A $63 Billion Week in Deals Cleared 

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1:29This is Bloomberg Law with June Grosso from Bloomberg Radio. I see it as my job to scrutinize deals consistently with the timeline Congress created in our antitrust laws. And if we think that they are illegal and we think that we can win in court, we're going to go to court. But if we don't think that they are illegal or we don't think we can win in court, the FTC is going to get out of the way. Again, I've heard this complaint a lot from the business community that in the previous administration, a deal would enter the FTC and it would sort of disappear. And sometimes it could disappear for months while, you know, novel ideas were floated, different theories.

2:08and sometimes it sort of seemed like the FTC was hoping that deals would die on the vine while they waited for regulatory clearance. I want nothing to do with that. Federal Trade Commission Chair Andrew Ferguson has repeatedly said that if his agency can resolve issues with a proposed merger, it will get out of the way. And it appears that both Trump's antitrust enforcers are getting out of the way of multi-billion dollar deals. In the last week of June, the FTC cleared candy maker Marr's$36 billion acquisition of Pringles maker Kelanova. It approved Omnicom's$13.5 billion buyout of rival Interpublic, which will create the world's largest advertising agency.

2:55And the Department of Justice cleared Hewlett-Packard's$14 billion acquisition of Juniper Networks. More than$63 billion in deals cleared in the same week. Who better to explain what's happening with the antitrust regulators than my guest, Harry First, a professor at NYU Law School who specializes in antitrust. Harry, the FTC and the Justice Department cleared three deals worth more than$63 billion in the last week of June. What does this tell you? Is it the change in management? Well, there's certainly a change in management. The question that everyone asks when management changed is what direction?

3:38So I think people were looking at two big things. One were the cases against the dominant platforms, the big tech platforms that were ongoing. You had five of those. What would they do with those? And the second is what were they going to do with mergers? So on the first, they've kept them going. They haven't dismissed anything. They're litigating them just like they were before. In fact, emphasizing the continuity of the position the department's taking. In some ways, maybe not surprising, given sort of the maybe populism streak in the Trump administration. But in some ways surprising because, you know, they're moved closer and closer to put up or shut up.

4:20You know, you have to remedy these things. So that's where we are with those. The other side was the mergers. And out of the box, they filed the case, HP's acquisition of Juniper Networks. And it was the first case they filed. And it looked like a Biden complaint. I think people were saying, look, what they're going to do is they'll pull the merger guidelines that were issued in 2023 by the Biden FTC and Justice Department, widely viewed as pretty aggressive in terms of enforcement. yeah, maybe they're going to pull those and pull back from merger enforcement. But what we saw in that first case was they file a case, they cite the 2023 guidelines, they follow them.

5:05They say, hey, this case is presumptively bad because it increases concentration. And they're trying to suppress a more innovative firm. Whoa, that seems to me surprising. So I thought, well, maybe it's something in the changeover. The person who signed it maybe doesn't understand what he's done or who knows, you know, we're not well supervised, but they kept it going. And so the next question is, well, what are they going to do with these cases? And you're right. Now we're seeing a string of dismissals. Let's look closer at the Hewlett Packard acquisition of Juniper Networks. What was the settlement like there?

5:45The Justice Department announced the settlement on a Saturday. Hot news. Really? Yeah. Saturday, June the 28th, they announced the settlement of HPE Juniper. This is a$14 billion acquisition. So the settlement that they explain, and this isn't over yet because the judge has to approve it, spins off some part of HPE that hasn't been mentioned, it's some part that does networks for small business. So it looks like small ball. You know, it's not even clear how that's going to affect competition. Remember, they pleaded that this was highly concentrated industry, anti-competitive, strong head-to-head competition between the two firms.

6:28What's the other part? The other part is a compulsory license to the software that Juniper has called MIST. Now, a compulsory license means actually the merge firm gets to keep it. They don't have to get rid of it. They don't have to divest it. All they have to do is license it for which they'll get some money, but not exclusively. So they get to keep it. And then do they have a potential licensee for this? No, they don't seem to have anyone. They're going to appoint a trustee. So who's going to take this license? Is it valuable? Isn't it? Not explained. And they say maybe a second party will show up.

7:10Well, if a second party shows up, says a decree, with a bid of over$8 million, they can have a license too. $8 million might be a second bid. Remember, this acquisition is a$14 billion acquisition. So is a non-exclusive license to this software valuable? Will someone come up and take it? Who might it be? No idea. So that's where we are. Looks to me like we can call it, shall we say, a really weak remedy for a case that's pleated that looked very strong. So this is your insight into where merger enforcement might be going. The first case out of the box looks strong when it's pleated. looks to me at the moment, hey, maybe more information will turn up, pretty weak on the remedy that they go for to allow the merger to go forward.

8:06And this seems to be the mantra that, you know, we've got these strong guidelines on the books that look very pro-enforcement. Maybe we'll file a case and then have a weak remedy. Or here's another good part. Maybe we won't file a case at all and just let these things go through. The Omnicon deal creates the world's largest advertising agency, and they got FTC approval by agreeing to stop withholding online ads for political reasons. So no economic concessions. You know, another tactic is just to let it go through. And in the advertising agency, it creates the largest advertising agency ever. And for an administration that talks about how horrible concentration is, you have to wonder exactly what's going on.

9:00There is one more, I guess, interesting case in the antitrust division allowing a merger to go forward. And it's a cellular phone merger. and it's T-Mobile acquiring a smaller company called U.S. Cellular. And that they let through without anything. But interestingly, they filed something that's called a closing statement, explaining why they closed the case. This is pretty rare for the Justice Department to do or the FTC. They don't usually explain why they don't do something. And there's a lot of controversy about this. But this one they explained. And I urge people to go and read it because it's sort of funny.

9:43It's like I think of, you remember the old Chinese fortune cookies? Oh, yes. And you always thought you'd open one up and whether fortune would be, help, I'm being held prisoner in a Chinese fortune cookie factory. Well, this was sort of like that because the closing statement was almost a statement about why this merger was so anti-competitive and why it so needed to be stopped that we didn't do anything. And what's also sort of great about it, and this is from the closing statement, this is the Justice Department writing, the company, the Justice Department understood the unmet needs of customers.

10:22This is the company that's going to be acquired, the company that understood the unmet needs of customers. And they called their customers Farmtown Frugal and Heartland Family. All right? This is great. And these in some ways would sound like J.D. Vance wrote this. And they're the consumers you would think this administration purports to want to protect. And instead, what they're going to be allowed to do is to join the Sprint Network, which presumably they decided not to do in the first place when they signed up with U.S. Cellular. And then it goes on to lament the concentration in the cell phone market.

11:02It's a big three, and we don't seem to be doing anything about this. We, the Justice Department, it is truly a curious document. Final curious point on this, Sprint T-Mobile merger. was supposed to establish a fourth carrier through DISH. So Sprint had to give Boost Mobile System to DISH to help them establish a fourth carrier. No hint in this statement that there's a fourth carrier that might emerge, even though the Justice Department is at this very moment supervising the decree that they entered that purported to establish or hoped to establish a fourth carrier. So this is curious, bizarre, prisoner in the fortune cookie factory material.

11:56But again, it's sort of this, boy, we see these problems, but hey, don't think we're going to do anything about it. Coming up next on the Bloomberg Law Show, I'll continue this conversation with Professor Harry First of NYU Law School. Why did antitrust enforcers during the Biden administration stop making deals?

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13:34early on trump's head of the ftc echoed the tough cop messaging of his controversial predecessor lena khan i think it's important to proceed like the ftc is a vigilant cop on the beat we're surveying the markets we're looking for competition problems we're looking for violation of the consumer protection laws and if we think they're there we're going to go to court but most importantly, if we don't think that there are problems, it's really important for the FTC to get out of the way. And those cops have cleared several multi-billion dollar deals without much fuss. I've been talking to antitrust law expert Harry Furst, a professor at NYU Law School.

14:15Harry, is Ferguson's tough talk, just talk, court, all talk? No, the idea that they're going to resolve it through, you know, a deal is not all talk. Apparently that is action. You either don't do anything, you know, the cell phone acquisition, or you do something weak, the HPE Juniper Networks merger. I mean, you can always make a deal if you're willing to give up a lot. That's not hard to do. There was reason why the Biden administration enforcers said, we're backing away from all these deals because the remedies that had been agreed in so many of these deals turned out to be ineffective. There were studies of this that, you know, you'd say, oh boy, this will reestablish competition in the market.

15:05And then it didn't. And so what happened? The deal basically went forward and we lost competition. Every once in a while, there'd be some good remedy. But basically, the argument was, you know, it's really hard to create competition through these government decrees. The better thing is not to let competition go away by allowing the merger. So, you know, that was the basis of the policy in the Justice Department, the FTC. Not that they didn't settle cases. They did. And not all of them were actually effective. They weren't. But the overall thrust was, we're suing, we're not settling. And then parties would put together deals knowing that there was a greater chance of litigation.

15:53Now it's gone the other way. And, you know, I think that this is what a deal making administration would want. And it looks to me like that's where they're going. always with the ability to bring suit in a case that suits them. Because the 2023 guidelines have a lot of discretion in them. And the flip side of we'll negotiate a lot is, but maybe not with you. So we have yet to see with whom they are tough. That was my next question. Are there certain kinds of deals you think they won't approve? Well, I think there's a push-pull in both agencies for actually following the law and saying, gee, this violates the statute, and maybe listening to their masters.

16:45And, you know, I don't really understand why they didn't bring suit in this T-Mobile U.S. cellular case. I don't know what's going on there. So maybe someone was interested in having it go forward. I don't know. So I think that there are a lot of serious antitrust people in both agencies. People generally credit Gail Slater as being a real antitrust person, not a hack antitrust person. But in the end, they really do serve in this administration very much, I think, at the will of those above them. Certainly that's true for Andrew Ferguson, or at least how he perceives it. And, you know, maybe to some extent to Gail Slater, but maybe this closing statement was the best she could do to get her voice on the record that this was a bad merger that should have been blocked.

17:39So Slater at Justice and Ferguson at the FTC, are they in tune or do they have the same goals? Well, you know, I love the in tune idea. So the question is, what's the tune? Let me put it a different way then. No, no, no. I think that's a great question because if the tune is what the piper calls and the piper is the president, Andrew Ferguson seems to be way in tune and really, just from what you read, I don't know him personally, eager, eager to please either the president or those with the president's ear. And, you know, he seemed to have been running for chair strongly of the Federal Trade Commission before he was appointed And as you read what he writes, it's, you know, very pro-Trump I mean, he came out in favor of firing his Democratic colleagues on the Federal Trade Commission Really?

18:38Why does he do that? He's saying, okay, and don't forget, President, you can fire me too Why would he do that? So I think Gail Slater may be a little different She did advise J.D. Vance during the campaign, apparently, and she just seems to me to be more centered as an antitrust person. But, you know, I don't think in the end, you know, she's less subject to commands. And she's in an organization where the lines of command are much clearer. You know, there's deputy attorney general above her and attorney general above her. There's clear lines of authority. So she, in the end, will have to follow that tune.

19:19But she may have more ability to maneuver or maybe more willing to. I just don't know. Harry, the first Trump administration, was that good for deals? Generally. Yeah. Yeah. I think generally, Mekon Delrahim, who was head of the antitrust division, the people at the Federal Trade Commission were sort of more, shall we say, normal antitrust enforcers in the mold of people who were willing to take settlements and not so clearly politically in tune. People thought that maybe Macon Delrahim was a little more politically in tune. I'm not sure. He did some things that looked like that. FGC, not so much.

20:03Apparently, Trump threatened to fire the chair a couple of times. So I think there was more independence, more, if you could call it that, normalcy. And the AGs were more normal. I mean, Bill Barr was, for whatever you think of him one way or the other, you know, he was a sort of a normal lawyer and, you know, not a sycophant to the president. So it was a different time. It was things were done differently. I think this administration, from all you can see, everything is just different. So do you think that dealmakers are happy with the Trump administration? Oh, sure. Yeah, I think they're glad to be finished with the Biden administration and Jonathan Cantor and Lena Kahn.

20:53Yeah, and feel that they're now in more of a let's make a deal and maybe more able to bring political pressure to bear if they can't make a deal, you know, if the staff resists and so forth. You know, they'll still have to work through the staff. And, you know, people who are still there and haven't been laid off, fired or left, resigned, you know, staff knows what they're in for. They've got new bosses. And are there any interesting cases that you're watching that we haven't talked about? Well, this is something that the Justice Department filed recently called a statement of interest, where they decide to poke their nose into private antitrust litigation and say what the position in the United States is and the public interest is.

21:42And they've chosen a case where the lead plaintiff is a group called Children's Health Defense. So Children's Health Defense is an anti-vax group that had been run by RFK Jr. And they filed private suit against, let's see, Washington Post, Reuters, AP, claiming that they've been feeding information or agreeing on information and feeding it to the platforms like Facebook so that these groups would be deplatformed for misinformation. And the information apparently centers around the idea that COVID vaccines were terrible, all the COVID conspiracies. It's an odd group of plaintiffs, an odd piece of litigation, because it's hard to see what the antitrust injury is, where competition has been affected.

22:42But the Justice Department just thought a statement of interest on the plaintiff's side. and you look at all the things that the Justice Department could do and you say, so why did you do this? In a case that, I mean, I would say it's an antitrust case. If it's marginal, that's sort of a nice thing to call it. And part of the problem that the Justice Department has in this statement of interest is if you credit their theory a little bit too much, they could cast a paw on what are called standard-setting organizations that help standardize interfaces in computers, telecommunications, all sorts of technical things, because that involves sort of similar behavior, except it has real economic consequences.

23:34So the paper that they filed is, to my reading, sort of odd, because they've got to make it a real legal brief. On the other hand, you know, they talk about the marketplace of ideas and discrimination and quote Clarence Thomas. So this is an interesting case to watch because, again, you know, what are they doing by weighing in on this case? There's a lot of work to do. And, you know, usually private plaintiffs are left to pursue private cases. They get triple damages if they win. But here the Justice Department feels the need to weigh in. and say, this might be a good case. It doesn't sound like you agree with them, Harry.

24:17Thanks so much. Always a pleasure to have you on. That's Professor Harry First of NYU Law School. And that's it for this edition of the Bloomberg Law Show. Remember, you can always get the latest legal news on our Bloomberg Law podcast. You can find them on Apple Podcasts, Spotify, and at www.bloomberg.com slash podcast slash law. And remember to tune into the Bloomberg Law Show every weeknight at 10 p.m. Wall Street time. I'm June Grosso, and you're listening to Bloomberg.

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26:15I'm ABC News legal analyst Brian Buckmeyer. Listen to Burden of Proof, Luigi Mangione, wherever you get your podcasts.