The Department of Justice’s (DOJ) Jonathan Kanter warned that the department will seek to block deals that are “likely to lessen competition” rather than pursuing complex settlements. The warning came in one of his first speeches as head of the DOJ antitrust division at the New York State Bar Association.
Kanter noted that antitrust law enforcement has not succeeded in keeping pace with fundamental changes in the economy and was “stuck fighting the last generation’s war, with precedent that bear little or no resemblance to today or the future.” In this framework, merger control may not have brought the results expected; sometimes, “merger remedies short of blocking a transaction too often miss the mark,” Kanter said.
This speech comes amid President Joe Biden’s push for stricter antitrust rules and tougher enforcement, especially after last year’s creation of a competition council at the White House. This announcement came days after the DOJ and the FTC made a joint public inquiry to review the merger guidelines with the aim of strengthening enforcement against illegal mergers.
The review of merger guidelines will focus on how to assess mergers that include free services where the traditional antitrust analysis may not bring accurate results. It will also examine “potential and nascent competition.” A new guideline may give the DOJ and FTC, as well as companies, a better tool to identify potential anticompetitive effects, particularly in digital markets. Yet, this is only half of the way to block a merger.
The DOJ’s decision not to pursue settlements in complex cases and seek an injunction to block a merger may save public resources and even restore existing competition, but it is not up to the DOJ to block a merger. If, in a merger investigation, the justice department concludes that the transaction could lessen competition, it must go to the court and ask a federal judge to prevent the merger. Then the judge will determine, based on the evidence, if the transaction will violate antitrust rules.
Thus, Kanter’s warning may apply more to a change in the policy than an actual change in enforcement. The DOJ may be poised to challenge more mergers in court, but only if there is enough evidence to do that, as judges may have a different view. Perhaps the best example of a merger challenge that went wrong is the $80 billion AT&T- Time Warner merger.
In 2016, AT&T announced its plan to buy Time Warner. One year later, the DOJ filed a suit to block the merger. In June 2018, a U.S. District Court Judge ruled that the deal was legal and did not impose any restriction on the merger. The DOJ appealed this decision but lost in 2019.
Interestingly, three years after closing the deal, the firm decided to spin off its media assets from the deal to combine with Discovery, a content giant. This is one case where a settlement may have saved more public resources than the judicial route.
Nonetheless, Kanter still leaves the door open for remedies and settlements as a solution to mergers that may be anticompetitive. In those cases, the remedy — divestiture — is clear, and eliminates all antitrust concerns. This new policy may seem more like a balancing act; if a merger poses antitrust risks, it may be up to the companies to submit clear-cut remedies to avoid litigation, which at the end of the day, is not much different to the system that is in place now.
