FIRST CIRCUIT GROUNDS THE NORTHEAST ALLIANCE
December 25, 2024
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On November 8, 2024, the United States Court of Appeals for the First Circuit (“First Circuit”) affirmed a lower court ruling that American and JetBlue’s Northeast Alliance (“NEA”) unlawfully reduced competition in violation of the Sherman Act. The First Circuit agreed that American and JetBlue went from competitors to partners in the NEA region which further concentrated market participants in what was already a consolidated marketplace. The fact that the NEA’s schedule-coordinating provisions caused American and JetBlue to function as one airline “when choosing which routes to fly, when to fly them, and which aircraft (and which partner) [would] do so” undercut American’s arguments on appeal. Although the First Circuit recognized that one colorable “procompetitive rationale” for the NEA was more flexible loyalty benefits for frequent fliers, a unanimous three-judge panel found American’s arguments unavailing, especially since any procompetitive benefits realized by the NEA could have been achieved through less restrictive means. After remarking that horizontal agreements allocating markets between substantial competitors are generally treated as per se illegal, the First Circuit placed the NEA’s market allocation near the anticompetitive end of the competition spectrum. It further rejected American’s alleged procompetitive justifications, noting that “American all but abandons any serious attempt to dispute the district court’s conclusion that the rest of its claimed benefits ‘lack evidentiary support entirely or find support only if an artificially narrow lens is applied.’” In other words, the unanimous three-judge panel found that the NEA’s purported procompetitive effects “wither under even the slightest scrutiny.” The First Circuit concluded that an arrangement like the West Coast International Alliance (“WCIA”) between American and Alaska could have served American and JetBlue’s objective without unlawfully restricting competition in the NEA region. Citing the fact that the WCIA did not involve carrier cooperation regarding capacity, scheduling, network planning, or market allocation, the First Circuit looked favorably on a more limited WCIA-style arrangement in contrast to the now grounded NEA. Although the First Circuit affirmed the finding that the joint venture between American and JetBlue violated federal antitrust law, savvy advocates are expected to mimic WCIA-style arrangement to avoid the NEA’s fate.
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