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Entertainment

Taylor Swift concert fiasco leads to U.S. Senate grilling for Ticketmaster

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WASHINGTON, Jan 24 (Reuters) – U.S. senators slammed Live Nation Entertainment’s lack of transparency and inability to block bot purchases of tickets on Tuesday, in a hearing called after a major fiasco involving ticket sales for Taylor Swift’s upcoming concert tour.

Live Nation Entertainment Inc (LYV.N) subsidiary Ticketmaster, which has been unpopular with fans for years, has drawn fresh heat from U.S. lawmakers over how it handled ticket sales last fall for Swift’s “Eras” tour, her first in five years. Experts say Ticketmaster commands more than 70% market share of primary ticket services for major U.S. concert venues.

“We apologize to the fans, we apologize to Ms. Swift, we need to do better and we will do better,” Joe Berchtold, who is president and chief financial officer of Live Nation, told the U.S. Senate Judiciary Committee hearing on Tuesday.

“In hindsight there are several things we could have done better – including staggering the sales over a longer period of time and doing a better job setting fan expectations for getting tickets,” Berchtold said.

Republican Senator Mike Lee said in an opening statement that the Ticketmaster debacle highlighted the importance of considering whether “new legislation or perhaps just better enforcement of existing laws might be needed to protect the American people.”

LACK OF COMPETITION

Senators slammed Berchtold for Live Nation’s fee structure and inability to deal with bots which bulk buy tickets and resell them at inflated prices.

“There isn’t transparency when no one knows who sets the fees,” Democratic Senator Amy Klobuchar said, responding to Berchtold’s claim that Live Nation fees fluctuate based on “ratings.”

Republican Senator Marsha Blackburn called Live Nation’s bot problem “unbelievable,” pointing out that much smaller companies are able to limit bad actors in their systems.

“You ought to be able to get some good advice from people and figure it out,” she said.

[1/2] Taylor Swift arrives at the 2022 MTV Video Music Awards at the Prudential Center in Newark, New Jersey, U.S., August 28, 2022. REUTERS/Eduardo Munoz

“I’m not against big per se, but I am against dumb,” Republican Senator John Kennedy said, referring to Live Nation’s dominance in the ticket sales market. “The way your company handled ticket sales for Ms. Swift was a debacle, and whoever in your company was in charge of that should be fired.

“If you care about the consumer, cut the price! Cut out the bots! Cut out the middle people and if you really care about the consumer, give the consumer a break!”

Jack Groetzinger, cofounder of ticket sales platform SeatGeek, testified that the process of buying tickets is “antiquated and ripe for innovation” and called for the breakup of Live Nation and Ticketmaster, which merged in 2010.

“As long as Live Nation remains both the dominant concert promoter and ticketer of major venues in the U.S., the industry will continue to lack competition and struggle,” he told lawmakers.

Ticketmaster has argued that the bots used by scalpers were behind the Taylor Swift debacle, and Berchtold asked for more help in fighting the bots that buy tickets for resale.

Other witnesses include Jerry Mickelson, president of JAM Productions, who has been among critics of Ticketmaster.

In November, Ticketmaster canceled a planned ticket sale to the general public for Swift’s tour after more than 3.5 billion requests from fans, bots and scalpers overwhelmed its website.

Senator Klobuchar, who heads the Judiciary Committee’s antitrust panel, has said the issues that cropped up in November were not new and potentially stemmed from consolidation in the ticketing industry.

In November, Ticketmaster denied any anticompetitive practices and noted it remained under a consent decree with the Justice Department following its 2010 merger with Live Nation, adding that there was no “evidence of systemic violations of the consent decree.”

A previous Ticketmaster dispute with the Justice Department culminated in a December 2019 settlement extending the consent agreement into 2025.

Reporting by Diane Bartz, Moira Warburton and David Shepardson; editing by Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

Diane Bartz

Thomson Reuters

Focused on U.S. antitrust as well as corporate regulation and legislation, with experience involving covering war in Bosnia, elections in Mexico and Nicaragua, as well as stories from Brazil, Chile, Cuba, El Salvador, Nigeria and Peru.

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Business

U.S. FTC probes Pepsi, Coca-Cola over price discrimination – Politico

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Jan 9 (Reuters) – Beverage giants Coca-Cola Co (KO.N) and PepsiCo Inc (PEP.O) are under preliminary investigation by the U.S. Federal Trade Commission (FTC) over potential price discrimination in the soft drink market, Politico reported on Monday citing sources.

The pricing strategies of both companies are being scrutinized under the Robinson-Patman Act, the report said.

The U.S. antitrust law prevents large franchises and chains from engaging in price discrimination against small businesses.

The FTC reached out to large retailers, including Walmart Inc (WMT.N), for at least a month seeking data and other information on how they purchase and price soft drinks, two of the sources told Politico. Walmart is currently not a target in the investigation, according to the report.

FTC, Coca-Cola, Pepsi and Walmart did not immediately respond to Reuters’ request for comments.

Reporting by Shivani Tanna in Bengaluru; Editing by Sherry Jacob-Phillips

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Technology

Video gamers sue Microsoft in U.S. court to stop Activision takeover

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Dec 20 (Reuters) – Microsoft Corp (MSFT.O) was hit on Tuesday in U.S. court with a private consumer lawsuit claiming the technology company’s $69 billion bid to purchase “Call of Duty” maker Activision Blizzard Inc (ATVI.O) will unlawfully squelch competition in the video game industry.

The complaint filed in federal court in California comes about two weeks after the U.S. Federal Trade Commission filed a case with an administrative law judge seeking to stop Microsoft, owner of the Xbox console, from completing the largest-ever acquisition in the video-gaming market.

The private lawsuit also seeks an order blocking Microsoft from acquiring Activision. It was filed on behalf of 10 video game players in California, New Mexico and New Jersey.

The proposed acquisition would give Microsoft “far-outsized market power in the video game industry,” the complaint alleged, “with the ability to foreclose rivals, limit output, reduce consumer choice, raise prices, and further inhibit competition.”

Microsoft logo is seen on a smartphone placed on displayed Activision Blizzard logo in this illustration taken January 18, 2022. REUTERS/Dado Ruvic/Illustration

A Microsoft representative on Tuesday defended the deal, saying in a statement that it “will expand competition and create more opportunities for gamers and game developers.” After the FTC sued, Microsoft President Brad Smith said, “We have complete confidence in our case and welcome the opportunity to present our case in court.”

In a statement, plaintiffs’ attorney Joseph Saveri in San Francisco said, “As the video game industry continues to grow and evolve, it’s critical that we protect the market from monopolistic mergers that will harm consumers in the long run.”

Private plaintiffs can pursue antitrust claims in U.S. court, even while a related U.S. agency case is pending. The takeover, announced in January, also faces antitrust scrutiny in the European Union.

The FTC previously said it sued to stop “Microsoft from gaining control over a leading independent game studio.” The agency said the merger would harm competition among rival gaming platforms from Nintendo Co Ltd (7974.T) and Sony Group Corp (6758.T).

Reporting by Mike Scarcella; editing by Leigh Jones, Cynthia Osterman and Jonathan Oatis

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Business

Meta battles U.S. antitrust agency over future of virtual reality

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SAN JOSE, Calif./ WASHINGTON, Dec 8 (Reuters) – The Biden administration on Thursday accused Meta Platforms Inc (META.O) of trying to buy its way to dominance in the metaverse, kicking off a high-profile trial to try to prevent the Facebook parent from buying virtual reality app developer Within Inc.

The FTC sued in July to stop the deal, saying Meta’s acquisition of Within would “tend to create a monopoly” in the market for virtual reality (VR) fitness apps. It has asked the judge to order a preliminary injunction that would halt the proposed transaction.

In an opening statement, FTC lawyer Abby Dennis said the Within acquisition was part of Meta’s bid to acquire new and more diverse virtual reality users, including customers of Within’s popular subscription-based virtual reality workout app Supernatural.

That would complement Meta’s existing virtual reality users, who tend to skew young and male, and be more focused on gaming, Dennis added.

“Meta could have chosen to use all its vast resources and capabilities to build its own dedicated VR fitness app, and it was planning on doing that before it acquired Within,” Dennis said, pointing to a plan from early 2021.

The plan, Operation Twinkie, involved expanding a rhythm game app called Beat Saber that the company acquired in 2019 into the fitness space via a proposed partnership with digital fitness company Peloton (PTON.O), Dennis said.

She cited an email from Chief Executive Mark Zuckerberg saying he was “bullish” on fitness and calling the proposed partnership with Peloton “awesome.”

Lawyers for Meta and Within argued that the FTC did a poor job of defining the relevant market and said the companies compete with a range of fitness content, not just VR-dedicated fitness apps.

Meta’s lawyers also disputed that plans for a Meta-owned VR fitness app had proceeded beyond low-level “brainstorming” and argued that the FTC underestimated the competition in the market it had defined, citing the potential for fellow tech giants Apple Inc (AAPL.O), Alphabet Inc’s (GOOGL.O) Google and Bytedance to join the fray.

Rade Stojsavljevic, who manages Meta’s in-house VR app developer studios, testified that he had proposed the tie-up between Beat Saber and Peloton but did not develop a formal plan and never discussed the idea with either party.

Internal documents from early 2021 that were displayed in court showed Stojsavljevic proposing acquisitions of VR developers before they could be “cannibalized” by competitors and discussing pressure from Zuckerberg to “get aggressive” in response to reports of a prospective Apple headset.

The trial, scheduled through Dec. 20, will serve as a test of the FTC’s bid to head off what it sees as a repeat of the company acquiring small upcoming would-be rivals and effectively buying its way to dominance, this time in the nascent virtual and augmented reality markets.

The FTC is separately trying to force Meta to unwind two previous acquisitions, Instagram and WhatsApp, in a lawsuit filed in 2020. Both were in relatively new markets at the time the companies were purchased.

PRESSURE TO PRODUCE HIT APPS

A government victory could crimp Meta’s ability to maneuver in an area of emerging technology – virtual and augmented reality – that Zuckerberg has identified as the “next generation of computing.”

If blocked from making acquisitions in the space, Meta would face greater pressure to produce its own hit apps and would give up the gains – in terms of revenue, talent, data and control – associated with bringing innovative developers in-house.

Within developed Supernatural, which it advertises as a “complete fitness service” with “expert coaches,” “beautiful destinations” and “workouts choreographed to the best music available.”

It is available only on Meta’s Quest devices, which are headsets offering immersive digital visuals and audio that market research firm IDC estimates capture 90% of global shipments in the virtual reality hardware market.

The majority of the more than 400 apps available in the Quest app store are produced by external developers. Meta owns the most popular virtual reality app in the Quest app store, Beat Saber, the app it was considering expanding with the Peloton partnership.

The social media company agreed to buy Within in October 2021, a day after changing its name from Facebook to Meta, signalling its ambition to build an immersive virtual environment known as the metaverse.

Zuckerberg will be a witness in the trial. Other potential witnesses are Within CEO Chris Milk and Meta Chief Technology Officer Andrew Bosworth, who runs the company’s metaverse-oriented Reality Labs unit.

The trial is at the U.S. District Court for the Northern District of California.

Reporting by Diane Bartz in Washington and Katie Paul in San Jose, Calif.; Editing by Alexandra Alper, Matthew Lewis and Cynthia Osterman

Our Standards: The Thomson Reuters Trust Principles.

Diane Bartz

Thomson Reuters

Focused on U.S. antitrust as well as corporate regulation and legislation, with experience involving covering war in Bosnia, elections in Mexico and Nicaragua, as well as stories from Brazil, Chile, Cuba, El Salvador, Nigeria and Peru.

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Business

Amazon faces $1 bln lawsuit in UK for ‘favouring its own products’

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  • Consumer rights advocate bringing case for customers
  • Amazon says collective action is ‘without merit’
  • Case focuses on marketplace’s ‘Buy Box’ feature

LONDON, Oct 20 (Reuters) – Amazon.com Inc (AMZN.O) is facing a lawsuit in Britain for damages of up to 900 million pounds ($1 billion) over allegations the online marketplace abused its dominant position by favouring its own products, lawyers said.

Consumer rights advocate Julie Hunter plans to bring the collective action on behalf of British consumers who have made purchases on Amazon since October 2016, lawyers representing her said.

The proposed case – which Amazon said was “without merit” – would be the latest mass action against a tech giant to be filed at London’s Competition Appeal Tribunal (CAT).

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Law firm Hausfeld, which represents Hunter, said on Thursday that Amazon has breached competition law by using “a secretive and self-favouring algorithm” to promote its own products through the “Buy Box” feature on its website.

Hunter said in a statement: “Far from being a recommendation based on price or quality, the Buy Box favours products sold by Amazon itself, or by retailers who pay Amazon for handling their logistics. Other sellers, however good their offers might be, are effectively shut out.”

An Amazon spokesperson said in a statement: “This claim is without merit and we’re confident that will become clear through the legal process.”

The lawsuit is expected to be filed at the CAT by the end of this month and will have to be certified by the tribunal before it can proceed.

It is being brought on an “opt-out” basis, meaning that any potential claimants will be included in the claim unless they choose to opt out.

The case follows the announcement by Britain’s antitrust watchdog in July that it is investigating Amazon over suspected breaches of competition law, including how it selects which products are placed within the “Buy Box” feature.

Amazon has faced similar probes elsewhere, recently making an offer to the European Commission to avert possible hefty EU antitrust fines.

The platform has also declined to describe its product-search system to an Australian competition regulator which has heard complaints of large marketplace platforms giving preference to in-house wares.

The CAT authorised an estimated 920 milion-pound ($1.1 billion) damages claim against Google (GOOGL.O) in July and approved another case worth up to 1.7 billion pounds against Apple (AAPL.O) in May.

The tribunal is also due to decide in January whether to give the go-ahead to a claim valued at up to 2.2 billion pounds against Meta Platforms (META.O), the owner of Facebook and Instagram, over alleged anti-competitive behaviour.

Google and Apple deny the allegations against them, according to court filings, and Meta did not immediately respond to a Reuters request for comment.

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Reporting by Sam Tobin; Editing by Andrew Heavens

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Business

U.S. grocer Kroger in talks to merge with rival Albertsons -sources

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Oct 13 (Reuters) – U.S. grocery company Kroger Co (KR.N) is in talks to merge with smaller rival Albertsons Companies Inc (ACI.N) in a tie-up that would create a supermarket titan, people familiar with the matter said.

The merger of the nation’s No. 1 and 2 standalone grocers, if reached, could provide the retailers with a leg up in negotiations with consumer-product makers such as Procter & Gamble (PG.N) and Unilever (ULVR.L) at a time of steep price hikes.

A deal could be announced as soon as this week if the talks do not fall apart, said the sources, who requested anonymity as the discussions are confidential.

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Major consumer products companies across the world have announced plans to boost prices at a faster pace as they seek to curb the impact of soaring raw materials costs on their margins.

Some critics noted that a supermarket merger would lessen competition among U.S. grocery chains and potentially lead to higher prices for American shoppers. A deal would create a combined company with a market valuation of about $47 billion, representing one of the biggest mergers in recent years in the retail space.

Neither Kroger nor Albertsons immediately responded to requests for comment. The news was first reported by Bloomberg.

Consultant Burt Flickinger, who holds shares of both Kroger and Albertsons, said a merger would give the two supermarket operators more buying power, making it easier for them to compete with Walmart Inc (WMT.N).

Groceries constitute roughly 55% of Walmart’s annual sales. Walmart traditionally has used its clout to demand the lowest possible prices from packaged-food and beverage companies, leaving rivals at a disadvantage in their own negotiations with suppliers.

Roughly 25% of all dollars spent on groceries in the United States are spent at Walmart, according to data provided by Euromonitor. Kroger and Albertsons have roughly 8% and 5% of the U.S. grocery market, respectively, according to Euromonitor.

COMPETING POWER

The specter of Amazon may have contributed to the merger talks as well. Michael Pachter, an analyst at Wedbush Securities, estimated the online retailer has taken about $4 billion in market share from Kroger and Albertsons in the past two years — small relative to an $800 billion grocery market but a threat nonetheless. “Amazon scares the bejeezus out of the conventional retailers,” he said.

The Seattle-based technology company is betting that the cashierless and contactless payment systems it is adding to stores, including at its subsidiary Whole Foods Market, will win it customers in the long run.

Shares of Albertsons were up 11% on Thursday afternoon, while Kroger’s stock slipped 1.4%. Shares of British online supermarket and technology group Ocado Group Plc (OCDO.L) were up over 10% in late London trade. Kroger is Ocado’s biggest client.

Kroger houses supermarket chains such as Fred Meyer, Ralphs and King Soopers. Boise, Idaho-based Albertsons includes the Safeway banner.

The razor-thin margins of standalone U.S. supermarket chains have been squeezed from soaring costs and supply-chain disruptions after a boom at the height of the pandemic.

Sarah Miller, executive director of the American Economic Liberties Project, an anti-monopoly nonprofit, said the deal would “squeeze consumers already struggling to afford food.”

“This merger is a cut and dried case of monopoly power, and enforcers should block it,” Miller said.

A deal could be reached as soon as this week, Bloomberg reported, adding that no final decision has been taken and talks could still be delayed or falter.

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Reporting by Anirban Sen and Abigail Summerville in New York; Additional reporting by Siddarth Cavale, Jessica DiNapoli and Arriana McLymore in New York, Jeffrey Dastin in San Francisco and Aishwarya Venugopal in Bengaluru; Editing by Sriraj Kalluvila, Matthew Lewis and Nick Zieminski

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Business

Google loses challenge against EU antitrust decision, other probes loom

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LUXEMBOURG, Sept 14 (Reuters) – Google suffered one of its biggest setbacks on Wednesday when a top European court upheld a ruling that it broke competition rules and fined it a record 4.1 billion euros, in a move that may encourage other regulators to ratchet up pressure on the U.S. giant.

The unit of U.S. tech giant Alphabet (GOOGL.O) had challenged an EU antitrust ruling, but the decision was broadly upheld by Europe’s General Court, with the fine trimmed modestly to 4.125 billion euros ($4.13 billion) from 4.34 billion euros.

Even with the reduction, it was still a record fine for an antitrust violation. The EU antitrust enforcer has fined the world’s most popular internet search engine a total of 8.25 billion euros in three investigations stretching back more than a decade.

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The judgment is set to boost landmark rules aimed at curbing the power of U.S. tech giants that will go into effect next year. read more

“The judgment strengthens the hand of the Commission. It confirms the Commission can use antitrust proceedings as a backstop threat to enforce rapid compliance with digital regulation also known as the DMA,” said Nicolas Petit, professor at European University Institute.

EU antitrust chief Margrethe Vestager did not mince her words.

“This, of course, is really good. Now, we have the second Google judgment and for us, it is really important as it backs our enforcement efforts,” she said.

This is the second court defeat for Google which lost its challenge to a 2.42 billion euro ($2.42 billion) fine last year, the first of a trio of cases.

“The General Court largely confirms the Commission’s decision that Google imposed unlawful restrictions on manufacturers of Android mobile devices and mobile network operators in order to consolidate the dominant position of its search engine,” the court said.

“In order better to reflect the gravity and duration of the infringement, the General Court considers it appropriate however to impose a fine of 4.125 billion euros on Google, its reasoning differing in certain respects from that of the Commission,” judges said.

Google, which can appeal on matters of law to the EU Court of Justice, Europe’s highest, voiced its disappointment.

“We are disappointed that the Court did not annul the decision in full. Android has created more choice for everyone, not less, and supports thousands of successful businesses in Europe and around the world,” a spokesperson said.

The logo for Google LLC is seen at the Google Store Chelsea in Manhattan, New York City, U.S., November 17, 2021. REUTERS/Andrew Kelly/File Photo

ANTITRUST BOOST

The ruling is a boost for Vestager after the General Court overturned her decisions against Intel (INTC.O) and Qualcomm (QCOM.O) earlier this year.

Vestager has made her crackdown against Big Tech a hallmark of her job, a move which has encouraged regulators in the United States and elsewhere to follow suit.

She is currently investigating Google’s digital advertising business, its Jedi Blue ad deal with Meta (META.O), Apple’s (AAPL.O) App Store rules, Meta’s marketplace and data use and Amazon’s (AMZN.O) online selling and market practices.

The Court agreed with the Commission’s assessment that iPhone maker Apple (AAPL.O) was not in the same market and therefore could not be a competitive constraint against Android.

The court backing could reinforce the EU antitrust watchdog in its investigations into Apple’s business practices in the music streaming market, which the regulator says Apple dominates.

FairSearch, whose 2013 complaint triggered the EU case, said the judgment may lead to more competition in the smartphone market.

“This shows the European Commission got it right. Google can no longer impose its will on phone makers. Now they may open their devices to competition in search and other services, allowing consumers to benefit from increased choice,” its lawyer Thomas Vinje said.

The Commission in its 2018 decision said Google used Android to cement its dominance in general internet search via payments to large manufacturers and mobile network operators and restrictions.

Google said it acted like countless other businesses and that such payments and agreements help keep Android a free operating system, criticising the EU decision as out of step with the economic reality of mobile software platforms.

The case is T-604/18 Google vs European Commission.

($1 = 1.0002 euros)

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Reporting by Foo Yun Chee
Editing by David Evans and Bernadette Baum

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Business

Google faces $25.4 billion damages claims in UK, Dutch courts over adtech practices

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The Google name is displayed outside the company’s office in London, Britain, November 1, 2018. REUTERS/Toby Melville/File Photo

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BRUSSELS, Sept 13 (Reuters) – Alphabet unit Google (GOOGL.O) will face damages claims for up to 25 billion euros ($25.4 billion) over its digital advertising practices in two suits to be filed in British and Dutch courts in the coming weeks by a law firm on behalf of publishers.

Google’s adtech has recently drawn scrutiny from antitrust regulators following complaints from publishers. read more

The French competition watchdog imposed a 220-million-euro fine on the company last year while the European Commission and its UK peer are investigating whether Google’s adtech business gives it an unfair advantage over rivals and advertisers. [ read more

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“It is time that Google owns up to its responsibilities and pays back the damages it has caused to this important industry. That is why today we are announcing these actions across two jurisdictions to obtain compensation for EU and UK publishers,” Damien Geradin at law firm Geradin Partners said in a statement on Tuesday.

Google criticised the imminent lawsuits, saying that it works constructively with publishers across Europe.

“This lawsuit is speculative and opportunistic. When we receive the complaint, we’ll fight it vigorously,” a spokesperson said.

The British claim at the UK Competition Appeal Tribunal will seek to recover compensation for all owners of websites carrying banner advertising, including traditional publishers. Britain has an opt-out regime.

The Dutch claim is open to publishers affected by Google’s actions. Litigation funder Harbour is funding both lawsuits.

($1 = 0.9860 euros)

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Reporting by Foo Yun Chee; editing by Philip Blenkinsop and David Evans

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Technology

U.S. antitrust regulators seek more data from Activision, Microsoft on planned deal

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March 21 (Reuters) – The U.S. Federal Trade Commission has sought additional data from Activision Blizzard Inc (ATVI.O) and Microsoft Corp (MSFT.O) related to the antitrust review of their deal, the games developer said in a regulatory filing on Monday.

Microsoft in January agreed to acquire the “Call of Duty” maker for $68.7 billion in the biggest gaming industry deal in history. read more

Microsoft will file for approval of the deal in 17 jurisdictions, the company’s president, Brad Smith, told reporters last month.

In order to woo U.S. and other regulators, the company said in February that it had developed a new set of principles for its app store, including open access to developers who meet privacy and security standards. read more

With the Activision deal, Microsoft will take on industry leaders Tencent Holdings Ltd (0700.HK) and Sony Group Corp (6758.T). Sony Interactive Entertainment recently said it would buy Bungie Inc, creator of the “Halo” videogame, in a deal valued at $3.6 billion.

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Reporting by Diane Bartz in Washington, Yuvraj Malik in Bengaluru
Editing by Shailesh Kuber and Matthew Lewis

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Business

Frontier to buy Spirit Airlines in $2.9 bln budget carrier deal

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CHICAGO, Feb 7 (Reuters) – Budget carriers Frontier Group Holdings and Spirit Airlines Inc (SAVE.N) on Monday unveiled plans to create the fifth-largest U.S. airline in a $2.9 billion tie-up likely to tighten competition against traditional carriers.

The proposal to form a new no-frills carrier controlled by Frontier Airlines pushed up shares of Spirit as much as 18.7%, though several analysts pressed the airlines over possible difficulties in obtaining regulatory approval.

“In a competitive industry like ours, the lowest costs always win,” Frontier Chief Executive Barry Biffle told analysts. “These low costs will, in turn, enable us to keep our fares low for customers.”

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The move comes at a time when the U.S. airline industry is grappling with volatility in travel demand due to new COVID-19 variants. At the same time, costs are soaring on a combination of rises in wages, fuel prices and airport charges.

Spirit’s wage expense as a percentage of revenue shot up by more than 10 points last year versus 2019. Higher fees prompted Frontier to exit airports such as Los Angeles and San Jose in California, and stop serving Washington-Dulles and Newark.

The merger, which is expected to close in the second half of 2022, is projected to result in synergies of $500 million a year, mainly through operational savings.

The companies pledged to avoid any job losses and add 10,000 direct jobs by 2026. They also promised the merger would deliver $1 billion in annual consumer savings and offer more than 1,000 daily flights to over 145 destinations.

Peter McNally, global sector lead for industrials, materials and energy at research firm Third Bridge, said cost pressure is the biggest threat to recovery in the airline industry’s profit.

The merged company would be in an “excellent” position to combat rising operating costs, McNally said.

ANTITRUST HURDLE

But some analysts warned the deal could face opposition from the White House as U.S. President Joe Biden’s administration takes a tough stance on big corporate mergers.

The Department of Justice (DOJ) declined to comment on the merger proposal. A White House spokesperson did not comment on the proposal but said the administration “is committed to protecting competition across a wide range of industries for the benefit of consumers.”

A Spirit Airlines Airbuys A320-200 airplane sits at a gate at the O’Hare Airport in Chicago, Illinois October 2, 2014.REUTERS/Jim Young/File Photo

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The DOJ has filed an antitrust lawsuit against American Airlines Group Inc (AAL.O) and JetBlue Airways Corp over their partnership, alleging it would lead to higher fares in busy Northeastern U.S. airports.

Biffle acknowledged the Frontier-Spirit deal would require DOJ approval but predicted it would be “well received” by regulators because it would lead to “low fares to more people in more places”.

Data from Cirium, an aviation data company, shows the two carriers overlap in only 18% of their routes.

Shares of Spirit Airlines closed up 17.2% at $25.46. Frontier’s shares ended the day with a gain of 3.5% at $12.82.

Renowned airline investor Bill Franke, a pioneer of rock-bottom fares coupled with top-up charges offered by ultra low-cost carriers (ULCC), will be chairman of the new airline, whose brand name and CEO have not been announced.

Franke’s private equity firm Indigo Partners, which is Frontier’s majority shareholder, had previously invested in Spirit which was once considered a suitor for Frontier.

Ultra low-cost carriers are a tier below Southwest Airlines (LUV.N), which pioneered the low-cost concept in the 1970s, and they have continued to expand during the COVID-19 pandemic.

The companies expect the deal to accelerate investment and help take on major U.S. airlines like American, Delta Air Lines (DAL.N), Southwest and United Airlines Holdings .

The merger would be worth $6.6 billion including the assumption of net debt and operating lease liabilities.

Colorado-based Frontier would own a 51.5% stake in the combined entity.

Under the cash-and-stock deal, Spirit’s shareholders would receive $25.83 per share, a premium of 18.8% to Friday’s close.

Both airlines use Airbus SE (AIR.PA) jets and signaled they were not looking at cancelling airplane orders.

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Reporting by Aishwarya Nair in Bengaluru and Rajesh Kumar Singh in Chicago; Additional reporting by David Shepardson in Washington
Editing by Uttaresh.V, Tim Hepher and Matthew Lewis

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