JetBlue and American Airlines Found Liable in Antitrust Case, Despite Absence of Evident Consumer Harm

In a recent ruling, the First Circuit Court of Appeals determined that American Airlines and Jet Blue violated the Sherman Antitrust Act due to their Northeast Alliance (NEA), which involved revenue sharing and coordinating services at several major airports, including Boston Logan, JFK, LaGuardia, and Newark Liberty. The decision upheld an earlier ruling by Massachusetts District Judge Leo Sorokin, emphasizing that the potential for “anticompetitive harm” was sufficient ground for legal action, regardless of whether actual consumer harm was demonstrated. Appellate Judge William Kayatta Jr.’s judgment reflects a broader trend under the Biden administration to prioritize competition itself, rather than the tangible effects on consumers. The case stemmed from a complaint by the Department of Justice (DOJ) asserting that the NEA, effective since February 2021, effectively merged operations and stifled competition in the Northeast aviation market.

The origins of the case date back to September 2021, when the DOJ filed a complaint alleging that the NEA restricted competition and violated Section 1 of the Sherman Act. Despite a lengthy investigation prior to this legal action, the DOJ’s claims centered around the purported prevention of “hundreds of millions of dollars in harm to consumers.” The complaint painted the NEA as a modern version of a historical business trust that could result in significant adverse impacts on consumer welfare, even though the DOJ did not substantiate claims of increased prices or degraded service quality. In response, American Airlines and Jet Blue moved to dismiss the case, arguing that the DOJ had not demonstrated sufficient market power to justify their claims.

Judge Sorokin’s denial of the dismissal motion indicated his belief that even without an explicit analysis of market dynamics, it was evident that the NEA posed an unlawful threat to competition. Sorokin criticized the alliance for reducing the number of competitors in the market and diminishing Jet Blue’s role as a so-called “maverick competitor.” Nevertheless, the post-NEA performance indicators showed that both airlines maintained similar consumer satisfaction levels, with Jet Blue scoring around 78, consistent with its pre-NEA performance, while American Airlines reported improved satisfaction ratings. This raises questions about the practical impact of the NEA on consumer choice and quality of service in the airline industry.

While legal principles regarding antitrust often focus on maintaining competition as an ideal, criticisms exist regarding the assessments made by the DOJ and Judge Sorokin. Economist Don Boudreaux argued that the optimal industry structure is unknown and that competition can often lead to unpredictable outcomes. In industries with high fixed costs like airlines, there are pragmatic economic arguments for permitted coordination, such as that created by the NEA, which may actually facilitate market entry for new firms by stabilizing expectations around profitability. Thus, the binary view that more competition is always desirable can overlook nuanced economic realities.

Critics also highlight a potential inconsistency in how antitrust laws are enforced, noting that the DOJ collaborates with the FTC to delineate responsibilities for enforcing antitrust regulations under different acts, including the Sherman Act and the Clayton Antitrust Act. This division of labor alleges a priority on upholding competition at the potential expense of consumer welfare. The court’s ruling reinforced the notion that the Sherman Act exists primarily to maintain competitive processes, even if this focus may obscure the actual well-being of consumers.

Ultimately, while the legal and economic discussions surrounding this case reflect ongoing tensions between maintaining competitive market conditions and ensuring consumer welfare, a deeper analysis is warranted. The emphasis must shift back to evaluating whether actions taken by airlines genuinely translate into tangible benefits for consumers rather than purely assessing the competitive landscape. The First Circuit’s ruling suggests an overarching commitment to competition, but a more comprehensive understanding of how coordinated efforts like the NEA function can inform policies that rigorously protect—not just competition but also consumer interests.