Month: March 2023

Source: United States Department of Justice News

The Justice Department, together with Attorneys General of the Commonwealth of Massachusetts, the State of New York, and the District of Columbia, filed a civil antitrust lawsuit today to block JetBlue Airways Corporation’s (JetBlue) proposed $3.8 billion acquisition of its largest and fastest-growing ultra-low-cost rival, Spirit Airlines, Inc. (Spirit). JetBlue and Spirit compete fiercely today on hundreds of routes serving millions of travelers. By eliminating that competition and further consolidating the United States airlines industry, the proposed transaction will increase fares and reduce choice on routes across the country, raising costs for the flying public and harming cost-conscious fliers most acutely.

The complaint, filed in the District of Massachusetts, alleges that Spirit’s low-cost, no-frills flying option has brought lower fares and more options to routes across the country, making it possible for more Americans – particularly price sensitive consumers who pay their own fares – to travel. JetBlue’s acquisition of Spirit would eliminate the “Spirit Effect,” where Spirit’s presence in a market forces other air carriers, including JetBlue, to lower their fares. The deal also would eliminate half of the ultra-low-cost capacity in the United States. This will lead to higher fares and fewer seats, harming millions of consumers on hundreds of routes.

“As our complaint alleges, the merger of JetBlue and Spirit would result in higher fares and fewer choices for tens of millions of travelers, with the greatest impact felt by those who rely on what are known as ultra-low-cost carriers in order to fly,” said Attorney General Merrick B. Garland. “Companies in every industry should understand by now that this Justice Department will not hesitate to enforce our antitrust laws and protect American consumers.”

“Our complaint alleges that JetBlue’s acquisition of Spirit would particularly hurt cost-conscious travelers,” said Associate Attorney General Vanita Gupta. “Ultra-low-cost carriers make air travel possible so more Americans can take a much-needed family vacation or celebrate or mourn together with loved ones. We allege that the proposed merger would lead to fewer seats and higher prices for travelers.”

“JetBlue’s proposed acquisition of Spirit eliminates a disruptive, low-cost option for millions of Americans. Whether they fly Spirit or not, travelers throughout the United States benefit from an independent Spirit because where Spirit competes, other airlines – including JetBlue – are forced to compete more vigorously by lowering fares, offering greater innovations, and delivering more consumer choice,” said Principal Deputy Assistant Attorney General Doha Mekki of the Justice Department’s Antitrust Division. “This transaction occurs against the backdrop of years of airline consolidation in the United States.”

The complaint, which seeks to block the acquisition under Section 7 of the Clayton Act, alleges Spirit has been a particularly disruptive force, growing rapidly, introducing innovative products, and allowing customers to choose which services to purchase, all while charging customers very low fares. Spirit has forced larger airlines, particularly the already-low-cost JetBlue, to compete for customers by introducing unbundled, customizable ticket options and lowering their own fares, allowing more Americans to travel. If the acquisition is allowed to proceed, prices would increase on routes where the two airlines currently compete. This is particularly the case on the over 40 direct routes where the two companies’ combined market shares are so high that the deal is presumptively anticompetitive.

As further alleged in the complaint, in the last 10 years, Spirit has doubled its network in size and, before this deal, expected to continue expanding at a quick pace. The acquisition stops this future competition before it starts.

The acquisition would also make it easier for the remaining airlines to coordinate to charge travelers higher fares or limit capacity. JetBlue has already partnered with American Airlines, the largest airline in the world, through the Northeast Alliance, which the Department sued to block. Now, JetBlue is doubling down on consolidation, seeking to acquire and eliminate its main ultra-low-cost competitor, depriving travelers of yet another choice.

If allowed to eliminate the Spirit option, JetBlue would likely increase prices on every route where Spirit flies today. As a result, travelers who previously preferred Spirit’s lower-price, no-frills service would either have to pay more for amenities they do not want, or may no longer be able to afford to travel at all.

JetBlue is a Delaware corporation headquartered in Long Island City, New York. In 2022, it flew over 39 million passengers to approximately 107 destinations around the world, earning about $9.1 billion in revenue.

Spirit is a Delaware corporation headquartered in Miramar, Florida. In 2022, it flew over 38 million passengers to approximately 92 destinations in the Americas, earning about $5 billion in revenue.

Source: United States Department of Justice News

Baltimore, Maryland – A federal jury convicted Cory Collin Fitzgerald Sanders, age 39, of Hagerstown, Maryland, late yesterday on federal charges of wire fraud, false claims, and making and using a false document in connection with his companies’ performance on federal contracts.  

The guilty verdict was announced by United States Attorney for the District of Maryland Erek L. Barron; Acting Special Agent in Charge Troy W. Springer, of the National Capital Region of the U.S. Department of Labor’s Office of Inspector General; and Acting Special Agent in Charge Michael D. Butler II of the Naval Criminal Investigative Service (NCIS) Economic Crimes Field Office.

According to the evidence presented at the nine-day trial, in June 2014 Sanders formed Sandtech LLC, a Maryland limited liability company whose business was the sale of video teleconference equipment to the Department of Defense and other agencies of the federal government.  Sanders was the sole owner, agent, and president of Sandtech.  Witnesses testified that Sanders obtained contracts with federal agencies for Sandtech to provide telecommunications equipment and services.  Sanders caused Sandtech to fail to perform on contracts with the U.S. Department of Labor and the Department of the Army, which terminated the Sandtech contracts for cause.  Sanders then formed Cycorp Technologies in 2016 to provide the same type of telecommunication services as Sandtech. 

The trial evidence proved that from February 10, 2015 through June 30, 2020, Sanders engaged in a scheme to defraud the government by entering into contracts with federal agencies which required Sandtech or Cycorp Technologies to provide new telecommunications equipment which was still under manufacturers’ warranty.  The evidence showed that in his communications with federal agency contracting officers Sanders provided false information about the delivery, source, warranty, and/or condition of the electronic equipment provided by his companies, including misrepresentations that the equipment was new and protected by the manufacturer’s warranty, when Sanders knew that the equipment was not new, or was new but not under warranty, or was procured through unauthorized channels.  The evidence also showed that Sanders was not authorized to provide certain IT services to the federal government, although he represented to government officials that he was.  

Further, Sanders provided contracting officials with false information and false documents about the credentials, certifications, and qualifications of Cycorp Technologies.  As proven during trial, Sanders provided fabricated and forged documents falsely certifying Cycorp Technologies’ status as an “authorized partner” of two large national telecommunications equipment manufacturers.  If true, the certificates would have authorized Cycorp Technologies to buy directly from those companies’ distributors, provide maintenance to their equipment, or re-sell their new and warrantied products.  In addition, Sanders submitted invoices on behalf of Sandtech and Cycorp Technologies so that the government agencies he contracted with would pay for deficient or non-existent performance by electronic deposit into business bank accounts.

Sanders faces a maximum sentence of 20 years in federal prison for each of 12 counts of wire fraud; a maximum of five years in federal prison for each of two counts of false claims; and a maximum of five years in federal prison for making and using a false document.  Chief U.S. District Judge James K. Bredar has scheduled sentencing for Sanders on July 14, 2023, at 10:00 a.m.

United States Attorney Erek L. Barron commended the Department of Labor – OIG and the NCIS for their work in the investigation and thanked the Army Criminal Investigation Division, and the Offices of Inspector General for the U.S. Department of State, the U. S. Department of Commerce, the U.S. Environmental Protection Agency, the U.S. Department of the Interior, the Defense Criminal Investigation Service, the U.S. Department of Homeland Security, the U.S. Department of Health and Human Services and the U.S. Department of Justice for their assistance.  Mr. Barron thanked Assistant U.S. Attorneys Joyce K. McDonald and Evelyn Lombardo Cusson, who are prosecuting the case.

For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to fight fraud, please visit https://www.justice.gov/usao-md and https://www.justice.gov/usao-md/report-fraud.

# # #

Source: United States Department of Justice News

            WASHINGTON – Joseph Tamjong, 51, of Lanham, Maryland, was sentenced today to 20 months in prison for stealing more than $700,000 from the D.C. Medicaid program. The sentence was announced by U.S. Attorney Matthew M. Graves, FBI Special Agent in Charge Wayne A. Jacobs, of the Washington Field Office’s Criminal and Cyber Division, Special Agent in Charge Maureen R. Dixon, of the U.S. Department of Health and Human Services’ Office of Inspector General for the region that includes Washington, D.C., and Daniel W. Lucas, Inspector General for the District of Columbia.

            In addition to the prison term, U.S. District Court Judge Christopher R. Cooper ordered that Tamjong serve three years of supervised release following his prison sentence. He also ordered him to pay $733,405 in restitution and $396,155 in a forfeiture money judgment. Tamjong pleaded guilty to one count of health care fraud on November 28, 2022. 

            Between December 2014 and February 2022, Tamjong was employed as a Personal Care Aide and/or a Participant-Directed Worker providing personal care services to residents of the District of Columbia who needed assistance performing activities of daily living, such as getting in and out of bed, bathing, dressing, and eating. Tamjong submitted false timesheets that claimed he provided these services to Medicaid beneficiaries when, in fact, he did not. Although he committed a bulk of his criminal conduct when he was in the United States, he brazenly caused Medicaid to be billed for approximately 3,400 hours of services that he purportedly provided when he was traveling outside the country. On 156 separate occasions, he claimed he provided 24 hours of services in a single day. In total, he defrauded Medicaid of $733,405, personally receiving at least $395,155 in fraudulent wages from the scheme.

            Since December 2018, 12 former personal care aides have been sentenced in the United States District Court for the District of Columbia for defrauding the District’s Medicaid program. 

            The government urges the public to provide tips and assistance to stop health care fraud. If you have information about individuals committing health care fraud, please call the Department of Health and Human Services’ Office of Inspector General hotline at 800- HHS‑TIPS (800 447-8477) or the D.C. Office of the Inspector General at 800-724-TIPS (800 274-8477).

            This case was investigated by the FBI’s Washington Field Office, the Department of Health and Human Services’ Office of Inspector General, and the District of Columbia’s Office of the Inspector General’s Medicaid Fraud Control Unit.

            The case was prosecuted by Assistant U.S. Attorney Kondi Kleinman with assistance from Paralegal Specialist Michon Tart.

Source: United States Department of Justice News

Good morning. Thank you, Attorney General Garland and Associate Attorney General Gupta.

This morning, we filed a lawsuit to block JetBlue’s proposed acquisition of Spirit. Spirit is a disruptive, low-cost airline. It is also the largest and fastest-growing ultra-low-cost carrier in the United States. As we allege in the complaint, JetBlue itself has recognized that “competition from Spirit lowers its fares more than competition from other ultra-low-cost carriers.”

Indeed, under federal antitrust law, the transaction is presumptively illegal on more than 150 routes and markets where JetBlue and Spirit fly today.

For years, Spirit’s unique business strategy has earned it a reputation for being a disruptor – a maverick – in a commercial airline industry beset by high concentration and oligopolistic practices. Customers throughout the United States benefit from an independent Spirit. Simply put, where Spirit competes, other airlines – including JetBlue – respond by competing vigorously and lowering the price of airfare to attract customers.

After spending many years criticizing consolidation in the airline industry, JetBlue appears to have changed its tune. JetBlue has previously warned that “all that power in the hands of a few very deep-pocketed airlines has implications for consumers in the form of reduced options, high fares, and often poor service.”

Rather than compete to win share, JetBlue has chosen to consolidate and cooperate instead of compete.

In 2020, JetBlue committed to what Spirit has previously described as a “de facto merger” with American Airlines, which you may know is the country’s biggest commercial airline. Today, JetBlue has already devoted 75% of its capacity to American Airlines, which we believe comes at a harm to passengers. But JetBlue wasn’t done. JetBlue engaged in a public courtship of Spirit, which was rejected more than once until Spirit finally accepted its offer.

We agree with JetBlue’s diagnosis, but not with its proposed cure. The best way to address consolidation is not more consolidation – it is competition.

#          #          #

As we allege in the complaint, flyers of all types benefit from competition that both JetBlue and Spirit offer. JetBlue often touts “its JetBlue Effect” – but it also has recognized that its own fares and revenues drop significantly when Spirit enters the market. This means that the Spirit Effect happens on routes that JetBlue already serves – so that whatever benefit JetBlue entry and the “JetBlue Effect’ offer, there are additional “Spirit Effects” when Spirit enters. We filed this lawsuit because the federal antitrust laws protect this competition between JetBlue and Spirit and because travelers should not have to make false choices between the two airlines.

The complaint details the many ways this acquisition threatens competition. Some of those ways are obvious:

• Travelers will no longer benefit from the head-to-head competition between Spirit and JetBlue that drives down air
• In an airline industry beset by high concentration, travelers will no longer benefit from the fact that Spirit has “no obligation” to “follow the herd” when it comes to the airline industry’s too-frequent efforts to coordinate their price increases.
• Travelers who are looking for the lowest fare and more control over how they spend their money will no longer have a chance to choose Spirit’s low-priced, unbundled fares.

There are some less obvious ways that this acquisition threatens competition and they are no less important. The low-priced, “basic economy” options that nearly all airlines offer today did not happen by accident – they came from disruptive choices Spirit made that the other airlines had to respond to. That innovation – and the chance for others that Spirit would bring to the market in the future – will be lost unless this acquisition is blocked.

JetBlue’s acquisition also stops competition we can’t see yet today. Spirit has grown significantly and had planned to continue doing so. Spirit is already six times larger today than it was in 2010. Even while the pandemic went on, Spirit stayed focused on its growth plans – it planned to double its fleet of airplanes by the end of 2025. Absent this acquisition, Spirit had expected to add flights to five new cities just this year. And it expected to offer more flights from four important JetBlue focus cities. All that growth would have meant more competition for JetBlue and other airlines. And if this acquisition is completed all that growth will be over before it even has a chance to start. Travelers know – now and in the future – they will be better off if JetBlue and Spirit remain independent competitors.

#          #          #

In closing, I want to thank the tremendous team of lawyers, economists, paralegals, and professional staff at the Antitrust Division who investigated this merger and filed today’s lawsuit. They are exceptional public servants, and I am so proud of them. We owe them a debt of gratitude.

I also want to thank and acknowledge our co-plaintiffs and law enforcement partners: the Commonwealth of Massachusetts, the State of New York, and the District of Columbia, who are once again working alongside us to ensure that consumers in those jurisdictions and around the country benefit from vibrant, free markets.

Finally, I want to thank our colleagues at the Department of Transportation. As in prior matters, we have worked closely with them throughout our investigation to determine how to use our respective enforcement authorities to best protect competition and consumers.

Source: United States Department of Justice News

Remarks as Delivered

Thank you.

Like the Attorney General, I want to thank the leadership and staff of the Antitrust Division for their incredible work on this matter. I want to especially acknowledge Principal Deputy Assistant Attorney General Doha Mekki, from whom you’ll hear shortly, for her incredible leadership in promoting competition.

Our complaint alleges that JetBlue’s acquisition of Spirit would particularly hurt those travelers who can least afford to see travel costs rise. Ultra-low-cost carriers like Spirit play a key role in the economy. They make air travel possible so more Americans can take a hard-earned family vacation or celebrate and mourn together with loved ones. We allege that the proposed merger would lead to fewer seats and higher prices for travelers. And we allege that the proposed merger would heighten the risk that remaining airlines would coordinate to raise prices. As Spirit’s own presentation put the point, “[a] JetBlue acquisition of Spirit will have lasting negative impacts on consumers” – and many of the consumers it hurts will be the most cost-conscious travelers.

Our complaint rests on well-established theories of anticompetitive harm. It is also an example of an enforcement action that promotes access to goods and services for all Americans, including those who are most likely to need ultra-low-cost carriers to fly. As a senior Spirit official told Congress in 2020, “Spirit’s product is designed for highly-price sensitive travelers,” like “ordinary individual consumers [and] families,” who are an “underserved segment in today’s market.” And this case is not unusual. Threats to competition like those alleged here are particularly likely to harm working- and middle-class families, who may struggle to withstand the price increases that consolidation often brings. The department’s commitment to ensuring economic opportunity and fairness means holding those concerns in the front of our minds.

Keeping the economy open to all Americans, regardless of income status, is a priority across the department. 

That effort includes the Civil Division taking on nursing homes who defraud vulnerable seniors; the Tax Division shutting down tax preparers who exploit workers and families; and the Antitrust Division going to court to fight companies that fix their workers’ wages.

It includes working to improve the bankruptcy process to provide a fresh start to deserving debtors. In recent months, the Civil Division has put out guidance to ensure that student loans are properly treated in bankruptcy, and the U.S. Trustee Program has launched a pilot program so that debtors no longer need to take a day off work to attend a meeting of creditors.

And it includes redoubling our environmental justice efforts to ensure that all Americans, regardless of income, background, or place of residence – be it Jackson, Mississippi, LaPlace, Louisiana, or elsewhere – have clean air, safe drinking water and a healthy environment. 

This work is more than the sum of its parts: Together, our efforts represent the department’s commitment to ensuring that our government and our economy work for everyone.

I’ll now turn it over to Doha Mekki, who will speak more about the details of our complaint.