Special Master Says U.S. Airline Merger Data Privileged

American Airlines and US Airways Group Inc. have no right to the Justice Department documents on previous airline mergers they sought as they fight a U.S. lawsuit to block their tie-up, a court-appointed official said.

Special Master Richard Levie, in an opinion issued today in federal court in Washington, recommended to the judge overseeing the case that she reject the request for all but one document, saying the records are exempt from disclosure under a legal doctrine that protects the internal work of attorneys preparing a lawsuit.

“Although defendants have established the relevance of their requests, the various privileges asserted by plaintiffs protect almost all of the requested material from disclosure,” Levie wrote.

The Justice Department, which sued the airlines in August, had refused to turn over records about its approval of airline deals such as the 2010 United-Continental tie-up. The airlines argued that the government’s analysis of those deals could help show their proposed merger is equally pro-competitive.

Levie also recommended that U.S. District Judge Colleen Kollar-Kotelly turn down the airlines’ bid for the names of third parties interviewed by the government in its investigation of the deal, and the information provided by those people. Levie said the work-product privilege also protects the U.S. against having to disclose that material.

Little Impact

Levie’s recommendations are unlikely to have much impact on the airlines’ chances in the suit, according to Albert Foer, president of the Washington-based American Antitrust Institute, a nonprofit group that advocates for antitrust enforcement.

“It may be a minor setback to their litigation strategy, but it has very little to do with the case,” Foer said.

Levie’s opinion that Justice Department work product documents should be off limits is similar to how courts have viewed such records in earlier cases, said David Balto, a Washington-based antitrust lawyer who represents consumer groups. “I don’t find that surprising at all,” he said.

Kollar-Kotelly may overrule Levie on the disclosure of third parties because allowing them to be identified “is fairly typical,” Balto said.

In a joint statement, the airlines said, “We are reviewing the special master’s ruling and will consider all of our options. We are confident in our legal position and our ability to win this case.”

Hurt Consumers

The government claims the proposed merger of American parent AMR Corp. and US Airways, which would create the world’s largest airline, would reduce competition and hurt consumers. Fort Worth, Texas-based AMR and US Airways, based in Tempe, Arizona, argue the deal would offer consumers more choices of non-stop flights. A trial in the case is scheduled to begin on Nov. 25.

The airlines sought documents showing the “facts, factual assumptions, and forecasts” on which the Justice Department based its conclusions that the previous mergers would increase competition. They said in court papers that they intended to use the information to show that their combination is pro-competitive even when using government models and forecasts.

The previous mergers are US Airways and America West in 2005, Delta Air Lines and Northwest Airlines in 2008, United Airlines and Continental Airlines in 2010, and Southwest Airlines and AirTran in 2011.

Economic Models

Levie agreed the information is relevant because the government’s economic models may be used to show that negative effects of earlier mergers stemmed from outside economic factors rather than the mergers themselves and that those deals are now having pro-competitive effects.

There are 18 documents at issue in the dispute, including staff recommendation memos, PowerPoint presentations and emails, according to Levie’s report. The documents contain detailed economic analyses.

“Disclosing this material creates a real risk that, in the future, economists may be inclined to provide only the bare facts considered and the bare results of their analyses,” Levie wrote. “This outcome would ultimately harm the decision-making process by limiting the information provided to the decision maker.”

The Justice Department has offered “to provide to the airlines all of the material which the other airlines provided to DOJ” when the government considered earlier mergers, according to Levie.

The case is U.S. v. US Airways Group Inc., 13-cv-01236, U.S. District Court, District of Columbia (Washington).

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