Not So Fast: Antitrust Fervor

By DirectorCorps

January 7, 2020 All Industries M&A

Large corporations are under attack from every corner. A group of states are fighting the proposed acquisition of Sprint Corp. by T-Mobile US. The Department of Justice and the Federal Trade Commission are investigating tech giants including Facebook and Alphabet’s Google for antitrust violations. Democratic presidential candidate Elizabeth Warren is proposing breaking up the big tech companies.

One could look at all of these examples and think big corporate mergers are becoming harder than ever to do. The truth is, the government hasn’t prevented big companies from merging in the last few years.

The DOJ unsuccessfully attempted to block AT&T’s acquisition of Time Warner last year. President Donald Trump had criticized the deal and sought to block it, referencing Time Warner’s ownership of the “wildly anti-Trump CNN.”

In 2018, the DOJ approved Walt Disney Co.’s purchase of 21st Century Fox in 2018, which owns Fox News, but stipulated some sports broadcast divestments.

The Trump administration similarly conditioned its approval of the $69 billion CVS Health Corp. merger with health insurer Aetna in 2018 after Aetna divested its Medicare prescription drug business to WellCare Health Plans. Last summer, the Federal Trade Commission approved UnitedHealth Group’s $4.3 billion purchase of DaVita Medical Group on condition that it sell some assets.

Physician P. Dileep Kumar wrote in an article published by the American Association for Physician Leadership that the Justice Department suffered a string of losses in antitrust cases against hospitals in the late 1990s; since then, more than 300 hospital acquisitions occurred between 2007 and 2012.

These days, the Justice Department might even provide advice on how to get proposed mergers approved. In the Sprint/T-Mobile deal, Sprint agreed to sell off Boost Mobile to Dish Network Corp. to help create a fourth wireless competitor. Dish Network Chairman Charlie Ergen testified last year that the Justice Department’s antitrust chief advised him to ask a senator to speak to the Federal Communications Commission’s chairman. “Today would be a good day to have your Senator friends contact the chairman,” the text advised.

It may also becoming harder for the government to win an antitrust case. In the case of the tech companies, the FTC closed a prior investigation in 2013 into Google’s search practices, despite evidence that Google’s search results likely harmed rivals.

Under legal precedent, the government must prove that consumers are harmed by anti-competitive practices — and it’s hard to prove consumers are harmed by the free services Facebook and Google provide. It’s not impossible, but it would require judges being open to new legal theories or Congress passing new laws.

It’s a bit of a stretch to think big tech and big hospital systems are going away. But stay tuned.