United States of America et al v. JetBlue Airways Corporation and Spirit Airlines Inc.

The Court enjoined the proposed merger, ruling that such a merger would “lessen competition in violation of the Clayton Act.”

Retained by the U.S. Department of Justice

In July 2022, JetBlue Airways Corporation (JetBlue) and Spirit Airlines (Spirit) announced they had reached an agreement for JetBlue to acquire Spirit for a proposed $3.8 billion. The announcement followed multiple offers by JetBlue to acquire Spirit, including a hostile takeover bid to buy outstanding Spirit shares from shareholders.

“Dr. Gowrisankaran’s testimony was thoughtful and credible, and… [h]e was also methodical and articulate in explaining his analysis and the conclusions that he drew from it.”

The U.S. Department of Justice (DOJ), six states, and the District of Columbia filed a lawsuit in March 2023 to block the merger. The plaintiffs alleged that the deal violated Section 7 of the Clayton Act and expressed concern that the merger would result in travelers facing higher airline fares and fewer options.

The DOJ retained Cornerstone Research to support Gautam Gowrisankaran of Columbia University and Tasneem Chipty of Chipty Economics as expert witnesses. Dr. Gowrisankaran analyzed the competitive effects of the merger, including both unilateral and coordinated effects, and concluded that the agreement was likely to result in substantial harm to consumers. Dr. Chipty studied potential mitigating factors, including entry, efficiencies, and divestitures, and concluded that those factors would be unlikely to offset the harm to consumers as identified by Dr. Gowrisankaran.

The Court found Dr. Chipty’s analysis of entry “most useful” and cited it in support of its finding that it is “practically impossible” that other ultra-low cost airlines could sufficiently replace Spirit in the relevant markets.

Following a five-week trial in the United States District Court, District of Massachusetts, the Court enjoined the proposed merger, ruling that such a merger would “substantially lessen competition in violation of the Clayton Act.” The Court’s opinion relied on analysis by both of the government’s experts. It described that “Dr. Gowrisankaran’s testimony was thoughtful and credible, and … [that h]e was also methodical and articulate in explaining his analysis and the conclusions that he drew from it.” The opinion gave significant weight to Dr. Gowrisankaran’s testimony on the effects of the proposed merger. In turn, the Court cited Dr. Chipty’s analysis of entry in support of its finding that “it is not only unlikely, but practically impossible” that other ultra-low cost airlines could sufficiently replace Spirit in the relevant markets.

In March 2024, the parties abandoned the merger.