The civil lawsuit which the US Department of Justice (DoJ) filed in late October to block Northwest Airlines from purchasing a controlling stake in Continental Airlines could take federal courts years to resolve.

The airlines describe the DoJ's claims as groundless, and Northwest still plans to buy the 51% of Continental's voting stock owned by David Bonderman's Air Partners investment house, for a mix of $311 million in cash and a block of new shares.

Earlier this year, the two sides agreed to a so-called "virtual merger" that would link route networks and involve broad codesharing, but maintain separate identities, fleets, management and workforces. Northwest says that its Continental stock will be placed in a voting trust to guarantee its independence. It agreed to vote the stock as directed by Continental's management, except on matters involving future merger proposals.

In treating the strategic alliance as a merger, the DoJ says the stock deal would be anti-competitive. It filed a lawsuit to kill the transaction, but did not ask a federal district court to block the stock sale. Meanwhile, the DoJ has expressed concern about other areas of the alliance which it is investigating.

The complaint alleges that the voting trust provision does not prevent the harm likely to result from the acquisition. "Anti-competitive acquisitions cannot be cured by long-term voting trusts or other artificial legal devices that leave one competitor in the hands of another," says Joel Klein, head of the DoJ's antitrust division.

DoJ lawyers believe Continental would be less likely to pursue competitive strategies once owned by Northwest. The airline insists that "-Continental will remain an independent airline, and a strong competitor in its own right". Jeff Smisek, Continental's legal counsel promises that "-this will drag out for many years to come."

Source: Flight International