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March 8, 2023

Breakingviews: Elizabeth Warren leads cavalry into deal battles

by Breakingviews.

Reinforcements are arriving in the trustbusting fight. The U.S. Department of Justice on Tuesday sued to block JetBlue Airways’ $3.8 billion acquisition of Spirit Airlines, and it may yet be joined by colleagues at the Department of Transportation. It would be the third curious regulatory intervention in recent weeks, each encouraged by Democratic Senator Elizabeth Warren. The cases speak to how President Joe Biden’s administration is pushing its consolidation crackdown to new extremes.

DOT merger approval is typically a formality. Since the industry was deregulated in the late 1970s, the agency rarely, if ever, has declined to approve the transfer of certificates to operate routes from a seller to a buyer. It typically defers on a transaction’s merits to the DOJ, which handles antitrust investigations. In a September letter to Transportation Secretary Pete Buttigieg, Warren argued that the DOT should use its own tools, specifically in the Spirit situation.

Airlines aren’t alone, either. The Federal Communications Commission dealt a blow to U.S. broadcaster Tegna’s $9 billion sale to hedge fund manager Standard General, while First Horizon’s $13.5 billion takeover by Toronto-Dominion Bank faces lengthy delays, including from the Office of the Comptroller of the Currency. Warren leaned on both regulators to get involved.

The significance comes down to the courts. The DOJ and the Federal Trade Commission, its partner antitrust agency, have a mixed record of convincing judges to let them block deals. UnitedHealth beat back a federal lawsuit against its plan to buy Change Healthcare; Facebook owner Meta Platforms shrugged off an FTC attempt to stop its purchase of fitness app developer Within.

Companies are increasingly bracing for pushback. JetBlue says it built time for a lawsuit into the Spirit merger agreement. Intercontinental Exchange on Tuesday renegotiated terms of its $12 billion deal to buy mortgage software developer Black Knight to account for a divestiture designed to placate regulators, but it also vowed to litigate any FTC challenge.

Attacking deals from other flanks might sidestep some of the risk. Warren emphasized that the DOT’s edge is that it can block mergers “without having to go to court.” Speaking last month, she envisioned a host of agencies backstopping their antitrust brethren. As the senator charges up the competition cavalry, dealmakers may have to redraw their battle plans.

Context News

The U.S. Department of Justice on March 7 filed a lawsuit to block the $3.8 billion acquisition of budget carrier Spirit Airlines by JetBlue Airways. The Department of Transportation is also expected to block the deal by denying the transfer of Spirit’s airline operating certificate to JetBlue, according to a March 6 report by Bloomberg. Senator Elizabeth Warren, a Democrat, on Sept. 15 sent a letter to Transportation Secretary Pete Buttigieg, requesting that the agency use its authority to scrutinize the merger, rather than deferring to the DOJ.



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