suit to enjoin the carriers from
proceeding with the NEA, alleging that it ran afoul of
the Sherman Act as an unreasonable restraint on
competition. After an extensive bench trial, the
district court agreed and entered judgment for
plaintiffs. American Airlines now appeals. Seeing no
2a
reversible error of either fact or law, we affirm. Our
reasoning follows.
I.
A.
In the passenger airline industry, where “market
share and capacity” have become “concentrated
among a relatively small number of domestic
carriers,” United States v. Am. Airlines Grp. Inc., 675
F. Supp. 3d 65, 76 (D. Mass. 2023), American and
JetBlue are no minor players. American is arguably
the largest airline in the world and one of four airlines
that collectively control around eighty percent of
domestic air travel. Id. at 73. It is one of three “global
network carriers” (“GNCs”) operating in the U.S.
today—each GNC (American, Delta Air Lines, and
United Airlines) “possess[es] [a] broad network[ ]” of
hub-and-spoke operations to reach a “wide range of
origins and destinations . . . either directly or through
connecting itineraries.”
Id. at 76.
American’s
domestic hubs as of 2019 included Charlotte, Chicago,
Dallas/Fort Worth, Los Angeles, Miami, New York
City, Philadelphia, Phoenix, and Washington, D.C.
Id. at 80.
Meanwhile, JetBlue is the sixth largest airline in
the U.S. Id. at 73. It is younger than American and
has historically operated with a reputation as a
“disruptor” that aggressively competes with older
legacy carriers, with documented procompetitive
effects. Id. at 79–80. Given its evolution and pursuit
of growth, JetBlue now falls within a category of
hybrid carriers that are neither GNCs nor “low-cost
carriers” (“LCCs”), i.e., those that generally rely on
“point-to-point flying using a single type of aircraft . . .
[and] class of service.” Id. at 76, 79. Like LCCs,
3a
JetBlue maintains a lower cost structure and
generally provides lower fares, although its cost
structure has become more complex in recent years.
Id. at 79, 102. But it also operates what could be
considered a regional hub-and-spoke network out of
the Northeast, with six “focus cities” as of 2019: New
York City (its headquarters), Boston, Fort
Lauderdale, Orlando, Los Angeles, and San Juan. Id.
at 79. Around seventy-five percent of JetBlue’s routes
fly in or out of New York or Boston, its two largest
focus cities. Id.
Through June 2020, American and JetBlue
competed with each other across all markets both
airlines served. Id. at 80. In the Northeast, American
and JetBlue were leading competitors—they were two
of the four largest carriers operating in New York,
and two of the largest three in Boston. Id. at 73. In
Boston, JetBlue and the three GNCs controlled more
than eighty percent of the domestic air travel market
in 2019, whereas in New York the four carriers’
combined market share exceeded seventy percent. Id.
at 78. In this northeast region, American and JetBlue
competed to provide nonstop service on twenty-nine
routes to and from New York and Boston, with
significant market shares on many of those routes.
Because “strategic fare and schedule changes are the
subject of continual analysis and discussion,” id. at 77,
competitors like American and JetBlue generally
reacted to any fare or schedule change by the other
carrier in the same market, id. at 77, 80.
Within this competitive environment, there are
various constraints on a carrier’s ability to operate at
a particular airport and expand the routes it may
offer. One such constraint is access to gates, which
are limited in number and sometimes fully allocated
4a
among existing carriers at any given time. Id. at 78
n.10. As such, a carrier looking to initiate or expand
service needs to secure access to the requisite gates.
Id. at 78. At certain heavily congested airports, like
JFK and LaGuardia (“LGA”) in New York, carriers
must also secure access to slots, which refers to
authorization
from
the
Federal
Aviation
Administration (“FAA”) to take off or land in a
particular time slot. Id. Both gates and slots are
“scarce, valuable, and sought-after resources.” Id.
In terms of domestic cooperation among airlines,
carriers in the United States historically have only
engaged in small-scale arrangements, unlike the
extensive cooperation between GNCs and various
international carriers to expand service to outlying
destinations through commingled itineraries. See id.
at 80–81. Domestically, cooperative arrangements
have included interline agreements, where if one
carrier promises to rebook its passengers after a
cancelled flight, it may do so using its partner’s flights
in addition to its own. Id. at 81. Carriers have also
engaged in code-sharing, where a carrier allows
customers of another carrier to purchase seats on a
particular flight via either carrier’s website. Id.
In 2019, American started to develop a “new
domestic strategy” that involved strengthening its
partnerships with other carriers to address its
apparent weaknesses on both the West and East
Coast. Id. On the West Coast, this strategy
culminated in February 2020 with the announcement
of the West Coast International Alliance (“WCIA”)
between American and Alaska Airlines. Id. The
WCIA made Alaska a member of American’s
“oneworld alliance” with international carriers,
continued the two carriers’ code-sharing partnership,
5a
and established “capped and non-reciprocal revenue
sharing” between certain complementary markets.
Id. at 81–82 (emphasis omitted). Importantly, the
WCIA did not include any coordination between the
carriers regarding capacity, scheduling, network
planning, or market allocation on direct overlapping
routes. Id. at 82. Indeed, the two carriers were
effectively not direct competitors prior to the WCIA,
which instead was meant to leverage their
complementary networks. Id. The WCIA, which
American described as a success, is still in effect
today. Id.
On the East Coast, American’s new domestic
strategy played out differently.
In New York,
American was worried about United and Delta’s
growth, and perceived its own operations as
insufficiently profitable even though—as of 2019—it
maintained the second-most slots at LGA and the
third-most at JFK. Id. at 83. Additionally, American
perceived that some of its slots at JFK were “under
heavy scrutiny” by the FAA for underuse and were
therefore at risk. Id. Meanwhile, JetBlue had
concerns of its own. Its growth in New York had
tapered due to its inability to obtain more slots at JFK
or LGA. Id. And by 2020, it was worried about Delta’s
investment in growth in Boston as a threat to its
dominance at Logan. Id.
As a result, talks began in late 2019 between
American and JetBlue regarding a possible lease of
some of American’s underused slots at JFK. Id. But
negotiations, which continued through the start of the
Covid-19 pandemic, soon expanded to contemplate a
broader WCIA-style alliance in the Northeast. Of
primary concern to both carriers was the hope of
addressing the perceived competitive threat that
6a
Delta posed in key markets in the region. Id. As part
of the negotiations, the carriers produced a
hypothetical joint network schedule for 2023 that
pooled and “optimized” their resources, including
expected aircraft fleets, to evaluate what a
partnership could achieve in terms of estimated
passenger traffic and revenue. Id. at 84.
On July 15, 2020, American and JetBlue
announced the result of their partnership: the
Northeast Alliance (“NEA”). Id. Established through
a set of contracts, the NEA included “codesharing,
schedule coordination, revenue sharing, reciprocal
loyalty benefits, and joint corporate customer
benefits.” Id. Both carriers’ short-haul services, as
well as American’s long-haul services touching Logan,
JFK, LGA, and Newark (“the NEA airports”), were
included. Id.
One of the NEA’s core features is “the optimization
of American’s and JetBlue’s route networks and
scheduling of flight times and frequencies at the NEA
[a]irports.” Id. at 85 (quotation marks omitted).
Though the agreement states that each carrier will
continue to operate independently as to pricing,
capacity, and network management decisions, the
NEA’s process of creating a joint schedule
“necessarily involves cooperation . . . regarding
capacity allocation” decisions, both generally and
with respect to individual routes. Id. To that end, the
NEA provides for the carriers to pool airport
infrastructure, including slots and gates. Id.
As for revenue sharing, American and JetBlue’s
stated goal is to align the parties’ incentives and
achieve “metal neutrality,” meaning an indifference
as to whether a passenger within the NEA region flies
on a JetBlue or American plane. Id. The carriers’
7a
contract sets out a complex process to split their
revenue pool annually, where each carrier receives a
base amount of passenger-related revenue based on
their respective performance during the most recent
year, after which the carriers divide the remaining
incremental revenue in the pool based on each
carrier’s proportion of total NEA capacity for that
year. Id. at 85–86. The actual mechanics of the
revenue-sharing process involve one carrier making
an annual “transfer payment” of excess revenue due
to the other under the terms of the agreement. Id.
at 86.
The NEA, by its terms, lasts for at least seven
years and would continue indefinitely absent
affirmative efforts by either party to terminate. Id. at
87. As amended, the NEA limits each airline’s ability
to transfer or sell any slots at JFK or LGA to other
third-party carriers. Id. It also includes promises
made as part of the carriers’ commitments to the U.S.
Department of Transportation (“DOT”) in connection
with that agency’s regulatory review of the NEA. Id.
Those include, among other things, a promise by
JetBlue not to exit certain JFK routes it served prior
to the Covid-19 pandemic, and an agreement to divest
certain slots at JFK if certain growth requirements
are not met. Id. at 87–88. Additionally, the parties
amended the NEA to remove revenue sharing on six
carve-out routes (all of which ended at Logan) on
which American and JetBlue had a particularly high
market share. Id. at 88.
B.
On September 21, 2021, DOJ, along with several
states, filed suit to enjoin American and JetBlue from
8a
further implementing the NEA.1 Plaintiffs alleged
that the NEA violated section one of the Sherman Act,
which prohibits “contract[s], combination[s] . . ., or
conspirac[ies], in restraint of trade or commerce.” 15
U.S.C. § 1.
In September 2022, the case proceeded to a
monthlong bench trial. As the district court noted,
the trial featured “testimony by two dozen witnesses,
most of whom were either executives of the
defendants or experts paid for their testimony by one
side or the other[,] . . . augmented by more than 2,700
pages of excerpts from the depositions of seventeen
additional witnesses.” Am. Airlines Grp., 675 F.
Supp. 3d at 74. “More than a thousand exhibits were
admitted into evidence,” and “[p]ost-trial written
submissions by the parties exceeded six hundred
pages.” Id.
In relevant part, six expert witnesses testified -two for plaintiffs, four for defendants. Id. at 100–01.
Put bluntly, the district court did not react favorably
to defendants’ experts. It rejected “entirely” the
opinions and conclusions of three of defendants’ four
experts for two main reasons. Id. at 104. First, the
court found them biased. Id. at 101. Each had
extensively (and largely uniformly) defended GNCs in
past antitrust litigation. Id. They also each acted and
spoke like advocates invested in obtaining a ruling for
the airlines. Id. And the court found their testimony
itself generally not credible, concluding that much of
it rested on faulty assumptions. Id. at 101–04.
1
By the time of trial, the NEA was approximately eightypercent implemented. See Am. Airlines Grp., 675 F. Supp. 3d
at 89.
9a
C.
On May 19, 2023, the district court issued its
findings of fact and conclusions of law. As to its
factual findings, the district court specifically
identified seven key effects resulting from the NEA.
First, the district court found that American and
JetBlue no longer competed within the scope of the
NEA. Id. at 89. More specifically, the NEA’s
schedule-coordinating provisions caused the carriers
to act as one airline in the NEA region “when choosing
which routes to fly, when to fly them, and which
aircraft (and which partner) will do so.” Id. The
NEA’s revenue-sharing provisions were also designed
to render the carriers indifferent as to which carrier a
customer uses within the NEA region. Id.
Second, the district court found that the NEA
caused both carriers to adjust their network
priorities, with both focusing more on growing in New
York at the expense -- because of fleet-size constraints
-- of “some pre-NEA plans to devote resources to
growth elsewhere.” Id. at 90. To that end, the court
rejected as factually unsupported the claim that the
NEA caused the carriers to expand (or at least delay
shrinking) their fleets. Id. at 91 n.44.
Third, the court found that after the NEA was
announced, American’s slots at JFK and LGA were
used “more heavily and efficiently.” Id. at 92.
However, the court found that this occurred in part
because American had leased certain slots to JetBlue
(which may have been likely without the NEA) as well
as “upgauged” some of its aircraft and added some
routes at those slots. Id. And the court found no
plausible explanation for why those changes could not
have occurred without the NEA. See id.
10a
Fourth, the court found that the NEA led to
“decreased capacity, lower frequencies, or reduced
consumer choice on multiple routes, including some
that are heavily traveled.” Id. For one, American and
JetBlue allocated certain routes to one or the other
carrier in at least thirteen markets touching LGA
(including Boston-LGA, from which American exited),
which reduced the total frequencies or capacity in
certain NEA markets.2 Id. at 92–93. The court also
noted that the evidence suggested that defendants
would “continue to allocate more markets between
them.” Id. at 93. Additionally, the court found that
even on the routes that both carriers continued to
serve, defendants ceased competing on “wing tip[ ]”
flights, meaning flights departing at the same time of
day. Id. at 93 & n.45.
Fifth, the court found that the NEA’s reciprocity
and code-sharing features caused frequent fliers and
many corporate clients to gain broader access to
benefits and discounts. Id. at 93. However, the court
noted that such travelers accounted for a relatively
small percentage of American’s customers. Id. at
93–94.
Sixth, the court found that the NEA raised
JetBlue’s operating costs and deprived the airline of
two significant opportunities to expand its collection
of slots and approvals, undermining the carrier’s role
as a maverick “disruptor” in the market. Id. at 94–95,
79. More specifically, JetBlue lost out on more
favorable slots at London’s Heathrow Airport because
of the NEA and similarly lost slots for which it had
bid at Newark based on DOT’s findings about the
2
American debates the factual underpinnings of this
finding, which we discuss infra.
11a
NEA’s likely effects on JetBlue’s market position. Id.
at 95 & n.52.
Seventh and finally, the court found that the
NEA’s “spirit of partnership” had already led
American and JetBlue to disregard the NEA’s
safeguards. Id. at 96. Specifically, pursuant to the
terms of the NEA’s revenue-sharing provisions, at the
end of 2021, JetBlue owed American a “transfer
payment” of over $200 million. Id. However,
American forgave most of that amount and instead
agreed to accept a transfer payment of $27 million.
Id. And even after disregarding the NEA’s express
requirements, the carriers declined to amend the
contracts accordingly -- a decision the district court
found to undermine the carriers’ claims that other
provisions in the NEA would have guaranteed that
they adhered to certain procompetitive conduct or
prevent anticompetitive effects. Id. at 96–97.
D.
Based on its factual findings, the district court
proceeded to assess the lawfulness of the NEA.
Courts have construed the Sherman Act to preclude
only those contracts that “unreasonably restrain
competition.” N. Pac. Ry. Co. v. United States, 356
U.S. 1, 5, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958). “A small
group of restraints are unreasonable per se because
they ‘always or almost always tend to restrict
competition and decrease output.’ ” Ohio v. Am.
Express Co. (Amex), 585 U.S. 529, 540, 138 S.Ct.
2274, 201 L.Ed.2d 678 (2018) (quoting Bus. Elecs.
Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 723, 108
S.Ct. 1515, 99 L.Ed.2d 808 (1988)). Otherwise,
“[d]etermining whether a restraint is undue for
purposes of the Sherman Act ‘presumptively’ calls for
what [courts] have described as a ‘rule of reason
12a
analysis.’ ” NCAA v. Alston, 594 U.S. 69, 81, 141 S.Ct.
2141, 210 L.Ed.2d 314 (2021) (quoting Texaco Inc. v.
Dagher, 547 U.S. 1, 5, 126 S.Ct. 1276, 164 L.Ed.2d 1
(2006)).
A rule-of-reason analysis requires a fact-specific
assessment of the restraint’s actual effect on
competition. Amex, 585 U.S. at 541, 138 S.Ct. 2274.
Under the rule of reason’s three-step burden-shifting
framework, the plaintiff must first make a showing
that the restraint has a substantial anticompetitive
effect, which can be proven directly or indirectly. Id.
at 541–42, 138 S.Ct. 2274. If the plaintiff carries that
burden, the burden shifts to the defendant to show a
“procompetitive rationale for the restraint.” Id. at
541, 138 S.Ct. 2274. And “[i]f the defendant makes
this showing, then the burden shifts back to the
plaintiff to demonstrate that the procompetitive
efficiencies could be reasonably achieved through less
anticompetitive means,” id. at 542, 138 S.Ct. 2274, or
that on balance, the restraint’s harms outweigh its
benefits, see Sullivan v. Nat’l Football League, 34
F.3d 1091, 1111 (1st Cir. 1994).
In applying the rule of reason, the district court
found that plaintiffs met their burden of showing that
the NEA had direct anticompetitive effects in three
ways. Most significantly, the district court found that
the NEA “led to decreased capacity, lower
frequencies, or reduced customer choices on multiple
routes . . . .” Am. Airlines Grp., 675 F. Supp. 3d at 92.
As to what drove that reduction in output, the district
court made three further findings. First, the court
found that JetBlue and American no longer directly
competed with each other within the NEA region,
reducing market participants in the already
extremely consolidated region by one. Second, by
13a
aligning its interests with American, JetBlue
sacrificed some of its independence and status as an
important maverick competitor in the industry. And
third, the NEA’s feature of schedule/route
“optimization” (including assigning routes to either
American or JetBlue) closely resembled per se illegal
market allocation.3 See Am. Airlines Grp., 675 F.
Supp. 3d at 113–17.
Next, the court found that American and JetBlue
failed to carry their burden to show a procompetitive
rationale for the NEA’s anticompetitive restraints,
because their asserted justifications either were not
legally cognizable or lacked evidentiary support. Id.
at 120–26. It also found that the NEA was not an
otherwise lawful joint venture with restraints merely
ancillary to its overarching procompetitive purpose,
such as pooling complementary resources to develop a
new service.
Id. at 122.
Rather, the NEA’s
anticompetitive features were “at its core.” Id. at 123.
For example, the court found that the primary reason
for the NEA was to strengthen defendants’
competitive position at the expense of Delta (and
United) -- rather than maximizing “customer value.”
Id. at 120–21. As to the remainder of defendants’
asserted benefits, that evidence supported at most
only one arguable benefit—more flexible loyalty
benefits.
Assuming that flexibility to be
procompetitive, the district court nevertheless found
it “de minimis compared to the anticompetitive harms
the court has found . . . .” Id. at 124, 126.
3
The district court also found that plaintiffs alternatively
satisfied their burden at step one of the rule of reason by showing
that the NEA had anticompetitive effects through indirect
evidence. Am. Airlines Grp., 675 F. Supp. 3d at 117–19.
14a
The district court closed with step three. It found
that the NEA’s ostensible procompetitive benefits
could have been achieved through less restrictive
alternatives—namely, an agreement like the WCIA
between American and Alaska Airlines—and that, on
balance, the NEA’s harms outweighed any cognizable
benefits. Id. at 126–28.
In light of its findings, the district court enjoined
American and JetBlue from continuing or further
implementing the NEA. Id. at 128. The court’s
injunction ordered them to cease all coordination of
schedules, routes, or any effort to allocate markets. It
also prohibited the carriers from entering into any
arrangement substantially similar to the NEA. To
that end, the injunction required that defendants
provide notice to plaintiffs prior to entering into any
such arrangement.
Shortly after the injunction entered, JetBlue
exited the NEA pursuant to its terms of cancellation.
American, the only remaining defendant, appealed.4
4
Even though the NEA is no longer in effect, American
requests that we vacate the district court’s permanent injunction
prohibiting it from pursuing similar arrangements in the future,
as well as subjecting it to a notice requirement prior to entering
into any such arrangement. American also indicated at oral
argument that it intends to enter into another NEA-like
arrangement if we grant its requested relief. For all of these
reasons collectively, American’s appeal is not moot. See Auto
Parts Mfg. Miss., Inc. v. King Constr. of Houston, L.L.C., 782
F.3d 186, 192 (5th Cir. 2015) (“Because appellants request
vacatur of the permanent injunction, there is still a live issue
before this court, and the challenge to the district court’s
injunctive relief is not moot.”); cf. Town of Portsmouth v. Lewis,
813 F.3d 54, 58 (1st Cir. 2016) (“[A] case is moot when the court
cannot give effectual relief to the potentially prevailing party.”
(citation omitted)).
15a
II.
We review the district court’s conclusions of law de
novo and its factual findings for clear error. Calandro
v. Sedgwick Claims Mgmt. Servs. Inc., 919 F.3d 26, 33
(1st Cir. 2019). The district court’s findings of fact
must be honored unless, “after careful evaluation of
the evidence, we are left with an abiding conviction
that those determinations and findings are simply
wrong.” State Police Ass’n of Mass. v. Comm’r of
Internal Revenue, 125 F.3d 1, 5 (1st Cir. 1997); Fed.
R. Civ. P. 52(a)(6).
On appeal, American nowhere expressly argues
that any of the district court’s factual findings were
clearly erroneous. Instead, American trains its
attention on the district court’s rule-of-reason
analysis, arguing that legal error befell it each step of
the way. We treat each of American’s arguments in
turn.
A.
American first takes issue with the mode of
analysis the district court employed to assess the
NEA’s lawfulness under the Sherman Act.
Specifically, American argues that the district court
erroneously subjected the NEA to “quick look”
condemnation rather than applying a full-blown ruleof-reason analysis. It suggests that joint ventures like
the NEA are “not usually unlawful,” Broad. Music,
Inc. v. Columbia Broad. Sys. Inc., 441 U.S. 1, 23, 99
S.Ct. 1551, 60 L.Ed.2d 1 (1979), even though they
inherently stifle competition between the two
venturing firms. Thus, it argues that the district
court’s ostensibly cursory dismissal of the NEA
warrants reversal.
16a
American’s argument is unavailing on multiple
levels. For one, that the NEA is a “joint venture” says
little about the level of antitrust scrutiny it should
receive. After all, one could describe price fixing as a
joint venture. Our inquiry therefore trains not on
American’s label, but rather on the terms and effects
of the parties’ agreement. Here, the district court
found as fact that this venture reduced output while
garnering no competitive benefits that could not
otherwise be achieved—which American does not
claim to be clearly wrong. The label of “joint venture”
does not itself change the analysis, which is “aimed at
substance rather than form.” Copperweld Corp. v.
Indep. Tube Corp., 467 U.S. 752, 760, 104 S.Ct. 2731,
81 L.Ed.2d 628 (1984). And while it is fair to say that
“most joint venture restrictions” are subject to the
rule of reason, the level of scrutiny required under
that standard exists along a “competitive spectrum.”
Alston, 594 U.S. at 88, 141 S.Ct. 2141; see also
Dagher, 547 U.S. at 7, 126 S.Ct. 1276 (rejecting per se
treatment of a joint venture). The rule of reason is
merely a “fact-specific assessment,” Amex, 585 U.S. at
541, 138 S.Ct. 2274, that varies based on “the
circumstances, details, and logic of a restraint,” Cal.
Dental Ass’n v. FTC, 526 U.S. 756, 781, 119 S.Ct.
1604, 143 L.Ed.2d 935 (1999). Indeed, the leading
treatise notes that “[t]he rule of reason is often
erroneously assumed to require detailed fact finding
and balancing” -- instead, the rule is better viewed as
creating a “sliding scale” of antitrust analysis with
many variations in proof that depend on context. 11
Phillip E. Areeda & Herbert Hovenkamp, Antitrust
Law: An Analysis of Antitrust Principles and Their
Application ¶ 1508 (4th ed. 2022) [hereinafter Areeda
& Hovenkamp].
17a
Moreover, the district court did not condemn the
NEA with as quick a look as American suggests.
Although the district court formally found that the
NEA merited a less “deep and searching analysis,”
Am. Airlines Grp., 675 F. Supp. 3d at 112, it
nonetheless made extensive and reasoned findings
regarding the NEA’s effects on competition after
conducting a monthlong bench trial and reviewing a
mountainous record. Under these circumstances, we
decline to classify the district court’s herculean efforts
in analyzing the NEA as a mere “quick look.” Rather,
tailoring its examination to the specific transaction at
issue, the court received evidence and made findings
sufficient for a confident and reliable assessment of
the actual and likely effects of the NEA’s adoption.
B.
American argues that the district court erred in
finding that plaintiffs met their initial burden of
proving
that
the
NEA
had
substantial
anticompetitive effects. First, American says the only
way to prove actual anticompetitive harm to
consumers in the relevant market is with empirical
evidence “that tends to prove that output was
restricted or prices were above a competitive level.”
Amex, 585 U.S. at 549, 138 S.Ct. 2274 (quoting
Brooke Grp. Ltd. v. Brown & Williamson Tobacco
Corp., 509 U.S. 209, 237, 113 S.Ct. 2578, 125 L.Ed.2d
168 (1993)). But whether there are other available
routes to show anticompetitive harm matters not at
all in this case because the district court expressly
found output reduced.
In an attempt to challenge that finding without
claiming clear error, American argues that the
district court unlawfully treated the NEA’s empirical
effects on output and price as immaterial. Here, we
18a
disagree. The court expressly found that the NEA
“led to decreased capacity, lower frequencies, or
reduced consumer choices on multiple routes,
including some that are heavily traveled.” Am.
Airlines Grp., 675 F. Supp. 3d at 92. American makes
no showing that these findings are clear error. More
specifically, the district court found that in at least
thirteen markets that American and JetBlue both
previously served, the NEA allocated the route to one
carrier and caused the other to exit, and that the
evidence suggested that the carriers would continue
to allocate more markets between them. Id. at 92–93.
And in markets the carriers both continued to serve,
the court found that the NEA caused American and
JetBlue to cease directly competing on “wing tip[ ]”
flights in those markets. Id. at 93. The district court
even found that the NEA’s “spirit of partnership”
undermined any claim that the carriers would
continue to compete on the routes the NEA
“carve[d][ ]out” from its joint schedule. Id. at 97.
Based on these findings, the district court concluded
that the NEA in fact “reduced total frequencies or
capacity in certain NEA markets.” Id. at 93.5
Consequently, even assuming arguendo that a
showing of reduced capacity was required to find
5
For the first time on reply, American argues that with
respect to two heavily traveled routes in which one carrier exited
-- Boston-LGA and Boston-DCA -- total capacity as measured by
seats increased. However, American’s only support for this
claim is an exhibit that is not in the trial record. Moreover, the
evidence itself is raw data from which American now offers an
extrapolation on appeal. We decline to entertain this evidence
and argument for the first time on appeal, particularly after a
bench trial. See United States v. Zannino, 895 F.2d 1, 9 n.7 (1st
Cir. 1990).
19a
anticompetitive harm, the district court made the
requisite findings here.
Without attempting to show that the district court
committed clear error in its output-related factual
findings to the contrary, American argues that the
NEA actually resulted in increased capacity in the
form of “more flights, more seats, more routes, shorter
connections, better frequent flyer benefits, and more
choices.” But the district court expressly rejected as
unreliable the evidence American offers in support of
these claims. Indeed, with respect to American’s
assertions regarding the NEA’s effects on capacity,
the district court noted that “[n]o objective or helpful
corroboration is provided by citations to defendants’
own internal slide decks pitching the benefits or
success of the NEA without providing reliable sources
or support for the claims contained therein.” Id. at
125. Yet American now cites the same slide deck on
appeal in support of the NEA’s purported success, as
if the district court simply never made this finding.
American also claims that the NEA’s capacityexpanding effects were undisputed. But the district
court expressly declined to attribute various capacity
increases to the NEA itself. See id. at 92. While the
district court did find that the NEA caused the
carriers to “adjust their overall network priorities” to
focus more on growth in New York, it also found that
such growth came “at the expense of resources and
output by the defendants elsewhere.” Id. at 90, 124.
The district court expressly found no evidentiary
support for the claim that the NEA led either carrier
to increase its fleet rather than reallocate it. See id.
at 91 n.44, 124–25. Additionally, while the district
court acknowledged that since the NEA was
announced, “American’s slots at JFK and LGA have
20a
been used more heavily and efficiently,” it did not
attribute this growth to the NEA because American
intended to lease underutilized slots to JetBlue even
prior to the NEA. Id. at 92. And more broadly, the
mere fact that airline capacity overall increased
between 2021 and 2022 -- just as the industry began
to recover from the Covid-19 pandemic -- did little to
show that the NEA itself increased American or
JetBlue’s capacity in any meaningful way.6
American also contends that the district court
erred in concluding that the NEA had direct
anticompetitive effects in the form of market
allocation and reduced consumer choice. American
argues that each of the various anticompetitive effects
the district court identified are all versions of the
same point: that the NEA was anticompetitive
because “American and JetBlue collaborated and
were no longer fully independent competitors.” In
6
To that end, American’s claim that plaintiffs’ experts
conceded at trial that the NEA did not cause any actual
consumer harm also fails. For example, plaintiffs’ expert Dr.
Town simply testified that it would be difficult to assess whether
the NEA caused actual consumer harm given the circumstances
of the pandemic recovery. Additionally, Dr. Miller’s testimony
that his model did not use actual NEA schedules as inputs to
observe post-NEA price or output effects did not amount to an
admission that the NEA did not or would not cause any
anticompetitive harm. Rather, the district court found that Dr.
Miller “explained why he chose the models he used to assess [the
NEA’s] effects,” and, in any event, only credited Dr. Miller’s
analysis to the extent it suggested that the NEA would create
upward pricing pressure. Am. Airlines Grp., 675 F. Supp. 3d at
100. Moreover, the district court ultimately found that it was
defendants who failed to show that new routes launched after
the NEA did not instead “ar[i]se from the substantial shift in
flying patterns occurring during and after the pandemic.” Id.
at 125.
21a
turn, it argues that the court could only reach such a
conclusion by relying on outdated case law that it says
viewed “the protection of rivalry,” as opposed to
consumer welfare, as the best means of promoting
competition. However, American misconstrues the
district court’s findings, which were legally sufficient.
For one, as we have already noted, horizontal
agreements allocating markets between substantial
competitors have generally been treated as per se
illegal. See Stop & Shop Supermarket Co. v. Blue
Cross & Blue Shield of R.I., 373 F.3d 57, 61 (1st Cir.
2004) (“The most important per se categories are
naked horizontal price-fixing, market allocation, and
output restrictions.”); see also Palmer v. BRG of
Georgia, Inc., 498 U.S. 46, 49, 111 S.Ct. 401, 112
L.Ed.2d 349 (1990) (“[A]greements between
competitors to allocate territories to minimize
competition are illegal.”). Granted, where a restraint
like market allocation is “ancillary” to an otherwise
procompetitive joint venture, per se condemnation of
the agreement may not be warranted. See, e.g.,
Broad. Music, Inc., 441 U.S. at 23, 99 S.Ct. 1551
(noting that joint ventures are not usually unlawful
as price fixing where an “agreement on price is
necessary to market the product at all”). But here,
the district court found -- and American does not
dispute -- that JetBlue and American’s agreement to
“optimiz[e]” their route schedules and thereby
allocate markets within the NEA region was central,
not ancillary, to the NEA.7 Am. Airlines Grp., 675 F.
7
For this reason, American’s challenge to the district
court’s reliance on cases like United States v. Topco Associates,
Inc., 405 U.S. 596, 608, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972),
which applied this per se rule to condemn a horizontal
22a
Supp. 3d at 122–23. Thus, the district court’s finding
that the NEA’s market allocation resides near the
anticompetitive end of the spectrum rests on stable
footing.
None of this is to say that the district court found
the NEA per se unlawful. It did not. It is to say,
rather, that the similarity between the NEA and
naked market allocation further buttresses the
district court’s already well-supported conclusion
that, by reducing output without producing
procompetitive benefits that were not otherwise
achievable, the NEA failed to survive a rule-of-reason
analysis.8
C.
Having failed to undo the district court’s
conclusions at step one, American turns its sights to
steps two and three of the rule-of-reason analysis.
The district court found that the only colorable
“procompetitive rationale” for the NEA’s restraints
established by American and JetBlue was more
flexible loyalty benefits. Alston, 594 U.S. at 96, 141
S.Ct. 2141; Am. Airlines Grp., 675 F. Supp. 3d at 120,
territorial-division agreement among competing grocery chains,
is irrelevant.
See Areeda & Hovenkamp ¶ 1511(d)(3)(A)
(critiquing Topco on the grounds that the Court should have
found the restraint at issue ancillary rather than per se illegal,
but also noting that the Supreme Court continues to cite Topco
with apparent approval, albeit in dicta).
8
Given these conclusions, we need not reach the issue of
whether the NEA’s reduction in the number of competitors itself,
or its effects on JetBlue’s “maverick” status, constituted
standalone anticompetitive harms. Nor must we address
American’s challenges to the district court’s alternative step-one
finding that plaintiffs established actual competitive harms
indirectly based on American and JetBlue’s “market power.”
Am. Airlines Grp., 675 F. Supp. 3d at 118–19, 118 n.88.
23a
124, 126. On appeal, American argues that the
district court improperly failed to countenance the
rest of the NEA’s ostensible procompetitive benefits
as a matter of law and nullified step two in so doing.
Specifically, it argues that the district court’s
rejection of its asserted benefits was not based on “any
relevant fact-finding,” but rather on the flawed legal
conclusion that the carriers’ asserted benefits only
arose out of the anticompetitive collaboration at the
heart of the NEA. Yet here too, American’s argument
fails.
First, despite American’s argument to the
contrary, some of its asserted procompetitive
justifications are simply not cognizable. For example,
any defense of a restraint based on the notion that
competition itself is “inefficient, unreasonable, or
confusing” is insufficient as a matter of law.
Viamedia, Inc. v. Comcast Corp., 951 F.3d 429, 479
(7th Cir. 2020); see also Collaboration Guidelines
§ 3.36(a) (“Some asserted efficiencies, such as those
premised on the notion that competition itself is
unreasonable, are insufficient as a matter of law.”).
Indeed, the FTC and DOJ’s Collaboration Guidelines
reiterate
this
point,
describing
“cognizable
efficiencies” in horizontal collaborations as those that
“do not arise from anticompetitive reductions in
output or service, and that cannot be achieved
through practical, significantly less restrictive
means.”
Collaboration
Guidelines
§ 3.36.
Additionally, it is well established that other defenses
are unacceptable, including that “the defendants
fixed prices or divided a market in order to ensure
that weaker market participants would get a ‘fair’
share of the trade,” or that -- as American itself tries
to argue -- “elimination of competition along one
24a
avenue . . . will not affect consumers adversely
because the participants will continue to compete on
price.” Areeda & Hovenkamp ¶ 1907(b).
The Sherman Act “exist[s] to protect the
competitive process itself, not individual firms.”
Grappone, Inc. v. Subaru of New Eng., Inc., 858 F.2d
792, 794 (1st Cir. 1988) (Breyer, J.). As such, the
notion that the “presence of a strong competitor
justifies a horizontal [anticompetitive] conspiracy” is
certainly not always the case. See United States v.
Apple, Inc., 791 F.3d 290, 298 (2d Cir. 2015) (finding
that Apple’s desire to compete with Amazon in the
e-reader market did not vindicate its price-fixing
conspiracy with publishers).
The district court
rejected on factual grounds the notion that American
and JetBlue were “two small companies” seeking to
collaborate so that they could “compete more
effectively with larger corporations dominating the
relevant market.” Am. Airlines Grp., 675 F. Supp. 3d
at 121 n.95 (quoting Brown Shoe Co. v. United States,
370 U.S. 294, 319, 82 S.Ct. 1502, 8 L.Ed.2d 510
(1962)). American does not directly challenge this
finding on appeal. So, we see no error in the district
court’s rejection of American’s argument that the
NEA generated a procompetitive benefit for the
purposes of step two in the sense that it better allowed
the carriers to compete with Delta -- the NEA’s
principal purpose. Id. at 121–22. Indeed, “a party
can[not] relabel a restraint as a product feature and
declare it ‘immune from § 1 scrutiny.’ ” Alston, 594
U.S. at 101, 141 S.Ct. 2141 (quoting Am. Needle, Inc.
v. Nat’l Football League, 560 U.S. 183, 199 n.7, 130
S.Ct. 2201, 176 L.Ed.2d 947 (2010)). To the extent
that is what American seeks to do here, the effort is
mistaken.
The NEA may well have benefited
25a
American and JetBlue, but to prevail at step two the
carriers had to focus on the effects on consumers and
“the competitive process” itself. See Grappone, Inc.,
858 F.2d at 794; cf. Viamedia, 951 F.3d at 479
(“[C]laimed benefits from [challenged] conduct must
be procompetitive and not simply the result of
eliminating competition.”).
Moreover, American otherwise fails to show that
the district court clearly erred in rejecting defendants’
remaining asserted procompetitive justifications as
factually unsupported. For one, American nowhere
lodges a challenge to the district court’s finding that
the NEA was not necessary “to create a new product
or market that could not otherwise exist,” or that
American and JetBlue’s pooled assets were not
“complementary” in a way that would -- with
collaboration -- enable them to innovate in a way
neither could alone.9 Am. Airlines Grp., 675 F. Supp.
3d at 122–23. Nor does American claim as clear error
the district court’s finding that, even taking the
carriers’ asserted benefit of increased competition
with Delta on its own terms, the evidence of any
competitive response to the NEA by Delta (or United)
was “milquetoast, at best” and was “in line with
[Delta’s] typical responses to any moves by any
competitors, included changes that were already part
of the carrier’s plans, and reflected general recovery
9
American does not meaningfully dispute the district
court’s finding that the NEA in no way revolutionized the
‘‘product’’ American and JetBlue provide: flights from one place
to another. Am. Airlines Grp., 675 F. Supp. 3d at 122 n.97. Nor
does American dispute the district court’s rejection of the claim
that the NEA actually resulted in ‘‘better schedules’’ from a
customer standpoint, given its elimination of wingtip flight
competition. Id. at 123.
26a
trends in New York in the wake of the pandemic.” Id.
at 124 & n.101. Indeed, rather than confront the
sufficiency of these findings head on, American
instead paints the district court’s step-two findings as
“not rooted in any relevant fact-finding” at all. We are
unpersuaded.
Perhaps most critically, American all but
abandons any serious attempt to dispute the district
court’s conclusion that the rest of its claimed benefits
“lack evidentiary support entirely or find support only
if an artificially narrow lens is applied.” Id. at 124.
As we explained supra at Section II.B, American’s
perfunctory claims regarding the NEA’s purported
effects on capacity and output wither under even the
slightest scrutiny. For example, American boasts -as if uncontroverted -- that the NEA’s efficiency gains
caused the carriers to increase their capacity at NEA
airports by “more than 200%” in the form of “nearly
50 new nonstop routes, increased frequencies on more
than 130 routes, [and] increased capacity on 45 New
York City flights.” For support, American cites only
to trial exhibits consisting of defendants’ own internal
slide decks and charts reiterating these very claims,
bereft of any primary source support. The district
court found this very evidence to provide “no objective
or helpful corroboration” of the carriers’ claims
regarding the NEA’s successes. Id. at 125–26, 126
n.109 (noting that by the time of trial, the carriers
distanced themselves from various internal
documents, likely realizing their evidentiary flaws).
And American now offers no dispositive counterpoint
to the district court’s finding that, even with respect
to discrete new routes launched within the NEA
region, the carriers failed to show that American or
27a
JetBlue added any such routes “because of” the NEA
itself. Id. at 125.
Nor does American undercut the district court’s
finding that the carriers’ claims of capacity growth
disregarded evidence that growth within the NEA
came “at the expense of resources and output by the
defendants elsewhere, as well as evidence the
defendants each would have pursued at least some of
this growth with or without the [NEA.]” Id. at 124.
American suggests that it was error for the district
court to consider “out-of-market effects” or what
would (or would not) have occurred but for the NEA
at step two of the rule of reason, rather than simply
take American’s asserted procompetitive benefits on
their own terms. Not so. These considerations -- both
contextualizing defendants’ asserted capacity effects
and considering the carriers’ pre-NEA incentives -properly figured into the court’s ultimate analysis of
whether any such asserted benefits actually flowed
from the NEA.
Finally, American asserts that the district court’s
step-three analysis was corrupted by its failure to
credit its arguments about procompetitive benefits.
In doing so, American ignores the district court’s
conclusion that the procompetitive benefit achieved
by the NEA -- more flexible loyalty benefits -- could
“plainly [be achieved] through less restrictive means.”
Am. Airlines Grp., 675 F. Supp. 3d at 126 n.112.
Indeed, the district court explained that a “more
limited WCIA-style arrangement” complete with
“some degree of codesharing and loyalty reciprocity,”
similar to the agreement between American and
Alaska Airlines on the West Coast, would have
28a
sufficed. Id. at 127. This finding is undisturbed on
appeal.10
All in all, American fails to convince us that the
district court committed clear factual errors or an
error of law in finding that the carriers did not carry
their burden to “justify the [NEA’s] restraints with
evidence of procompetitive benefits.” Am. Airlines
Grp., 675 F. Supp. 3d at 110 (citing NCAA v. Bd. of
Regents of Univ. of Okla., 468 U.S. 85, 113, 104 S.Ct.
2948, 82 L.Ed.2d 70 (1984)).11
III.
Presented with an arrangement that had many of
the essential attributes of an agreement between two
powerful competitors sharing revenues and divvying
up highly concentrated markets, the district court
conducted a monthlong proceeding, after which it
made detailed findings of fact, many key ones of which
were unfavorable to American. Seeing no clear error
in those findings, we also see no error of law in the
court’s application of the rule of reason to conclude
that the arrangement violated section one of the
Sherman Act.
10 As the Supreme Court has noted, “however framed and
at whichever step, anticompetitive restraints of trade may wind
up flunking the rule of reason to the extent the evidence shows
that substantially less restrictive means exist to achieve any
proven procompetitive benefits.” Alston, 594 U.S. at 100, 141
S.Ct. 2141; see also Areeda & Hovenkamp ¶ 1505 (noting that
steps two and three “can be collapsed into one,” in part because
a “legitimate objective that is not promoted by the challenged
restraint can be equally served by simply abandoning the
restraint, which is surely a less restrictive alternative”).
11 Additionally, we have otherwise considered American’s
remaining arguments and find them to be without merit.
29a
For the foregoing reasons, the judgment of the
district court is affirmed.
30a
[675 F. Supp. 3d 65]
UNITED STATES DISTRICT COURT,
D. Massachusetts
UNITED STATES of America et al., Plaintiffs,
v.
AMERICAN AIRLINES GROUP INC. and
JetBlue Airways Corporation, Defendants.
Civil No. 21-11558-LTS
Signed May 19, 2023
FINDINGS OF FACT AND
CONCLUSIONS OF LAW
SOROKIN, United States District Judge
I. INTRODUCTION
This case turns on what “competition” means. To
the defendants, competition is enhanced if they join
forces to unseat a powerful rival. The Sherman Act,
however, has a different focus. Federal antitrust law
is not concerned with making individual competitors
larger or more powerful. It aims to preserve the free
functioning of markets and foster participation by a
diverse array of competitors. Those principles are
generally undermined, rather than promoted, by
agreements among horizontal competitors to dispense
with competition and cooperate instead. That is
precisely what happened here.
Each of the defendants is a formidable and
influential player in the air travel market in this
country. American Airlines Group Inc. is the largest
airline in the world. It offers more seats and serves
more origins and destinations than any other carrier
in the United States. It is one of four airlines that
control approximately eighty percent of domestic air
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travel. JetBlue Airways Corporation is the sixthlargest airline in the United States. Younger than its
larger domestic competitors and using a lower-cost
business model, JetBlue has nurtured its reputation
as a maverick airline seeking to disrupt the industry
to the benefit of consumers. Until 2020, American
and JetBlue were fierce and frequent head-to-head
competitors. This was especially so in the northeast,
where JetBlue looms large and centers a majority of
its operations.
American and JetBlue are two of the four largest
carriers operating in New York, and two of the largest
three in Boston. Delta Air Lines is the only other
carrier with a large presence in Boston. Besides Delta
and United Airlines, no other carrier matches or
approaches in size the defendants’ respective
positions in New York. Challengers seeking to enter
or expand in New York would first need to secure
gates from which to operate, as well as schedule
authorizations from federal regulators who control air
traffic in one of the most congested markets in the
world. Both the gates and the authorizations are
exceedingly difficult to acquire. Challengers seeking
to enter or expand in Boston would need to secure
gates, which also are in scarce supply. Because of
these significant barriers, the defendants’ positions at
or near the top of these constrained markets had
proven relatively robust and durable over the decade
or so preceding the onset of the COVID-19 pandemic.
In the first months of 2020, executives at
American Airlines and JetBlue negotiated and signed
a first-of-its-kind alliance, in which the two carriers
essentially agreed to operate as one airline for most of
their flights in and out of New York City and Boston.
The partnership is called the Northeast Alliance, or
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the NEA. This was a sea change in the relationship
between two airlines that were direct and aggressive
competitors with decidedly different business models
and cost structures. There is no doubt that savvy
executives representing both defendants earnestly
believe the NEA promotes the interests of their
respective shareholders and will strengthen
American and JetBlue in their rivalry against Delta
(and, to a lesser extent, United) in New York and
Boston. It is similarly beyond dispute that the NEA
involves substantial coordination by two powerful
competitors in an industry that, on a domestic level,
is closely regulated, highly concentrated, and often
volatile.
Invoking the Sherman Act, the United States
Department of Justice, joined by the District of
Columbia, the states of Arizona, California, and
Florida, and the Commonwealths of Massachusetts,
Pennsylvania, and Virginia, filed suit to enjoin the
defendants from proceeding with the NEA. The
lawsuit culminated in a month-long bench trial
featuring testimony by two dozen witnesses, most of
whom were either executives of the defendants or
experts paid for their testimony by one side or the
other. The trial transcript surpasses 3,600 pages,
accompanied by at least fifty binders containing
exhibits presented to witnesses. The live testimony
was augmented by more than 2,700 pages of excerpts
from the depositions of seventeen additional
witnesses. More than a thousand exhibits were
admitted
into
evidence.
Post-trial
written
submissions by the parties exceeded six hundred
pages. This tidal wave of evidence reflects both the
33a
state of antitrust litigation1 and the “unprecedented”
nature of the NEA. Doc. No. 1 at 2.2
After close attention to the evidence at trial and a
careful review of the voluminous submissions by the
parties, certain points became clear. Within the
highly concentrated airline markets in New York and
Boston, where opportunities to enter or expand are
vanishingly rare, JetBlue stood largely alone as the
only low-cost airline with a significant presence in a
domestic market dominated by larger, higher-cost
network carriers. With the NEA, American and
JetBlue transformed themselves from competitors to
collaborators, joining forces to create a single
“optimized network.” They design that network
together, jointly determining which airline will fly
which routes in and out of the NEA region, how often
and on what schedule they will serve each route, and
which aircraft (i.e., how many seats) will be used on
each route. To further promote the arrangement,
American and JetBlue share the revenues each
generates within the NEA.
This is no minor shift for the two businesses or the
region. Nearly three-quarters of JetBlue’s overall
operations are flights in or out of the NEA. American
counts New York among its hubs and is the thirdlargest carrier operating in Boston. In both locations,
1
This unwieldy process has led one federal judge to liken
“[a]djudication of antitrust disputes” to “a judicial reading of the
future”—a “murky function [which] demands a massive
enterprise.” New York v. Deutsche Telekom AG, 439 F. Supp.
3d 179, 187 (S.D.N.Y. 2020).
2
Citations to “Doc. No. __at __” reference items appearing
on the court’s electronic docketing system, and pincites are to the
page numbers in the ECF header (which may differ from page
numbers included elsewhere as part of the original document).
34a
the defendants vigorously competed on everything
from fares to the features they offered customers. The
NEA changes all of that. It makes the two airlines
partners, each having a substantial interest in the
success of their joint and individual efforts, instead of
vigorous, arms-length rivals regularly challenging
each other in the marketplace of competition. Though
the
defendants
claim
their
bigger-is-better
collaboration will benefit the flying public, they
produced minimal objectively credible proof to
support that claim.
Whatever the benefits to
American and JetBlue of becoming more powerful—
in the northeast generally or in their shared rivalry
with Delta—such benefits arise from a naked
agreement not to compete with one another. Such a
pact is just the sort of “unreasonable restraint on
trade” the Sherman Act was designed to prevent.
In arriving at the findings of fact and conclusions
of law set forth in the following pages, the Court sifted
through the evidence and assessed it with a few
foundational principles in mind. First, the Sherman
Act aims to broadly preserve “free and unfettered
competition as the rule of trade.” N. Pac. Ry. Co. v.
United States, 356 U.S. 1, 4, 78 S.Ct. 514, 2 L.Ed.2d
545 (1958). As long as the competitive process is
functioning freely, it is not the concern of the
Sherman Act (or of a federal court applying it) which
competitors win dominant shares in any given
market. Next, certain restraints, based on their
character or context, pose threats of anticompetitive
harm that are sufficiently obvious that they warrant
careful scrutiny, if they can be justified at all. See
United States v. Topco Assocs., Inc., 405 U.S. 596,
607-09, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972). Such
restraints include agreements between powerful
35a
horizontal competitors to control output or allocate
markets, which trigger an especially heavy burden on
the collaborators to justify what otherwise would be
obviously unlawful collusion. Lastly, despite its
unusual complexity, this case requires the Court to
call upon familiar tools of the judicial trade—
observations of witness demeanor, common sense,
and a general understanding of human behavior—as
it evaluates the credibility and assesses the
motivation of people describing their roles in
conceiving, debating, and implementing business
decisions on behalf of their employers.
Guided by these standards, and for the reasons
explained below, the Court finds that the plaintiffs
have convincingly established that the NEA violates
Section 1 of the Sherman Act.3
II. FINDINGS OF FACT
A. The Industry
The United States passenger airline industry, as
we know it today, has been shaped by a series of
events that unfolded during the past four decades.
After the industry was deregulated in 1978, thenexisting carriers began building larger, nationwide
3
The Court anticipated convening a further argument or
hearing once it had reviewed, digested, and analyzed all of the
evidence and the parties’ submissions. After concluding that
process, and given the clear and comprehensive post-trial
submissions cogently expressing each party’s arguments, the
Court determined that a further proceeding was unnecessary.
Such a hearing would have been for the benefit of the Court only,
to clarify any questions remaining after review of the record and
post-trial papers. Having no such lingering questions, the Court
proceeded to its decision without further argument.
36a
networks.4
Meanwhile, new carriers emerged,
operating with lower cost structures that allowed
them to offer lower prices and compete for market
share with the established network carriers.
Vigorous competition, an increase in capacity,5 and a
reduction in ticket prices followed. The first decade of
the 2000s, however, saw the airline industry rocked
by external events including the September 11, 2001,
terrorist attacks and the 2008 global financial crisis.
During the same time period, overall airline capacity
fell, and the number of domestic carriers declined, as
struggling airlines—including all of the predecessors
to the current three largest domestic carriers—
declared bankruptcy or pursued mergers and
acquisitions. As a result of these events, market
share and capacity in the industry are now
concentrated among a relatively small number of
domestic carriers.
Today, domestic carriers can be roughly divided
into four categories based on business model and cost
structure. Global network carriers (“GNCs”) possess
broad networks that reach a wide range of origins and
destinations (“O&Ds”) either directly or through
connecting itineraries. A GNC relies on a collection of
“hubs”—airports where the carrier operates at a
significant scale, with many flights arriving and
departing
each
day—and
“spokes”—other
4
Airlines that were operating before 1978 are sometimes
called “legacy carriers.”
5
Capacity in the airline industry is generally measured in
terms of “available seat miles,” or “ASMs.” One ASM is one seat
on one plane flying one mile. Thus, an airline can increase its
ASMs by operating more planes, offering more seats, or flying
longer routes.
37a
destinations the carrier serves on a smaller scale—to
create a network that can serve customers going to or
from as many places as possible. Three GNCs operate
domestically today: American, Delta, and United.
Each GNC is the result of one or more mergers.6
Low-cost carriers (“LCCs”) generally rely on pointto-point flying using a single type of aircraft with a
single class of service. This simplifies operations by
ensuring every pilot, flight attendant, and mechanic
can serve every plane in the fleet. Carriers employing
this business model enjoy operation costs that are
lower than those of a GNC, allowing them to remain
profitable while offering lower fares than a GNC.
Southwest Airlines was the first LCC and remains the
largest domestic LCC.
Ultra-low-cost carriers
(“ULCCs”), as the name suggests, operate with even
lower costs and offer even lower fares. They, too,
generally offer point-to-point flying with one class of
service and one type of aircraft, often focusing on
high-traffic routes with a substantial demand for
direct service. ULCCs achieve lower fares by selling
an “unbundled” product. That is, a typical ULCC fare
includes only transportation from one place to
another (often in less comfortable seats); few
additional products and services are available, and
they carry additional fees. Spirit Airlines was the
original domestic ULCC, with Frontier Airlines,
Allegiant Air, Avelo Airlines, Breeze Airways, and
Sun Country Airlines now joining it in the category.
6
For example, America West Airlines merged with US
Airways in 2005; Delta merged with Northwest Airlines in 2008;
United merged with Continental Airlines in 2010; and American
merged with US Airways in 2013.
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The last category includes carriers that fall
somewhere between the GNC and LCC business
models. Alaska Airlines and Hawaiian Airlines are
such hybrid carriers, operating what amount to
regional hub-and-spoke networks. At trial, different
witnesses characterized JetBlue as an LCC, a hybrid
carrier, or a carrier presently transitioning between
categories. The Court will describe JetBlue’s status
further in the next subsection. See discussion infra
Section II(B).
Airlines serving overlapping geographical areas
with similar business models tend to compete most
directly and most often with one another. Such
carriers offer similar fares, fly similar types of
aircraft, provide similar levels and varieties of
services, and serve similar locations and categories of
customers. However, airlines make pricing and
scheduling decisions on a market-by-market basis.
As to any given market, an airline generally considers
the actions of, and views itself as competing with,
every other airline serving that market, regardless of
business model, as well as other airlines capable of
entering that market. If American, Delta, Southwest,
and Spirit all provide direct flights from City A to City
B, Delta will consider reacting to fare or schedule
changes by any of its three direct competitors serving
the route. In the airline industry, scheduling and
pricing information is published and updated
multiple times each day, enabling each carrier to
track its competitors’ actions almost constantly. As a
result, strategic fare and schedule changes are the
subject of continual analysis and discussion. Any
carrier operating in a particular market also
considers the prospect of other carriers entering that
39a
market, as well as the likelihood and possible timing
of such an event.
The industry is highly concentrated. Four carriers
control more than eighty percent of the market for
domestic air travel: the three GNCs (American, Delta,
and United) and Southwest. The remainder of the
market—less than twenty percent—is generally split
among nine smaller carriers. Though most of the
smaller carriers formed after the industry was
deregulated, the four dominant carriers existed in
some form before that time. Each of those four is the
product of consolidation in the industry.7
Though the merger of two carriers with
complementary networks can result in one bigger
carrier with a network that is broader and deeper
than what existed before, a merger also requires the
investment of substantial time and resources. The
process of effectively combining the separate
operations and assets of two merging entities is costly
and complex. For example, schedules, networks,
aircraft, personnel (including unionized groups of
workers), technology systems, advertising and
branding, loyalty programs, and real estate (from
airport lounges to hangars) all must be combined into
a cohesive, seamless, single carrier. American’s Chief
Executive Officer (“CEO”) described the numerous
challenges created by mergers, as well as the
“inordinate amount of management time and
attention” required to integrate two airlines. Trial Tr.
vol. 5 at 58-59. Evidence regarding carrier growth
from 2009 to 2019 corroborates that testimony and
suggests a correlation between growth trends and the
7
2011.
Southwest acquired Air Tran Airways, another LCC, in
40a
merger digestion process.
For example, Delta
appears to have benefited from completing its merger
first and managing the integration expeditiously,
paving the way for fairly aggressive and steady
growth beginning in 2012. United trailed Delta by
two years and effected its merger slightly less
smoothly; its growth line turned upward in 2014 but
became more aggressively so only around 2016.
American’s merger was later and more protracted,
with the integration continuing into 2019.
Nevertheless, American’s growth was on an upward
trajectory even before its merger, with a steeper
incline beginning in 2017.
The trend of consolidation over the past twenty or
so years is subject to differing interpretations. For
example, various American executives have praised
consolidation as a necessary strategy that created a
healthier industry with capacity levels that
appropriately balance the needs of consumers and
carriers. On the other hand, JetBlue’s executives
have often warned that consolidation leads to higher
costs, reduced capacity, and less choice for consumers.
The Court’s role is not to resolve which general view
is more apt or to chart a regulatory course for the
industry, but rather to resolve the dispute presented
in this case. It is enough for present purposes to
observe that the number of domestic carriers from
which air travelers in the United States may choose
has diminished, and market share in this industry
has become meaningfully more concentrated, over
time.
These trends are evident in the northeast, though
with one caveat worth noting. Despite the power it
commands nationally, Southwest controls a relatively
small segment of the market in Boston and New
41a
York.8 There, the three GNCs and JetBlue account
for a substantial majority of domestic traffic. In
Boston, those four carriers controlled more than
eighty percent of the market for domestic air travel in
2019. In New York, their combined share exceeded
seventy percent. Though other carriers also operate
in both places, they do so on much smaller scales.
JetBlue considers Boston Logan International Airport
(“Logan”) its second-largest focus city; Delta considers
it a hub. New York is JetBlue’s largest focus city,
which it serves with operations at John F. Kennedy
International Airport (“JFK”), LaGuardia Airport
(“LaGuardia”), and Newark Liberty International
Airport (“Newark”). Indeed, JetBlue touts itself as
New York City’s “Hometown Airline.” Delta considers
New York a hub and is the biggest carrier at both
LaGuardia and JFK. Newark is a major hub for
United’s domestic and international service.
An airline’s ability to operate at a particular
airport depends on a number of factors, some of which
are especially pertinent here. One is access to gates
at which passengers can board and disembark flights.
The number of gates allocated to a carrier dictates the
number of flights it can operate at the airport.9 Like
8
Southwest’s presence in the northeast is limited,
amounting to a single-digit market share in Boston and New
York (where its only operations are at LaGuardia Airport).
9 In some instances, the nature or location of the gate might
further limit the size of the aircraft that can be operated and/or
the route that can be served. Additionally, there is some
variation in how a single gate is used, depending on the nature
of the carrier operating it. For example, all other factors held
constant, a ULCC tends to “highly utilize assets,” keeping
overall costs low by scheduling more flights per day out of a
single gate, than does a GNC. Trial Tr. vol. 3 at 114.
42a
most airports, Logan is gate-constrained; a carrier
looking to initiate or expand service there would first
need to secure access to gates.10 A handful of airports
have additional limitations on access to air space. In
Newark, a carrier must secure access to gates and
schedule approval from the Federal Aviation
Administration (“FAA”), which monitors air traffic
demand there. At LaGuardia and JFK—two of the
busiest airports in the country—carriers must acquire
both gates and “slots.” A slot is authorization from
the FAA to land or take off during a particular period
of time. Slot control enables the FAA to regulate air
traffic in certain congested, high-demand areas.
Generally, once slots are awarded, they are treated as
the property of the airline obtaining them. A carrier
looking to initiate or expand service at LaGuardia or
JFK would first need to secure access to gates and
slots, both of which are scarce, valuable, and soughtafter resources.11 Numerous witnesses explained at
trial that operating in New York is a costly
proposition, and that opportunities to obtain slots at
10 A Southwest executive described the steps it would need
to take in order to expand its modest operations at Logan but
expressed skepticism about the ability to grow based on his
“understanding” that “all the gates” in the terminal where
Southwest operates at Logan “are allocated” already. Trial Tr.
vol. 2 at 118-19.
11 It is possible to operate to some extent without obtaining
slots, but only during limited (and often unappealing) time
periods. One additional constraint impacts LaGuardia: a rule
imposed by the Port Authority of New York and New Jersey,
which operates the airport, limits the length of flights
originating there to a maximum of 1,500 miles, with one
exception not relevant here.
43a
LaGuardia and JFK are exceedingly rare.12 Though
these constraints make growth in New York
challenging for all airlines, they also insulate those
carriers who have accrued substantial slot holdings
from challenges by new or smaller competitors.
The airline industry, like the rest of the world, was
turned upside down by the COVID-19 pandemic. In
March 2020, demand for air travel in the United
States all but vanished.
Airlines cut capacity,
parking planes in the desert to wait out the pandemic.
The FAA temporarily excused carriers at slotcontrolled airports from the usage requirements they
normally must satisfy in order to retain the rights to
their slots. As travel began to resume—later and
much more slowly than expected—airlines altered
strategies and schedules to account for changes in the
relative demands for leisure and business travel that
persist even today. Some executives predicted that
business travel might never return to pre-pandemic
patterns.
It is against this backdrop of industry
consolidation, in this competitive landscape, and
amid an industry meltdown during the early months
12 Slots can be sold or leased by the carriers holding the
rights to them. In addition, in some circumstances the FAA
might divest an airline of slots, either due to the airline’s failure
to satisfy the minimum usage requirements or to ameliorate
competitive concerns arising from a merger or other joint
venture, then conduct a process to review and choose among
applications from other airlines interested in receiving the
divested slots. For example, after American and US Airways
merged, JetBlue received slots at Ronald Reagan Washington
National Airport (“Reagan”) because American was required to
divest them as a condition of the merger’s approval.
44a
of the COVID-19 pandemic that the agreement at
issue here arose.
B. The Defendants
JetBlue is much smaller than American, ranking
as the sixth-largest airline in the United States. In
2019, it operated six “focus cities”: New York City,
New York (also the location of JetBlue’s
headquarters);
Boston,
Massachusetts;
Fort
Lauderdale/Hollywood and Orlando, Florida; Los
Angeles, California; and San Juan, Puerto Rico.
Approximately three-quarters of JetBlue’s operations
have either Boston or New York as an origin or
destination. JetBlue’s business model has historically
centered on pursuing aggressive growth, providing
high-quality service, offering affordable fares, and
taking market share from other airlines (especially
the GNCs). This model has constrained prices
charged by other airlines (again, especially the GNCs)
and promoted competition. Though often referred to
as an LCC—a category into which it once comfortably
fit—JetBlue’s business model and cost structure have
evolved over time. The carrier now offers more than
one class of service and has a fleet featuring more
than one type of aircraft.
Some witnesses
characterized JetBlue as either a hybrid carrier (akin
to Alaska, but focusing its operations along the east
coast), or as attempting a migration to the GNC
category.
However it is presently categorized, JetBlue
plainly occupies a unique position in the domestic
airline industry. The carrier prides itself on its
“disruptor” status.
Its executives have spoken
publicly—loudly and often—about the harms they
believe consolidation, the GNCs, and coordination via
45a
unchecked alliances have wrought on consumers.
JetBlue’s aggressive approach to competing with the
GNCs and the responses it has provoked are well
documented.13 See, e.g., Doc. No. 325 ¶¶ 32-45
(summarizing evidence of various instances in which
JetBlue impacted the prices and service of the GNCs,
and American in particular).
For example, its
introduction of Mint (a premium class of service akin
to the GNCs’ business class) on transcontinental
routes increased demand for premium seats on such
flights and triggered a substantial, market-wide
reduction in fares for such seats.
It is beyond dispute that, through June 2020,
JetBlue vigorously and directly competed with
American across all markets both carriers served.
See Doc. No. 325 ¶ 236 (describing announcement of
new routes by JetBlue on the eve of the NEA’s
signing, including new nonstop overlaps with
American). JetBlue’s Mint service distinguished it
from every domestic LCC and ULCC carrier (all of
which offer a single class of service) and enabled it to
compete with the GNCs for corporate clients—
especially those in the northeast, where JetBlue’s
presence is especially strong—in a way the other nonGNC airlines could not. The competition was not a
one-way street, with JetBlue triggering fare
responses by American. It worked in the other
direction, too. For instance, when American removed
capacity in some markets in the northeast due to the
grounding of part of its fleet, the competitive pressure
13 The effect of its entry or departure in a market—
increasing demand and lowering fares—has its own name (“the
JetBlue Effect”), though the effect originated with Southwest
before JetBlue’s inception.
46a
arising from American’s presence eased, and JetBlue
raised its fares in response.
American is one of the most powerful airlines
in the world. By some measures, it is the largest
carrier both domestically and internationally.
Headquartered in Texas, American identified the
following cities as its hubs in 2019: Charlotte, North
Carolina; Chicago, Illinois; Dallas/Fort Worth, Texas;
Los Angeles, California; Miami, Florida; New York
City, New York;14 Philadelphia, Pennsylvania;
14 New York was conspicuously absent from the list of hubs
American included in its Proposed Findings of Fact. Doc. No.
324 ¶ 5; cf. Trial Tr. vol. 7 at 131 (claiming “what the NEA did
was” allow American to “buil[d] another hub” in New York, and
thereby implying that American had not considered New York a
hub before the NEA). Its own business documents (including the
slide deck American cited to support its list of hubs), however,
characterize New York as a hub for all three GNCs—American
included. DX-0089B at -014. And, though it contended at trial
that New York was not one of its hubs, American took precisely
the opposite position before this Court in a recently filed private
antitrust lawsuit challenging the NEA. See Mem. Supp. Mot.
Dismiss Transfer at 6-7, 18, Buehler v. JetBlue Airways Corp.,
No. 23-cv-10281-LTS, ECF No. 23 (D. Mass. Mar. 16, 2023)
(supporting request for dismissal or transfer to the Eastern
District of New York of a putative class action by consumers
alleging harm arising from the NEA by asserting that “American
operates a hub in New York,” making litigation there “more
convenient”). These references to New York as a hub do not
depend on the NEA. The internal documents are describing the
network in 2019 (pre-NEA), and the more recent motion papers
advance distinct arguments about why New York is a more
convenient forum for American and for JetBlue independently.
These are just some of the facts supporting the Court’s
straightforward finding that New York is among American’s
hubs, despite protestations otherwise. Simply put, American’s
hubs include New York. The Court rejects the contrary
47a
Phoenix, Arizona; and Washington, D.C. The carrier
achieved its dominant position via a combination of
mergers, alliances, and joint ventures, some of which
aimed specifically to strengthen American’s network
in the northeast.
American pursued growth by establishing
relationships with other domestic and international
carriers. It founded the global oneworld alliance,
which includes American and thirteen other airlines,
and it participates in three smaller joint ventures
focused on transatlantic service and transpacific
service to both Asia and Australia/New Zealand. An
airline based in one country is generally unable to
serve routes that begin and end in other countries.
For example, American can (and does) offer a flight
from New York to Madrid, but it cannot provide a
connecting flight from Madrid to a smaller
destination in Spain, or from Madrid to other
destinations throughout Europe.
Through the
oneworld alliance, however, American can rely on one
or more partner airlines (for example, Iberia) to
complete such itineraries—and members of
American’s frequent-flyer program can accrue or
spend miles on all legs of the trips.
Members of these international arrangements
generally coordinate schedules, share access to
airport lounges, offer reciprocal loyalty benefits,
allocate markets, jointly decide on capacity, share
profits, and sometimes make joint pricing decisions,
all with the aim of providing their customers with
access to a global network no member airline alone
could replicate. Because of such features, alliances
contention as unsupported by the facts, contradicted by the
record, and not credible.
48a
and joint-business agreements like these are
reviewed by government regulators and require
antitrust immunity in order to operate.
Carriers in the United States have not historically
attempted arrangements that intertwine their
operations so broadly with other domestic airlines.
This is at least partly due to a general understanding
across the industry that such coordination would run
afoul of federal antitrust law.15 Domestic carriers
have cooperated on much smaller scales.
For
example, some develop interline agreements, which
essentially promise that if one carrier must rebook its
passengers in the wake of a cancelled flight, it may
offer its passengers open seats on its interline
partner’s flights as well as its own. Others have
adopted codesharing—whereby one carrier places its
own number (or code) on a flight operated by its
partner, allowing for customers of both carriers to
locate and purchase seats on the flight through either
carrier’s website—with or without some degree of
loyalty-program reciprocity. Delta once had such a
relationship with Alaska (before Delta strengthened
15 See, e.g., Trial Tr. vol. 1 at 145-47 (addressing comments
by JetBlue’s CEO criticizing regulators’ liberal approach to
granting antitrust immunity to international joint ventures
among airlines and noting that “in any other industry, they’d
march you off to the penitentiary” for that degree of coordination
with competitors); Trial Tr. vol. 2 at 106 (reflecting belief of
Southwest’s Executive Vice President and Chief Commercial
Officer that discussing network planning with another airline
would be “illegal”); Trial Tr. vol. 15 at 125 (addressing email in
which American’s Vice President of Network Strategy suggested
executives in his position “go to prison if [they] coordinate
schedules” without approval from their “legal team”).
49a
its own west-coast presence), as does JetBlue with
Hawaiian.
Led by Vasu Raja, then its Senior Vice President
of Strategy,16 American began contemplating a new
domestic strategy in 2019, which involved pursuing
deeper partnerships with other domestic carriers.
This effort started before the pandemic took hold, and
it eventually crystallized into two partnerships—one
aimed
at
addressing
American’s
perceived
weaknesses on each coast.
In February 2020,
American announced the West Coast International
Alliance (“WCIA”) it formed with Alaska.17
The WCIA has the following salient features: 1) it
makes Alaska a member of American’s oneworld
alliance; 2) it continues the codeshare relationship the
partners already had; 3) it offers reciprocal lounge
access and other loyalty benefits to frequent flyers
with both partners; 4) it allows the partners to jointly
contract with corporate clients; and 5) it establishes
capped and non-reciprocal revenue sharing between
the partners, with Alaska contributing revenue from
its domestic service within the defined region and
American contributing revenue only from its longhaul international flights from the west coast. The
collaboration between American and Alaska is also
limited in certain important ways. For example, the
WCIA does not include any coordination by the
16 Raja became American’s Chief Revenue Officer in June
2020, and then its Chief Operating Officer in November 2021. In
each role, his responsibilities have included network planning,
as well as alliances and partnerships.
17 The
WCIA essentially replaced a more limited
partnership the two airlines previously had, which included
codeshare and frequent flyer reciprocity agreements.
50a
partners regarding capacity, scheduling, or network
planning, nor does it allocate to one partner any
markets previously served by both partners. In
addition, any routes on which both partners offered
competing direct service (“nonstop overlaps”) are
excluded from the scope of the WCIA, including its
codesharing provision.
Representatives of both Alaska and American
described the WCIA as a success, noting it remains in
place today and is serving its intended purposes. The
WCIA is designed to benefit each partner in a
different way. It enables Alaska, an airline without
significant international service and with no plans to
begin long-haul flying, to provide its customers access
to American’s international flights and those of its
oneworld partners. This, in turn, helps Alaska
“address a growing threat from Delta in Seattle,
Alaska’s primary hub.” Doc. No. 324 ¶ 10. For
American, the WCIA feeds connecting traffic to its
international long-haul flights via Alaska’s domestic
service on the west coast (primarily, at its Seattle
hub). The relationship is important to American,
which viewed itself as operating at a disadvantage on
the west coast, where Delta, United, and Southwest
each have a more substantial presence.18 Both
partners to the WCIA believe it provides their
customers with access to a better network and better
18 Of course, every carrier is strong in some places and
relatively weaker in others. No carrier, not even a GNC—and
not even American, the largest carrier in the world by some
measures—can have a hub in every city or serve every
connecting market. Like all businesses, airlines make choices
about where to focus the resources they have and where to
pursue growth in the short and long term.
51a
loyalty benefits on the west coast, and that it does so
as seamlessly as possible.
For purposes of antitrust analysis, there are other
salient features of the WCIA. American and Alaska,
by and large, were not direct competitors. They
provided competing nonstop service on few, if any,
domestic O&Ds, and Alaska did not offer
international long-haul service. In other words, their
separate networks were fairly characterized as more
complementary than overlapping. The terms of the
WCIA largely leave competition between the two
airlines intact. They do not coordinate schedules,
they do not allocate markets, they share revenue only
in a limited way, and they continue to operate as
separate airlines in all respects. Even with these
limitations, both partners believe the WCIA
accomplishes its purposes—including strengthening
their positions with respect to their shared rival,
Delta.
Neither the WCIA nor any other domestic airline
joint venture has received antitrust immunity. There
is no evidence that any domestic airlines have formed
relationships involving revenue sharing, pooling of
slots and gates with joint decision-making about their
use, allocation of markets, coordination of schedules,
or broad efforts to operate as one airline in a
substantial region of the country. At least, that was
the case until American and JetBlue formed the NEA.
C. The Agreement
By 2020, JetBlue knew that Delta was mounting a
challenge to its dominance in Boston. Delta had
invested in growth there, ultimately declaring Logan
a Delta hub. Meanwhile, JetBlue’s growth in New
York had stalled due to its inability to secure access
52a
to more slots at LaGuardia or JFK. Around the same
time, American was fretting about its operations in
New York. It had a strong historical position there,19
controlled the second-most slots at LaGuardia and the
third-most slots at JFK, and counted New York
among its hubs. Nevertheless, American did not
consider its operations in New York to be sufficiently
profitable, and it believed growth by Delta (at JFK
and LaGuardia) and United (at Newark) posed a
threat to American’s overall position in the region. By
the fall of 2019, American perceived that JFK slot
usage was “under heavy scrutiny with the FAA,” and
that American’s underuse of its slots in recent years
put those valuable assets at risk. PX 0148 at 3.20
These atmospherics set the scene for negotiations
between American and JetBlue that culminated in
the NEA.
In late 2019, the two carriers began discussing a
possible lease, through which JetBlue would acquire
temporary control over some of American’s slots at
JFK. Though they negotiated an agreement to lease
twenty-seven slots on a short-term basis, American
19 According to at least one witness, American benefitted in
New York due to its legacy of having launched the first nonstop
transcontinental flight, from New York to Los Angeles. This
fact, it appears, created a preference among corporate clients in
the entertainment industry for American over other airlines—a
preference which continues to this day.
20 Copies of the trial exhibits, cited by “PX” or “DX” number
here, are on file with the Court. The original exhibits “remain
in the custody of the party that introduced them” in accordance
with this Court’s Local Rule 79.1(a). The same rule requires the
party having custody of an exhibit to maintain it “in the form in
which [it was] offered until the proceeding is finally concluded,”
and to “make the exhibits available to all parties.”
53a
subsequently proposed adding more slots for a longer
(two-year) term, and internal discussions at JetBlue
reflect a belief among its network planners that the
leases would continue or renew for longer than a
season or two. E.g., PX 0507 at 1; PX 0527 at 1. Talks
between the carriers expanded to contemplate a
broader domestic partnership focused on the
northeast, as envisioned by Raja and modeled after
the WCIA. The record establishes that a primary
goal—and a significant concern—motivating both
American and JetBlue to pursue a partnership was a
mutual desire to address the competitive threat they
each perceived Delta presented in markets they
deemed important.21 See PX 0268 at 2-3 (describing
purpose of the initiative that yielded the NEA as
improving the competitive positions of American and
JetBlue “relative to” Delta and United). The parties
had another set of complementary goals. JetBlue
sought access to more slots in New York, so it could
expand its presence there. American hoped to reduce
21 Testimony by executives for both defendants—including
Raja, the NEA’s architect—makes this abundantly clear. See,
e.g., Trial Tr. vol. 1 at 182, 213 (reflecting testimony by JetBlue’s
CEO that JetBlue is “collaborating” with American in order to
“compete against two much larger airlines in the form of Delta
and United” in New York and “to ensure that we had a long term
viable position in Boston . . . as Delta continued to grow”); Trial
Tr. vol. 4 at 101-02 (reflecting Raja’s description of the NEA’s
revenue sharing component as meant “to align our incentives to
get people away from Delta”); Trial Tr. vol. 5 at 8-9, 29 (reflecting
testimony by American’s CEO that a rationale for entering the
NEA was “to make [American] stronger versus Delta and
United”); see also Trial Tr. vol. 13 at 110-11 (reflecting testimony
by defense expert that the NEA is the result of JetBlue and
American “trying to figure out how to compete with Delta’s
position in Boston” and “with Delta and United” in New York).
54a
the unprofitable portion of its New York operations
and avoid regulatory action for underuse of its New
York slots.
Negotiations between American and JetBlue
continued despite the COVID-19 pandemic. In April
2020, on the advice of their legal departments,
American
and
JetBlue
each
designated
representatives to a “Clean Team”—a group of
individuals with knowledge of scheduling and
network planning, but whose daily responsibilities
did not involve such work.22 The Clean Team built a
theoretical joint network schedule that would allow
American and JetBlue to evaluate what the carriers
could achieve via a partnership. This process lasted
through May 2020. Ultimately, the Clean Team
produced a hypothetical schedule for 2023,23 which
pooled the resources of both carriers—including
aircraft they did not yet possess but, per their
respective order books, they expected to receive by
202324—and “optimized” them to create one cohesive
NEA schedule. The Clean Team then ran the
22 The idea was that Clean Team participants would be
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