DOJ REMARKS ON LAWSUIT CHALLENGING US AIRWAYS PROPOSED MERGER WITH AMERICAN AIRLINES

FROM:  U.S. DEPARTMENT OF JUSTICE 

REMARKS AS PREPARED FOR DELIVERY BY ASSISTANT ATTORNEY GENERAL BILL BAER AT THE CONFERENCE CALL REGARDING THE JUSTICE DEPARTMENT’S LAWSUIT CHALLENGING US AIRWAYS’ PROPOSED MERGER 
WITH AMERICAN AIRLINES WASHINGTON, D.C.

As you are aware, this morning, the Department of Justice, six state attorneys general plus the District of Columbia, filed a lawsuit in U.S. District Court in Washington, D.C., to block the proposed merger of American Airlines and US Airways.

Those attorneys general participating in the lawsuit are: Texas, from American’s home state; Arizona, from US Airways’ home state; Pennsylvania, home to one of US Airways’ largest hubs; Florida; Tennessee; and Virginia and Washington, D.C. – where both airlines operate. We filed the lawsuit today because we determined that the merger – which would create the world’s largest airline and leave just three legacy carriers remaining in the U.S. – would substantially lessen competition for commercial air travel throughout the United States. Importantly, neither airline needs this merger to succeed. We simply cannot approve a merger that would result in U.S. consumers paying higher fares, higher fees and receiving less service. Americans spent more than $70 billion flying around the country last year. Increases in the price of airline tickets, checked bags or flight change fees resulting from this merger would result in hundreds of millions of dollars of harm to American consumers.

If this merger were to go forward, consumers will lose the benefit of head-to-head
competition between US Airways and American on thousands of airline routes across the country – in cities big and small. They will pay more for less service because the remaining three legacy carriers – United, Delta and the new American – will have very little incentive to compete on price. Indeed, as our complaint shows, the management of US Airways, which will run the new airline, sees consolidation as a vehicle to reduce competition between the airlines and raise fees and fares. Here is one powerful example. Today, US Airways competes vigorously by offering discounts of up to 40 percent if a consumer takes its one stop instead of another airline’s nonstop route. This means that if you need to catch a flight at the last minute for any reason –

celebration or emergency – you will find it is 40 percent cheaper to take US Airways’ connecting service than the non-stop fare offered by American, Delta and United. The big three airlines – American, Delta and United – don’t like this aggressive price cutting by US Airways. For example, for round-trip flights leaving on August 13 and returning on August 14 from Miami to Cincinnati, you can see the benefits of US Airways’ discount program. American is the only airline on this route to offer nonstop service, charging $740. Delta and United don’t have offer competition since they both charge more for their connecting service than American charges for nonstop service. In this instance, a consumer who bought a US Airways one-stop ticket would save $269 compared to American’s nonstop service. You can see the benefits of competition between US Airways and American on hundreds of other flights. For example, on round-trip flights leaving on August 13 and returning on August 14 from New York to Houston, US Airways’ one stop fare is about $870 cheaper than the other legacy carriers’ nonstop flights, and even beats JetBlue and AirTran by more than $300. Although Southwest doesn’t participate in the standard online travel sites, a cross-check against the Southwest website for the same dates demonstrates that US Airways also beats Southwest’s $887 nonstop fare by more than $300.  If this merger happens, US Airways’ aggressive discounting – called Advantage Fares –

will disappear. As a bigger airline with many more hubs, there will be no incentive for the merged company to offer any of the discounts I just described, resulting in higher prices, less choice and fewer services for the more than two million travelers who today benefit from the program. How do we know it? We know this from the internal analyses and the planning documents put together by American in considering the likely effects of this merger. The elimination of the Advantage Fares program is just one example. If the merger goes forward, consumers can also expect to pay higher fees for things like checked bags, flight changes, more legroom and frequent flyer benefits. Today, American does not charge if you redeem frequent flyer miles. US Airways charges an average of $40. If the merger is allowed, US Airways is planning to take this frequent flyer benefit away and make American’s frequent flyers pay redemption fees. By eliminating this competitive distinction between American and US Airways, the new airline generates an additional $120 million in revenue. But you pay the price. Consumers will also pay more on routes where US Airways and American today offer competing nonstop service. We know from prior mergers that elimination of head-to-head competition on nonstop routes results in substantial price increases for consumers.

Expect similar fare increases if this merger is allowed. For example, US Airways and American offer competing nonstop service between Charlotte, North Carolina and Dallas-Ft. Worth. Consumers will likely pay more than $3 million more per year for travel on that route alone.  You don’t need to go far from this very city to see another worrisome effect from the proposed merger. Across the Potomac River, the merged airline would dominate Washington Reagan National Airport, by controlling 69 percent of the take-off and landing slots at DCA. And, it would have a monopoly on 63 percent of the nonstop routes out of Reagan.

National. By allowing one airline to control that many slots, the merger will prevent other airlines, including low-fare carriers like JetBlue and Southwest from competing at Reagan National.  It would face little or NO competition.  Indeed, this would get worse. Recently JetBlue started service from Reagan National to Boston, competing with US Airways, and fares dropped by more than 30 percent saving consumers about $50 million a year. Similarly, consumers saved about $14 million in lower fares between Tampa and Reagan National after JetBlue started competing against US Airways. But – and this is important – half of JetBlue’s slots at Reagan National are leased from American. If this deal is allowed, new American can terminate that lease and JetBlue’s ability to compete will be severely diminished. Consumers will pay the price.

Blocking the merger will preserve current competition and service at Reagan National airport, including flights that US Airways currently offers to large and small communities around the country. The complaint also describes other ways in which consumers are at risk if we allow this deal to further reduce the number of competitors in this industry.

You do not need to take my word for this. High level executives at US Airways have talked about how consolidation allows for capacity reductions that “enable” fare increases. One US Airways executive recently stated that this merger is “the last major piece needed to fully rationalize the industry.” In the airline business the word “rationalize” is a code word for less competition, higher costs for consumers and fewer choices.

Both US Airways and American have publicly stated that they can do well without this merger. American has used the bankruptcy process to lower its costs and revitalize its fleet. It has repeatedly said that it can thrive as a standalone competitor. Just this January, American’s management presented plans that would increase the destinations and frequency of its flights in the U.S., allowing it to compete independently and vigorously with plans to grow.

And, executives of US Airways agree about American’s ability to make it on its own. They have noted that American will be stronger post-bankruptcy and that “[t]here is NO question” about American’s ability “to survive on a standalone basis.”

 US Airways also has said that US Airways itself does not need the merger – that it can thrive as a standalone firm.

The lawsuit we filed today to block this deal gives consumers the best possible chance for continued competition in an important industry that they have come to rely upon.
I want to thank the litigation team from the division’s Transportation, Energy and
Agriculture Section, led by Chief Bill Stallings and Assistant Chief Kathy O’Neill, as well as the Economic Analysis Group led by Bob Majure and Oliver Richard for their hard work on this.  And, I want to thank the attorneys general who have joined this lawsuit and are working with us to protect the consumers of their respective states.
And with that, I’m happy to take any questions you have.

COURT AUTHORIZES JOHN DOE SUMMONSES IN NORWAY SEEKING IDENTITIES OF PAYMENT CARD USERS

FROM:  U.S. DEPARTMENT OF JUSTICE 
Monday, July 29, 2013
Federal Courts Authorize Service of John Doe Summonses Seeking Identities of Persons Using Payment Cards in Norway

Ten Lawsuits Initiated Pursuant to Tax Treaty Between United States and Norway; Seven Petitions Granted, Three Petitions Remain Pending
The Justice Department announced that federal courts in Minnesota, Texas, Pennsylvania, Oklahoma, Virginia and California have entered orders over the past week authorizing the Internal Revenue Service (IRS) to serve John Doe summonses on certain U.S. banks and financial institutions, seeking information about persons who have used specific credit or debit cards in Norway.  The summonses are referred to as “John Doe” summonses because the IRS does not know the identity of the person being investigated.  While orders have been entered in seven of these cases, the United States’ petitions in three additional cases remain pending.

The lawsuits, filed on July 19 and 22, 2013, in nine federal districts, were initiated at the request of the Norwegian government under a treaty between Norway and the United States.  The treaty allows the two countries to cooperate in exchanging information that is helpful in enforcing each country’s tax laws.  The United States is seeking the identities of persons who have used specific debit or credit cards issued by certain U.S. financial institutions so that Norway can determine if those persons have complied with Norwegian tax laws. A total of 18 U.S. financial institutions are identified in the government’s court filings. The filings do not allege that these financial institutions have violated any U.S. laws with respect to these accounts.

As alleged in court papers filed by the Justice Department, Norwegian authorities have reason to believe, based upon the use of payment cards in Norway that were issued by U.S. banks, that unidentified card holders may have failed to report financial account information or income on their Norwegian tax returns.  Court papers cite examples where individuals using non-Norwegian payment cards have claimed to be tax residents of other countries but were found to have resided in Norway for sufficient time to subject them to taxes in Norway.  

 “The Department of Justice and the IRS are committed to working with our treaty partners to fight tax evasion wherever it occurs,” said Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division. “All taxpayers should know that our efforts in this area are global, coordinated and will continue.”

  “These summonses reflect our continuing efforts to work with our international partners on offshore tax evasion,” said Douglas O’Donnell, IRS Assistant Deputy Commissioner, Large Business & International (LB&I). “By using effectively our existing network of bilateral agreements, countries can help one another put an end to the global practice of evading taxation by hiding assets abroad.”

The lawsuits are a part of ongoing international efforts to stop persons from using foreign financial accounts as a way to evade taxes.  Courts have previously approved John Doe summonses allowing the IRS to identify individuals using offshore accounts to evade their U. S tax obligations.  In the present suits, the Justice Department is seeking the identities of persons who may be attempting to hide their Norwegian taxable income in U.S. financial accounts.

DOJ FILES LAWSUIT OVER ALLEGED RETALIATION AGAINST A DEAF COUPLE

FROM:  U.S. DEPARTMENT OF JUSTICE
Monday, July 29, 2013
Department of Justice Files Lawsuit Against Vero Beach, Fla. Doctor and Medical Practice for Retaliating Against Deaf Couple

The Department of Justice announced today that it has filed a lawsuit against Dr. Hal Brown and Primary Care of the Treasure Coast of Vero Beach, Fla. (PCTC), alleging that the doctor and the medical practice violated the Americans with Disabilities Act by discriminating against Susan and James Liese, who are deaf. The complaint alleges that the doctor and the practice violated the ADA by retaliating against Mr. and Mrs. Liese because they engaged in activities protected under the act.  The suit was filed in the U.S. District Court for the Southern District of Florida in Ft. Pierce.

According to the Justice Department’s complaint, the doctor and medical practice terminated Mr. and Mrs. Liese as patients because the couple pursued ADA claims against a hospital for not providing effective communication during an emergency surgery.  The hospital is located next door to and affiliated with PCTC.  The complaint alleges that the Lieses threatened the hospital with an ADA suit based on failure to provide sign language interpreter services, and upon learning of the lawsuit, PCTC and Dr. Brown, who was the Liese’s primary doctor at PCTC, immediately terminated the Lieses as patients.

“The Department of Justice is committed to enforcing the provisions of the ADA that protect an individual from retaliation when he or she opposes disability discrimination and prohibit interference with an individual in the exercise of rights granted by the ADA,” said Jocelyn Samuels, Acting Assistant Attorney General for the Civil Rights Division.  “A person cannot be terminated as a patient because he or she asserts the right to effective communication at a hospital.”

The enforcement of the ADA is a top priority of the Justice Department’s Civil Rights Division.  The ADA prohibits retaliation against an individual because they oppose an act that is unlawful under the ADA and because they made a charge, testified, assisted or participated in any manner in an investigation, proceeding or hearing under the ADA.  The ADA also makes it unlawful to coerce, intimidate, threaten or interfere with any individual exercising their rights protected by the ADA.