When criminal types aren't prosecuted for their criminal behavior– when they get away with it without paying a price– it effectively gives them permission to keep it up and even go further down the road of criminality. We've been writing about Rahm Emanuel's criminal behavior– behavior rewarded with immense sums of money, prestige and power… and more money– and how he always gets away with it. It's the public that pays the price. Justin Elliott, writing this week for ProPublica shows how Rahm and other grotesquely corrupt Democrats have helped turning flying into a hell on earth– and now they can afford private jets.
Three years ago, the Obama administration unleashed its might on behalf of beleaguered American air travelers, filing suit to block a mega-merger between American Airlines and US Airways. The Justice Department laid out a case that went well beyond one merger.
“Increasing consolidation among large airlines has hurt passengers,” the lawsuit said. “The major airlines have copied each other in raising fares, imposing new fees on travelers, reducing or eliminating service on a number of city pairs, and downgrading amenities.”
The Obama administration itself had helped create that reality by approving two previous mergers in the industry, which had seen nine major players shrink to five in a decade. In the lawsuit, the government was effectively admitting it had been wrong. It was now making a stand.
Then a mere three months later, the government stunned observers by backing down.
It announced a settlement that allowed American and US Airways to form the world’s largest airline in exchange for modest concessions that fell far short of addressing the concerns outlined in the lawsuit.
The Justice Department’s abrupt reversal came after the airlines tapped former Obama administration officials and other well-connected Democrats to launch an intense lobbying campaign, the full extent of which has never been reported.
They used their pull in the administration, including at the White House, and with a high-level friend at the Justice Department, going over the heads of staff prosecutors. And just days after the suit was announced, the airlines turned to Chicago Mayor Rahm Emanuel, Obama’s first White House chief of staff, to help push back against the Justice Department.
Some lawyers and officials who worked on the American-US Airways case now say they were “appalled” by the decision to settle, as one put it.
“It was a gross miscarriage of justice that that case was dropped and an outrage and an example of how our system should not work,” said Tom Horne, the former state attorney general of Arizona, one of seven states that were co-plaintiffs with the federal government.
As a candidate in 2007, President Obama pledged to “reinvigorate antitrust enforcement,” calling that the “American way to make capitalism work for consumers.” Hillary Clinton has recently made similar promises.
But the reversal in the American-US Airways case was part of what antitrust observers see as a string of disappointing decisions by the Obama administration.
…Obama’s antitrust enforcers have been somewhat more aggressive than the Bush administration in challenging mergers. But that has come in the face of a record-breaking wave of often audacious deals. Nor has the Obama administration brought any major cases challenging companies that abuse their monopoly power. It approved three major airline mergers, for example, leaving four companies in control of more than 80 percent of the market.
In the American-US Airways case, Emanuel emerged as one of the deal’s biggest champions. He was in regular contact with the CEOs and lobbyists for both airlines.
“The combination of American Airlines and US Airways creates a better network than either carrier could build on its own,” Emanuel wrote in an October 2013 letter to the Justice Department that other mayors signed onto. “American’s substantial operations throughout the central United States provide critical coverage where US Airways is underdeveloped.”
The letter was an uncanny echo of the airlines’ arguments– for good reason: It was actually written by an American Airlines lobbyist, emails obtained by ProPublica show.
The day after sending the missive, as government lawyers were racing to prepare for trial, Emanuel lunched with the CEOs of American and US Airways at a suite in the St. Regis hotel in Washington. The next stop on his schedule: the White House, for meetings with President Obama and Chief of Staff Denis McDonough. Later that day, Emanuel met with Secretary of Transportation Anthony Foxx, whose agency also had a hand in reviewing the merger. (The White House and Department of Transportation declined to comment on the meetings.) …[T]he airlines spent $13 million on a phalanx of super-lobbyists, including Heather and Tony Podesta, to marshal support in Washington, records show. Another Democratic lobbyist, Hilary Rosen, also reached out to the White House.
…Some Justice Department staff attorneys who built the case against the merger were dismayed when they were summoned by a superior to a conference room at the Antitrust Division’s Judiciary Square offices and told the case was done.
“People were upset. The displeasure in the room was palpable,” said one attorney who worked on the case. “The staff was building a really good case and was almost entirely left out of the settlement decision.”
Indeed, government investigators had uncovered documents showing airline executives crowing about how mergers allow them to charge travelers more. “Three successful fare increases– [we were] able to pass along to customers because of consolidation,” wrote Scott Kirby, who became the president of the new American Airlines, in a 2010 internal company presentation.
Economists say it’s difficult to prove definitively effects of a merger, and there’s been no comprehensive study of the American-US Airways deal. Still, there are signs that the concerns the government voiced in its lawsuit have become a reality.
While the price of fuel– one of airlines’ biggest expenses– has plummeted by as much as 70 percent in the last two years, the industry has kept most of those savings for itself. Fares went down by just 4 percent in 2015 as U.S. airlines made record profits of nearly $26 billion. That’s in contrast to Europe, where the industry is significantly less concentrated and there is intense competition.
The combined company, which operates as American Airlines, has steadily increased fees since the deal, one of the harms the Justice Department warned of three years ago. So-called Main Cabin Extra seats, for example, which went for an additional $8 to $159 in 2013, now cost an extra $20 to $280.
Earlier this year, American also eliminated a discount fare program before bringing it back on “selected routes.” The rollback of the program was another thing the government had predicted.
Wall Street has cheered the effects of the deal. A 2014 Goldman Sachs analysis about “dreams of oligopoly” used the American-US Airways merger as an example. Industry consolidation leads to “lower competitive intensity” and greater “pricing power with customers due to reduced choice,” the analysis said.
…A century ago, amid fears that concentrated corporate power would subvert American democracy, Congress passed a law that prohibited anti-competitive mergers.
“Unless their insatiate greed is checked, all wealth will be aggregated in a few hands and the Republic destroyed,” warned the 1900 Democratic platform of monopolies, echoing the Republican platform that year.
Though the antitrust laws were created in the days of Standard Oil and railroad monopolies, regulators in the modern era have long had concerns about the airline industry.
For decades, the federal government directly regulated fares and routes. Amid runaway inflation in the late 1970s, the industry was deregulated on the theory that market forces would produce lower prices and more efficiency. Still, the father of deregulation, economist Alfred Kahn, argued the new market needed strong antitrust enforcement to preserve the benefits of competition that deregulation was supposed to produce.
The enforcement Kahn envisioned never materialized. The Reagan administration introduced new merger guidelines that were much friendlier to combinations of large corporations. Under the mantra “Bigness Isn’t Badness,” the Justice Department Antitrust Division became much more receptive to claims that efficiencies resulting from mergers outweighed any bad effects.
In the airline industry, despite occasional interventions by antitrust authorities over the years, the number of companies has dropped sharply through dozens of mergers.
…Publicly, airlines argued that combining networks would lead to greater choices and more efficiency for travelers, allowing them to fly on a single airline between previously disconnected cities.
“Consumer demand is the driver for this combination,” then-US Airways CEO Doug Parker told Congress while pushing the merger with American Airlines in early 2013. “Airline passengers want broader networks, capable of getting them to more places more efficiently.”
But sifting through millions of pages of airline documents, Justice Department lawyers and economists found evidence instead that airline executives coveted the market power that mergers could deliver.
“Consolidation has also helped with capacity discipline,” Scott Kirby, who became president of the new American Airlines, said at a conference in the run-up to the merger. “And it has allowed the industry to do things like ancillary revenues; again, hard to overstate the importance of that.”
Capacity discipline is an industry term for limiting the number of available seats or flights, which in turn allows for higher fares. Ancillary revenue– which has ballooned in recent years– comes from fees airlines charge for checked bags, different levels of seating, and food.
The government identified more than 1,000 routes in which American and US Airways competed head to head. The merger would significantly increase the level of concentration on those routes, which could lead to higher fares, the complaint argued.
The Justice Department’s concerns were not just about prices. It was also worried that the American-US Airways merger would lead the combined company to reduce service or jettison plans for more routes.
Following previous mergers, airlines had cut hubs, especially in mid-sized cities away from the coasts. Such cuts could devastate already struggling communities… On Capitol Hill, American and US Airways hired both Democratic and Republican lobbying firms, and 183 members of Congress ultimately came out in favor of the deal.
Do you think Donald Trump is unbearably disgusting? So do I. Rahm Emanuel is just as bad. So is Patrick Murphy and Chuck Schumer and Debbie Wasserman Schultz, Mitch McConnell, Sean Duffy, Paul Ryan, and other criminal types infecting our whole political system. Are all politicians that corrupt? No, just the vast majority.
“When fascism comes to America, it will be wrapped in the flag and carrying the cross.” — Sinclair Lewis