Texas' decision to join the U.S. Justice Department's lawsuit seeking to stop the American Airlines' merger with US Airways is the latest example of injudicious involvement of states in federal antitrust enforcement.
In our paper, Protecting Innovation: The Role of State Attorneys General in Antitrust Enforcement, we found that while there is a clear role for the states in enforcing antitrust law in local commerce, it is difficult to discern an appropriate role for the states in markets that are in many cases not only national, but international. Instead, the involvement of the states in these markets is more likely to lead to an expansive regulatory regime that inhibits-rather than enhances-competition and innovation.
The recent increase of state involvement in federal antitrust enforcement raises several concerns, including the potential of geographic bias, the potential for increased litigation and harsher penalties, and duplicative nature of state antitrust enforcement. When it comes to premerger reviews, as in the current situation, state involvement is superfluous and fraught with the potential for interference in private transactions that show a positive return on investment and a net benefit in terms of consumer welfare.
The widespread availability of options for air travel today calls into question the wisdom of the Justice Department's lawsuit. What is clear, though, is that Texas and other states should not be involved in the lawsuit at all.