M&A Enforcement Easing Under the Trump Administration

The federal antitrust agencies appear to be easing up on merger enforcement, ditching a Biden administration policy of discouraging mergers. This change in direction could promote enhanced American innovation and economic growth.

M&A Economic Benefits

Mergers and acquisitions (M&A) generate various major economic benefits:

1. They reallocate badly managed commercial assets to higher-valued uses, raising business efficiency.
2. They bring about dynamic improvements in the use of assets that yield new and improved products. This may particularly be the case when M&A joins firms with complementary assets that can be melded to “work together” more effectively.
3. They drive scale economies by spreading high fixed costs over a larger volume of production.
4. Scale economies may, in turn, spur innovation-producing research and development (R&D) and help U.S. firms compete more effectively in international markets.
5. M&A activity may also raise corporate earnings and create new wealth, benefiting workers’ retirement accounts and corporate shareholders.

M&A Economic Costs

M&A may, however, impose economic costs when it reduces competition in the marketplace. The Clayton Act bars M&A transactions that may substantially lessen competition.

Prior to the Biden administration, a longstanding bipartisan enforcement consensus recognized M&A’s general benefits. Federal antitrust guidelines from the Federal Trade Commission (FTC) and the U.S. Justice Department (DOJ) stressed that those agencies would target only M&A transactions that were likely to harm competition. Whenever possible, the agencies also worked with merging parties to “cure” the potentially anticompetitive parts of a generally beneficial deal through structural (spinning off business assets) or behavioral (precluding future anticompetitive actions) remedies. The agencies did, of course, oppose unsalvageable anticompetitive deals.

Biden Anti-Merger Policies

During the Biden administration, DOJ and FTC leadership dramatically shifted gears and promoted an anti-merger policy:

1. The agencies rejected the longstanding bipartisan practice of clearing clearly untroublesome deals less than 30 days after a required pre-merger filing. This imposed unnecessary and costly delays that affected the majority of proposed mergers.
2. Agency heads criticized the need for mergers in publicized speeches and public comments, raising uncertainty that killed many beneficial deals before they left the boardroom.
3. The agencies warned that a decision not to challenge a merger was no guarantee that it would not be challenged in the future.
4. New merger guidelines introduced by the agencies in 2023 abandoned traditional language that the agencies only sought to oppose anticompetitive mergers, and did not want to discourage any other mergers. The guidelines also downplayed efficiencies, harped on theories of merger harm, and reemphasized dated and discredited anti-merger court opinions.
5. The agencies also opposed negotiating consent decrees that could fix the curable part of deals.
6. The agencies carried out unprecedentedly long merger reviews and issued “spurious second requests” for additional information from the merging parties, further discouraging many sound transactions.
7. Taken as a whole, these and other anti-merger tactics undermined due process and cast a pall over economically beneficial M&A.

Pre-Biden Merger Policy Restored

New leadership at the FTC and DOJ have publicly committed to rolling back the anti-merger agenda.

In a June 4 speech, Deputy Assistant U.S. Attorney General William Rinner of the DOJ Antitrust Division committed to restoring merger enforcement “transparency and procedural fairness.” Rinner stated that the DOJ rejected the “total deterrence” approach to mergers, that it would restore “fairness and predictability” to merger reviews, and that it would be open to crafting settlements that allowed mergers to proceed whenever feasible.

In a similar vein, new FTC Chairman Andrew Ferguson pledged that the FTC would “stop [former FTC Chair] Lina Khan’s war on mergers,” and restore fairness and speed to merger reviews, thereby enabling “the economy . . . [can] thrive, businesses can bring their new ideas to market, and we can grow our way out of this debt crisis.” The FTC, like the DOJ, seeks to pursue settlements whenever it can.

There already are indications that the new FTC and DOJ leadership are clearing mergers more quickly than was done during the Biden administration.

Specific Matters

A rash of recent DOJ and FTC decisions on proposed mergers are in line with new agency leaders’ recent bold pronouncements. It is doubtful that these mergers would have passed muster under previous leadership.

Perhaps the most significant recent development is the DOJ’s June 28 decision to greenlight HPE’s acquisition of Juniper Networks, subject to narrowly tailored structural and behavioral remedies. This merger brings together the second- (HPE) and third-largest (Juniper) wireless local network providers of wireless local area networks (WLANs) in the United States (Cisco is the largest). The DOJ originally had opposed the merger, and a trial had been scheduled for this month.

As I explained last month in Forbes, this tie-up promises substantial efficiency gains that could accrue to consumers and the broader U.S. economy. It also should create a second major U.S. WLAN competitor on the global stage, bolstering the United States’ strategic advantage in critical digital infrastructure.

Other major deals have settled in recent weeks, creating potentially procompetitive synergies that benefit the U.S. economy:

• Synopsys Inc.’s acquisition of ANSYS, Inc. (DOJ), in the markets for high-tech optical-software tools and register-transfer-level power-consumption-analysis tools.
• Keysight Technologies’ acquisition of Spirent Communications (DOJ), involving high-speed ethernet testing equipment, network-security testing equipment, and radio-frequency-channel emulators.
• Omnicom Group’s acquisition of The Interpublic Group (FTC), involving media-buying advertising agencies.
• Safran’s acquisition of Collins Aerospace (DOJ), involving actuation and flight-control systems.
• Convenience-store chain Alimentation Couche-Tard’s acquisition of hundreds of gas stations from grocery-store chain Giant Eagle (FTC), subject to the divestiture of 35 Couche-Tard gas stations.

Another merger has been fully cleared by the FTC after a very quick review:

Looking Forward

The administration’s merger-enforcement record is off to a very good start. Initial official pronouncements and a rash of merger approvals (some with “fixes”) are helpful. They signal to markets that an economically sound and expeditious merger-review process that respects due process has been restored.

Nevertheless, work still remains to be done. The administration may wish to consider further steps to encourage welfare-enhancing mergers.

Specifically, for example:

• The FTC and the DOJ might consider revising the 2023 merger guidelines to: (1) place a greater weight on efficiency factors and potential positive innovation effects; and (2) eliminate reliance on outmoded case law and a one-sided overemphasis on anticompetitive harm theories.
• The FTC might weigh redoing the fall 2024 premerger-notification rule (which also applies to DOJ merger reviews), that imposes enormous new and unwarranted information-request burdens on private parties.
• To clarify settlement policy, the agencies could also consider issuing a new joint policy statement on merger remedies (Ferguson has indicated that one is forthcoming).

Clarifications of merger policy that increase businesses’ regulatory certainty and encourage dynamically efficient M&A transactions could bolster U.S. competitiveness in international markets, benefiting both American producers and consumers.