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A $63 Billion Week in Deals Cleared · Bloomberg Law

0:02
Speaker 1: This is Bloomberg Law with June Grosso from Bloomberg Radio.
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Speaker 1: I see it as my job to scrutinize deals consistently
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Speaker 1: with the timeline Congress created and our antitrust laws. And
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Speaker 1: if we think that they are illegal and we think
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Speaker 1: that we can win in court, we're going to go
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Speaker 1: to court. But if we don't think that they are
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Speaker 1: illegal or we don't think we can win in court,
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Speaker 1: the FTC is going to get out of the way again.
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Speaker 1: I've heard this complain a lot from the business community
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Speaker 1: that in the previous administration, a deal would enter the
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Speaker 1: FTC and it would sort of disappear, and sometimes it
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Speaker 1: could disappear for months while, you know, novel ideas were floated,
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Speaker 1: different theories, and sometimes it sort of seemed like the
0:44
Speaker 1: FTC was hoping that deals would die on the vine
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Speaker 1: while they waited for regulatory clearance. I want nothing to
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Speaker 1: do with that.
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Speaker 2: Federal Trade Commission Chair Andrew Ferguson has repeatedly said that
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Speaker 2: if his agency can resolve issues with a proposed it
1:00
Speaker 2: will get out of the way. And it appears that
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Speaker 2: both Trump's anti trust enforcers are getting out of the
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Speaker 2: way of multi billion dollar deals In the last week
1:10
Speaker 2: of June. The FTC cleared candymaker mars thirty six billion
1:14
Speaker 2: dollar acquisition of pringles maker Keleinova, It approved Omnicom's thirteen
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Speaker 2: point five billion dollar buyout of rival inter Public, which
1:25
Speaker 2: will create the world's largest advertising agency, and the Department
1:29
Speaker 2: of Justice cleared Hewlett Packard's fourteen billion dollar acquisition of
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Speaker 2: Juniper Networks. More than sixty three billion dollars in deals
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Speaker 2: cleared in the same week. Who better to explain what's
1:42
Speaker 2: happening with the anti trust regulators than my guest, Harry First,
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Speaker 2: a professor at NYU Law School who specializes in anti trust. Harry,
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Speaker 2: the FTC and the Justice Department cleared three deals worth
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Speaker 2: more than sixty three billion dollars in the last week
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Speaker 2: of What does this tell you? Is it the change
2:03
Speaker 2: in management?
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Speaker 3: Well, there's certainly a change in management. The question that
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Speaker 3: everyone asked when management changed is what direction? So I
2:12
Speaker 3: think people were looking at two big things. The one
2:15
Speaker 3: where the cases against the dominant platforms, the big tech
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Speaker 3: platforms that were ongoing neared five of those, what would
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Speaker 3: they do with those? And the second is what were
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Speaker 3: they going to do with mergers? So on the first,
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Speaker 3: they've kept them going. They haven't dismissed anything. They're litigating
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Speaker 3: them just like they were before, in fact, emphasizing the
2:37
Speaker 3: continuity of the position of departments taking in some ways
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Speaker 3: maybe not surprising given sort of the maybe populism streak
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Speaker 3: in the Trump administration, but in some way surprising because
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Speaker 3: you know, they have moved closer and closer to put
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Speaker 3: up or shut up. You know, you have to remedy
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Speaker 3: these things. So that's where we are with those. The
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Speaker 3: other side was the mergers, and out of the box,
3:00
Speaker 3: they filed the case HP's acquisition of Juniper Networks, and
3:05
Speaker 3: it was the first case they filed, and it looked
3:08
Speaker 3: like a Biden complaint. I think people were saying, look,
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Speaker 3: what they're going to do is they'll they'll pull the
3:14
Speaker 3: merger guidelines that were issued in twenty twenty three by
3:18
Speaker 3: the Biden FTC and Justice Department widely viewed as pretty
3:23
Speaker 3: aggressive in terms of enforcement. Yeah, maybe they're going to
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Speaker 3: pull those and pull back from merger enforcement. But what
3:30
Speaker 3: we saw in that first case was they file the case,
3:34
Speaker 3: they cite the twenty twenty three guidelines, they follow them,
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Speaker 3: They say, hey, this case is presumptively bad because it
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Speaker 3: increases concentration, and you know, they're trying to suppress a
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Speaker 3: more innovative firm. WHOA. That seems to me surprising, So
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Speaker 3: I thought, well, maybe it's something in the changeover. The
3:55
Speaker 3: person has signed it, maybe doesn't understand what he's done,
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Speaker 3: or who knows. You know, we're not well supervised. But
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Speaker 3: they kept it going. And so the next question is, well,
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Speaker 3: what are they going to do with these cases? And
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Speaker 3: you're right now we're seeing a string of dismissals.
4:11
Speaker 2: Let's look closer at the Hewlett Packard acquisition of Juniper Networks.
4:16
Speaker 2: What was the settlement like?
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Speaker 1: There?
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Speaker 3: The Justice Department announced the settlement. So on a Saturday
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Speaker 3: Hot news, Yeah, Saturday, June the twenty eighth, they announced
4:27
Speaker 3: the settlement of HPE Juniper. This is a fourteen billion
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Speaker 3: dollar acquisition. So the settlement that they explain, and this
4:36
Speaker 3: isn't over yet because the judge has to approve it
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Speaker 3: spins off some part of HPE that hasn't been mentioned.
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Speaker 3: It's some part that does networks for small business. So
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Speaker 3: it looks like small ball. You know, it's not even
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Speaker 3: clear how that's going to affect competition. Remember, they pleaded
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Speaker 3: that this was highly concentrated industry, anti competitive, strong head
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Speaker 3: to head competition between the two firms. What's the other part.
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Speaker 3: The other part is a compulsory license to the software
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Speaker 3: that Juniper has called missed. Now, a compulsory license means
5:12
Speaker 3: actually the merge firm gets to keep it. They don't
5:16
Speaker 3: have to get rid of it, they don't have to
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Speaker 3: divest it. All they have to do is license it,
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Speaker 3: for which they'll get some money, but non exclusively, so
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Speaker 3: they get to keep it. And then do they have
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Speaker 3: a potential licensee for this, No, they don't seem to
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Speaker 3: have anyone. They are going to appoint a trustee. So
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Speaker 3: who's going to take this license? Is as valuable? Isn't
5:39
Speaker 3: it not explained? And they say maybe a second party
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Speaker 3: will show up. Well, a second party shows up, says
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Speaker 3: the decree with a bid of over eight million dollars,
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Speaker 3: they can have a license to eight million dollars. Might
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Speaker 3: be a second bid. Remember this acquisition is a fourteen
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Speaker 3: billion dollars acquisitions. So is a non exclusive life sense
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Speaker 3: to this software valuable? Will someone come up and take it?
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Speaker 3: Who might it be? No idea? So that's where we are.
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Speaker 3: Looks to me like we can call it, shall we say,
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Speaker 3: a really weak remedy for a case that's pleaded that
6:16
Speaker 3: look very strong. So this is your insight into where
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Speaker 3: merger enforcement might be going. The first case out of
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Speaker 3: the box looks strong when it's pleaded. Looks to me
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Speaker 3: at the moment, Hey, maybe more information will turn up
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Speaker 3: pretty weak on the remedy that they go forward to
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Speaker 3: allow the merger to go forward. And this seems to
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Speaker 3: be the mantra that, you know, we've got these strong
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Speaker 3: guidelines on the books that look very pro enforcement. Maybe
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Speaker 3: we'll file a case and then have a weak remedy.
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Speaker 3: Or here's another good part, maybe we won't file a
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Speaker 3: case at all and just let these things go through.
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Speaker 2: The Omnicon deal creates the world's largest advertising agency, and
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Speaker 2: they got FDC approval by agreeing to stop withholding online
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Speaker 2: ads for political reasons, so no economic concessions.
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Speaker 3: You know. Another tactic is just to let it go through.
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Speaker 3: And in the advertising agency creates the largest advertising agency ever.
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Speaker 3: And for an administration that talks about how horrible concentration is,
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Speaker 3: you have to wonder exactly what's going on. There is
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Speaker 3: one more moler I guess interesting case in any trust
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Speaker 3: division allowing a merger to go forward. And it's a
7:44
Speaker 3: cellular phone merger and it's T Mobile acquiring a smaller
7:50
Speaker 3: company called US Cellular, and that they led through without anything.
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Speaker 3: But interestingly, they filed something that's called a closing statement
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Speaker 3: explaining why they closed the case. This is pretty rare
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Speaker 3: for the Justice Department to do or the FTC. They
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Speaker 3: don't usually explain why they don't do something, and there's
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Speaker 3: a lot of controversy about this, but this one they explained.
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Speaker 3: And I urge people to go and read it because
8:15
Speaker 3: it's sort of funny. It's like, I think of you
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Speaker 3: remember the old Chinese fortune cookies.
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Speaker 1: Oh yeah, you know, right.
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Speaker 3: And you always thought you'd open one up whether the
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Speaker 3: fortune would be help I'm being held prisoner in a
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Speaker 3: Chinese fortune cookie factory. Well this was sort of like that,
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Speaker 3: because the closing statement was almost a statement about why
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Speaker 3: this merger was so any competitive and why it's so
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Speaker 3: needed to be stopped that we didn't do anything. And
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Speaker 3: what's also sort of great about it, and it is
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Speaker 3: from the closing statement, this is the Justice Department writing
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Speaker 3: the company. The Justice Department understood the unmet needs of customers. Okay,
8:55
Speaker 3: this is the company that's going to be acquired, the
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Speaker 3: company that understood the un met needs of customers, right,
9:02
Speaker 3: and they called their customers farm town, frugal and heartland families.
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Speaker 3: All right, it's just great. And these in some ways
9:12
Speaker 3: would sound like you know, JD. Vans wrote this, and
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Speaker 3: they are the consumers you would think this administration purports
9:19
Speaker 3: to want to protect. And instead what they're going to
9:22
Speaker 3: be allowed to do is to join the Sprint network,
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Speaker 3: which presumably they decide not to do in the first
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Speaker 3: place when they signed up with US Cellular. And then
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Speaker 3: it goes on to lament the concentration in the cell
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Speaker 3: phone market. It's a big three and we don't seem,
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Speaker 3: you know, to be doing anything about this, we the
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Speaker 3: Justice Department. It is truly a curious document. Final curious
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Speaker 3: point on this Sprint T Mobile merger was supposed to
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Speaker 3: establish a fourth carrier, you know, through Dish. So Sprint
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Speaker 3: had to give Boost Mobile system to Dish to help
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Speaker 3: them stay I was a fourth carrier. No hint in
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Speaker 3: this statement that there's a fourth carrier that might emerge,
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Speaker 3: even though the Just Department is at this very moment
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Speaker 3: supervising the decree that they entered that purported to establish
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Speaker 3: or hope to establish a fourth carrier. So this is curious,
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Speaker 3: bizarre prisoner in the Fortune Cookie factory material. But again
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Speaker 3: it's sort of this why we see these problems, But hey,
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Speaker 3: I don't think we're going to do anything about it.
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Speaker 2: Coming up next on the Bloomberg Law Show, I'll continue
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Speaker 2: this conversation with Professor Harry First of NYU Law School.
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Speaker 2: Why did antitrust enforces during the Biden administration stop making deals?
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Speaker 2: Early on Chrump's head of the FTC echoed the tough
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Speaker 2: cop messaging of his controversial predecessor, Lena Kahan.
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Speaker 1: I think it's important to proceed like the FTC is
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Speaker 1: a vigilant cop on the beat. We're surveying the markets.
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Speaker 1: We're looking for competition problems, We're looking for violation of
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Speaker 1: the consumer protection laws, and if we think they're there,
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Speaker 1: we're going to go to court. But most importantly, if
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Speaker 1: we don't think that there are problems, it's really important
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Speaker 1: for the FTC to get out of the way.
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Speaker 2: And those comps have cleared several multi billion dollar deals
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Speaker 2: without much fuss. I've been talking to anti trust law
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Speaker 2: expert Harry First, a professor at NYU Law School, Harry
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Speaker 2: is Ferguson's tough talk, just talk court, all talk.
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Speaker 3: No, the idea that they're going to resolve it through,
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Speaker 3: you know, a deal is not all talk. Apparently, that
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Speaker 3: is action. You either don't do anything, you know, the
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Speaker 3: cell phone acquisition, or you do something weak the HP
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Speaker 3: Tuna Per Networks merger. I mean, you can always make
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Speaker 3: a deal if you're willing to give up a lot.
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Speaker 3: That's not hard to do. There was reason why the
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Speaker 3: Biden administration forcers said we're backing away from all these
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Speaker 3: deals because the remedies that had been agreed in so
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Speaker 3: many of these deals turned out to be ineffective. There
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Speaker 3: were studies of this that you know, you'd say, oh boy,
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Speaker 3: this will re establish competition in the market, and then
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Speaker 3: it didn't. And so what happened that people basically went
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Speaker 3: forward and we lost competition. You know, every once in
12:28
Speaker 3: a while to be some good remedy. But basically the
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Speaker 3: argument was, you know, it's really hard to create competition
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Speaker 3: through these government decrees. The better thing is not to
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Speaker 3: let competition go away by allowing the merger. So, you know,
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Speaker 3: that was the basis of the policy in the Justice Department,
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Speaker 3: the FTC. Not that they didn't settle cases. They didn't,
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Speaker 3: and not all of them were actually effective. They weren't,
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Speaker 3: but the overall thrust was we're doing we're not settling,
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Speaker 3: And then parties were put together deals knowing that there
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Speaker 3: was a greater chance of litigation. Now it's gone the
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Speaker 3: other way, and you know, I think that this is
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Speaker 3: what a deal making the administration would want, And it
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Speaker 3: looks to me like that's where they're going always with
13:20
Speaker 3: the ability to bring suit in a case that suits them,
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Speaker 3: because the twenty twenty frequentidelines have a lot of discretion
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Speaker 3: in them, and the flip side of we'll negotiate a
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Speaker 3: lot is but maybe not with you. So we have
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Speaker 3: yet to see with whom they are tough.
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Speaker 2: That was my next question. Are there certain kinds of
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Speaker 2: deals you think they won't approve?
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Speaker 3: Well, I think there's a push pull in both agencies
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Speaker 3: for actually following the law and saying, gee, this violates
13:56
Speaker 3: the statue and maybe listening to their master. And you know,
14:01
Speaker 3: I don't really understand why they didn't bring suit in
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Speaker 3: this T Mobile US cellular case. I don't know what's
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Speaker 3: going on there. So maybe someone was interested in having
14:11
Speaker 3: it go forward. I don't know. So I think that
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Speaker 3: you know, there are a lot of serious anti trust
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Speaker 3: people in both agencies. People generally credit Gail Slater as being,
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Speaker 3: you know, a real anti trust person, not a hack
14:26
Speaker 3: anti trust person, you know, but in the end, they
14:30
Speaker 3: really do serve in this administration very much. I think
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Speaker 3: it's the will of those above them. Certainly that's true
14:37
Speaker 3: for Andrew Ferguson, or at least how he perceives it.
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Speaker 3: And you know, maybe just some extent to Gail Slater,
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Speaker 3: but maybe this closing statement was the best she could
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Speaker 3: do to get her voice on the record that this
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Speaker 3: is a bad merger that should have been blocked.
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Speaker 2: So Slater at Justice and Ferguson at the FTC, see,
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Speaker 2: are they in tune or do they have the same goals?
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Speaker 3: Well, you know, I love the in tune idea. So
15:08
Speaker 3: the question is what's the tune the no, no no. I
15:13
Speaker 3: think that's a great question because if the tune is
15:16
Speaker 3: what the piper calls, and the piper is the president,
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Speaker 3: Andrew Ferguson seems to be way in tune, and really,
15:25
Speaker 3: just from what you read, I don't know him personally,
15:27
Speaker 3: eager eager to please either the president or those with
15:33
Speaker 3: the presidents here. And you know, he seemed to have
15:37
Speaker 3: been running for chair strongly of the Federal Trade Commission
15:41
Speaker 3: before he was appointed. And as you read what he writes, it's,
15:46
Speaker 3: you know, very pro Trump. I mean, he came out
15:49
Speaker 3: in favor of firing his Democratic colleagues on the Federal
15:52
Speaker 3: Trade Commission. Really, why why does he do that? He's saying, okay,
15:56
Speaker 3: and don't forget President, you can fire me too. Why
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Speaker 3: did you do that?
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Speaker 2: So?
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Speaker 3: I think gel Slator may be a little different. She
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Speaker 3: did advise jd Vance, you know, during the campaign apparently,
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Speaker 3: and she just seems to me to be more centered
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Speaker 3: as an any trust person. But you know, I don't
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Speaker 3: think in the end, you know, she's less subject to commands,
16:19
Speaker 3: and she's in a in an organization where the lines
16:22
Speaker 3: of command are much clearer. You know, there's deputy Attorney
16:26
Speaker 3: General above her and the Attorney general above her, the
16:29
Speaker 3: clear lines of authority. So she in the end will
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Speaker 3: you know, have to follow that tune. But she may
16:36
Speaker 3: have more ability to maneuver, or maybe more willing to.
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Speaker 3: I just don't know, Harry.
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Speaker 2: The first Trump administration was that good for deals.
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Speaker 3: Generally, Yeah, I think generally Making Del Raheem, who was
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Speaker 3: head of any trust divisions, the people at the Federal
16:56
Speaker 3: Trade Commission were sort of more shall we say, normal
17:00
Speaker 3: anti trust enforcers in the mold of people who were
17:05
Speaker 3: willing to take settlements and not so clearly politically in tune.
17:11
Speaker 3: People thought that maybe making Delwraheem was a little more
17:14
Speaker 3: politically in tune, and I'm not sure he did some
17:16
Speaker 3: things that looked like that FTC not so much. Apparently
17:20
Speaker 3: Trump threatened to fire the chair a couple of times.
17:23
Speaker 3: So I think there was more independence, more if you
17:26
Speaker 3: could call it that normalcy, and the ags were more normal.
17:31
Speaker 3: I mean, Bill Barr was, for whatever you think of
17:34
Speaker 3: him one way or the other. You know, he was
17:36
Speaker 3: a sort of a normal lawyer and you know, not
17:40
Speaker 3: a sick ephant to the president. So it was a
17:44
Speaker 3: different time, it was things were done differently. I think
17:47
Speaker 3: this administration, from all you can see, everything is just different.
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Speaker 2: So do you think that deal makers are happy with
17:55
Speaker 2: the Trump administration?
17:57
Speaker 3: Oh? Sure, yeah, I think they're they're glad to be
18:02
Speaker 3: finished with the Biden administration. And Jonathan Canter and Lena Khan, yeah,
18:09
Speaker 3: and feel that they're now in more of a let's
18:11
Speaker 3: make a deal and maybe more able to bring political
18:15
Speaker 3: pressure to bear if they can't make a deal, you know,
18:19
Speaker 3: if staff resists and so forth, you know, they'll still
18:22
Speaker 3: have to work through the staff. And you know, people
18:25
Speaker 3: who are still there and haven't been laid off, fired
18:28
Speaker 3: or left resigned. You know, staff knows what they're in for.
18:33
Speaker 3: They've got new bosses.
18:35
Speaker 2: And are there any interesting cases that you're watching that
18:38
Speaker 2: we haven't talked about.
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Speaker 3: Well, this is something that the Justice Department filed recently
18:45
Speaker 3: called a statement of interest, where they decide to poke
18:50
Speaker 3: their nose into private any trust litigation and say what
18:54
Speaker 3: the position in the United States is and the public
18:57
Speaker 3: interest is. And they've chosen a case where the lead
19:02
Speaker 3: plaintiff is a group called Children's Health Defense. So Children's
19:08
Speaker 3: Health Defense is an anti vaxed group that had been
19:11
Speaker 3: run by RFK Junior, and they filed private suit against
19:15
Speaker 3: let's see Washington Post, Reuter's ap claiming that they've been
19:22
Speaker 3: feeding information or agreeing and information and feeding it to
19:27
Speaker 3: the platforms like Facebook so that these groups would be
19:32
Speaker 3: deep platformed for misinformation. And the information apparently centers around
19:39
Speaker 3: the idea that COVID vaccines were terrible COVID you know,
19:42
Speaker 3: all the COVID conspiracy. It's an odd group of plaintiffs,
19:47
Speaker 3: an odd piece of litigation because it's hard to see
19:52
Speaker 3: what the anti trust injury is what you know, where
19:56
Speaker 3: competition has been affected. But the Justice Department just thought
19:59
Speaker 3: us statement of interest on the plaintiff side. And you know,
20:05
Speaker 3: you look at all the things that the Justice Department
20:08
Speaker 3: could do, and you say, so, why did you do
20:12
Speaker 3: that in a case that I mean, I would say
20:15
Speaker 3: in any trust case if it's marginal, that's sort of
20:18
Speaker 3: a nice thing to call it. And part of the
20:22
Speaker 3: problem that the Justice Department has in this statement of
20:25
Speaker 3: interest is if you credit their theory a little bit
20:29
Speaker 3: too much, they could cast a pall on what are
20:33
Speaker 3: called standard setting organizations that help standardize interfaces in computers, telecommunications,
20:42
Speaker 3: all sorts of technical things, because that involves sort of
20:46
Speaker 3: similar behavior, except that as real economic consequences. So the
20:51
Speaker 3: paper that they filed is to my reading, sort of
20:55
Speaker 3: odd because they've got to make it a real legal brief.
20:58
Speaker 3: On the other hand, you know, they talk about the
21:01
Speaker 3: marketplace of ideas and discrimination and quote Clarence Thomas. So
21:07
Speaker 3: this is an interesting case to watch because again, you know,
21:11
Speaker 3: what are they doing by weighing in on this case.
21:14
Speaker 3: There's a lot of work to do, and you know,
21:18
Speaker 3: usually private plane ifs are left to pursue private cases,
21:22
Speaker 3: they get treble damages if they win. But here just
21:26
Speaker 3: the department feels the need to weigh in and say
21:29
Speaker 3: this might be.
21:29
Speaker 1: A good case.
21:30
Speaker 2: It doesn't sound like you agree with them. Harry, thanks
21:33
Speaker 2: so much, Always a pleasure to have you on. That's
21:35
Speaker 2: Professor Harry First of NYU Law School. And that's it
21:39
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