Biden’s Antitrust Batters Strike Out

Justice keeps losing in court as it brings meritless lawsuits against mergers

WSJ editorial.

"Hard to believe, but the Biden antitrust squad is having a worse season than the Washington Nationals did. The Justice Department recently lost its third merger case in a month. This is what happens when the government swings for the fences and brings lawsuits that lack merit.

The government traditionally hasn’t gone to court to challenge mergers unless it’s reasonably confident it can win. Justice also usually tries to address competition concerns with conditions on mergers such as asset divestitures. But the Biden Justice Department is choosing litigation first at the risk of striking out, and is it ever. 

A federal judge last week declined to block Booz Allen Hamilton’s acquisition of the cybersecurity and intelligence firm EverWatch. Justice argued that the two companies were competitors for a National Security Agency five-year contract before Booz Allen proposed a $440 million “merger-to-monopoly” that would guarantee it won the procurement order. What monopoly?

Unlike weapons contracts in which competition is concentrated, hundreds of companies compete for government technology contracts. Booz Allen made a compelling case that the acquisition would accelerate its delivery of classified software to the government.

The contract also would yield a mere $17 million in profit, which is small compared to the size of the deal and other government contracts. Booz Allen said the tie-up would make it a stronger competitor for large NSA contracts against the likes of Lockheed Martin, Raytheon, Peraton and General Dynamics.

Underlying the Justice lawsuit is the modern progressive belief that companies should never be allowed to buy potential rivals even if the mergers increase competition and benefit consumers. This flies in the face of the longstanding “rule of reason” standard that judges use to analyze whether business combinations or agreements violate antitrust laws.

The barrage of Justice lawsuits defies reason and modern antitrust law that emphasizes consumer welfare. Thus a federal judge last month rejected a Justice bid to enjoin UnitedHealth Group’s $13 billion acquisition of Change Healthcare, a technology startup that providers and pharmacies use to manage insurance claims for reimbursement.

Justice argued that the acquisition would give UnitedHealth access to rival insurers’ information for a competitive advantage. But UnitedHealth agreed to establish internal firewalls to prevent it from accessing rivals’ information, and Justice couldn’t demonstrate that the deal would harm other insurers or their customers.

One lesson from the Trump Justice Department’s failure to block AT&T’s acquisition of TimeWarner is that facts matter, especially in merger reviews involving companies that don’t compete head-to-head. The evidence required to block so-called horizontal mergers between companies that compete directly is more lenient. Yet Justice still failed to persuade a judge last month to block a tie-up between U.S. Sugar Corp. and Imperial Sugar, two of the largest U.S. sugar producers.

Justice said the merger would result in two companies controlling 75% of refined sugar sales in the southeastern U.S., which would let them increase prices. But its gerrymandered market analysis ignored that sugar is bought and sold across geographic regions. The Department of Agriculture also regulates sugar prices.

Antitrust lawyers are scratching their heads at why Justice is bringing such conspicuously weak cases. It’s embarrassing for the government to lose like this. But Justice appears unabashed and undeterred. After its UnitedHealth loss, a DOJ spokesperson said: “Not doing anything is not an option.” Actually it is, when you don’t have a case.

The Administration seems to be firing at any merger that moves to create enough regulatory uncertainty to discourage businesses from combining. Businesses may decide it’s not worth the expense and time, which has a monetary value, to defend against even meritless government lawsuits. Several companies have called off mergers after antitrust regulators sued.

Progressives last week demanded that the Biden Administration stop Kroger’s announced merger with Albertsons, which would help the unionized supermarket chains compete with Walmart, Amazon and lower-cost grocers. If only antitrust law had a three-strike rule."