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Competitive Strategies and Government

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The Antitrust Division of the Department of Justice (DOJ) enforces the federal antitrust laws, and is responsible for reviewing mergers through a process before mergers are finalized. There are no specific policies for the airline business. Externalities that exist for the industry are rising fuel prices, terrorist attacks, emissions, noise pollution, congestion, and traffic delays just, to name a few. The Antitrust Division’s role maintains the competitive market by blocking anticompetitive mergers. The DOJ approach to reviewing mergers is given in detail in the Horizontal Merger Guidelines. Lawyers and economists are the individuals that analyze the market.
The Clayton Antitrust Act of 1914, section 7, does not allow the approval of mergers, and acquisitions that will cause the U.S. market to decrease in competition. The responsibility of DOJ is to determine if the merger will enhance or create market power. According to J. Bruce McDonald, Deputy Assistant Attorney General, Antitrust Division (2005), “Market power is the ability to raise profitability prices over the long-term, without losing sales such that the price increases become unprofitable. Protecting consumers maintaining competitive markets is the goal of antitrust enforcement.”
According to DOJ (2005), “the last merger investigated was in 2000-2001, United's proposed acquisition of US Airways. The merger presented competitive problems that can arise in airline mergers: * United had a large base of operations at Washington Dulles, and USAir at Washington Reagan and BWI. Therefore, they were the only two significant competitors for nonstop service from the Washington area to a number of cities, such as Rochester and New Orleans. * Similarly, the two were the most significant nonstop carriers in a number of hub-hub markets, including Philadelphia-Los Angeles, Philadelphia-San Francisco,...

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