BOSTON (Legal Newsline) - JetBlue and American Airlines are taking aim at the federal government's choice of experts in a lawsuit that alleges a business arrangement between the two will hurt customers.
The airline companies on Sept. 2 filed a motion to exclude expert testimony the Department of Justice plans to introduce to back claims the so-called "Northeast Alliance" will increase costs for flyers. A Boston federal judge earlier this year rejected the companies' motion to dismiss.
Judge Leo Sorokin said the DOJ and six states have adequately alleged the agreement is "likely to harm competition in the relevant markets, and that American and JetBlue control a significant share in an already concentrated market."
To prove their claims, the plaintiffs turned to Nathan Miller, a professor at the McDonough School of Business and Department of Economics at Georgetown University. To show future increased costs, he used a merger simulation model.
"The NEA is in no way, shape or form a merger," the airlines said as they argue Miller doesn't pass the Daubert rule for admitting expert testimony.
"Indeed, to put the square peg of the NEA into the round hole of merger simulation, Dr. Miller explicitly assumes that JetBlue and American willignore the terms of the NEA agreements, 'behave' as if they split profits in fixed proportions, and in that way replicate the effects of a merger," the motion says.
The agreement has American and JetBlue sharing revenue and coordinating flights into and out of four major airports – Boston Logan, John F. Kennedy International, LaGuardia and Newark Liberty International.
The companies briefed both the DOJ and the DOT before announcing the alliance in July 2020. After a six-month investigation, the DOT gave the pact its blessing as long as it increased options for consumers.
The six states that joined the feds as plaintiffs are Arizona, California, Florida, Massachusetts, Virginia and Pennsylvania. They allege the alliance will eliminate significant competition between American and JetBlue that has led to lower fares and higher quality service for consumers traveling to and from those airports. It will also closely tie JetBlue’s fate to that of American, diminishing JetBlue’s incentives to compete with American in markets across the country, the suit claims.
They want a ruling that says the NEA violates the Sherman Act. That can’t happen, the companies say, because the plaintiffs fail to allege any harm and fail to allege that revenue sharing is anticompetitive.
In bashing Miller's opinion, the airlines say his failure to simulate the actual terms of the NEA leaves his findings inadmissible.
"Dr. Miller predicts average price increases that are far in excess of those associated with past airline mergers, especially the most recent ones, where the common finding is lower fares on well-travelled routes such as those at the heart of Dr. Miller's harm estimates," the motion says.
"Former DOJ and FTC economists wrote that anyone performing a merger simulation should be 'prepared to persuade others' that the model 'explains the past well enough to provide useful predictions of the future.'
"Dr. Miller cannot do so. For this and other reasons, Dr. Miller's simulation is not reliable and should be excluded from evidence."