Will President Trump Interfere With Antitrust Reviews?

About a week before taking office, President-elect Trump had two high level meetings with CEOs of companies that are involved in significant acquisitions currently under antitrust review by the Department of Justice’s Antitrust Division.  The meetings raise questions about the integrity and independence of the DOJ’s merger reviews going forward under a Trump administration. 

AT&T/Time Warner

On January 12, 2017, AT&T Inc. (“AT&T”) Chief Executive Officer Randall Stephenson said that in his meeting with President-elect Donald Trump they touched on job creation, investment and competition, but he noted that AT&T’s merger with Time Warner Inc. (“Time Warner”) did not come up.  We find that hard to believe given President-elect Trump’s open reservations about the transaction and his ongoing battle with CNN.

Sean Spicer, the incoming White House press secretary, was asked by reporters on a January 12 conference call whether Trump still favors scuttling the deal.  “His primary focus is how companies will continue to create jobs” when he meets with CEOs, Spicer said.  “That’s generally been the subject of all of his meetings when he meets with these CEOs.”

During the campaign, President-elect Trump said he would block the proposed megamerger because he believes it would concentrate too much power in the media industry.  But the question is whether he actually opposes the deal or CNN’s coverage of him.

Anyhow, given that AT&T has figured out a way to avoid FCC scrutiny, the only obstacle for the merger is the DOJ’s antitrust review.

Bayer/Monsanto

On January 12, 2017, Bayer AG (“Bayer”), which is seeking regulatory approval for its $66 billion deal to buy U.S. seeds giant Monsanto Company (“Monsanto”), said the chief executives of both companies had a productive meeting with President-elect Donald Trump.  Trump spoke to Bayer CEO Werner Baumann, Monsanto CEO Hugh Grant and some of their advisers in New York, his transition team said on January 11.  A Bayer spokesman said “it was a productive meeting about the future of agriculture and the need for innovation.”  The companies also released a public statement that says they will “create several thousand new high-tech, well-paying jobs after integration is complete.”  The fate of of the Bayer/Monsanto proposed merger will be decided by Trump’s nominees to lead antitrust enforcement at the DOJ.

While the transaction raises serious antitrust concerns in a number of product markets that could result in competitive harm through higher prices to farmers and ultimately consumers, Bayer claims that it is willing to resolve the competitive problems through a settlement agreement.  However, it has not openly discussed what it actually proposes.  A number of antitrust concerns exist in various markets including soybean, cotton and canola seeds as well as LibertyLink-branded crops that are resistant to its glufosinate herbicide, an important alternative to Monsanto’s Roundup Ready seeds, among other things.

But uncertainty remains over how difficult it may be to structure a comprehensive remedy that resolves wide ranging competitive concerns and what the DOJ will make of the merged firm’s grip of the overall seed market because Monsanto has such a dominating position in the technology aspect of traited seeds.  An independent DOJ Antitrust Division would certainly explore whether the combination could harm actual competition as well as innovation competition going forward. For its part, Bayer has said that much needed innovation will come from combined seeds-chemicals offerings and that it needs to merge to compete against other integrated suppliers such as the future Dow/DuPont.

Will Meeting with the President Be Standard Procedure For Merger Parties Going Forward?

When the CEOs of AT&T, Monsanto and Bayer met President-elect Trump, they promised jobs and investment, which is great except for the fact that the Antitrust Division is investigating both deals. These meetings raise the question of whether President Trump will inject himself directly into merger reviews and whether it is appropriate for the White House to openly comment on merger reviews that pending at the antitrust agencies?

The antitrust agencies have guidelines on how to assess whether a merger violates the antitrust laws.  The DOJ has career antitrust attorneys’ and economists’ who analyze mergers.  They review company documents, interview executives of the merging parties, third parties, and consumers to determine whether the merger will lead to price increases.  American consumers deserve an independent analysis of the competitive effects of mergers because allowing an anticompetitive merger to through without conducting a thorough analysis could lead to consumer harm through higher prices and a loss of innovation.  Accepting the CEOs promises of jobs would simply be a bad deal for consumers.  First, the promise is a difficult one for the DOJ to enforce.  Second, job creation may not outweigh the competitive effects.

To be sure, merging companies typically tout the benefits of their deals.  But the antitrust staff at the agencies are tasked with scrutinizing whether those benefits would actually result from the merger, rather than from business decisions that would have been made anyway.  Moreover, the staff is usually conducting the investigation without the interference of superiors let alone the President.  The DOJ’s job is to make an objective law enforcement decision related to whether the transaction violates the antitrust laws.  The DOJ has put a lot of effort in trying to provide businesses some predictability about what types of mergers will raise competitive harm so their independence in making decisions is vitally important.

Politics Still Plays a Role in Merger Reviews

Although the antitrust analysis at the DOJ is normally done without direct political interference, this is not to say that politics never plays a role in antitrust reviews.  It would be naive to think otherwise.  For example, many antitrust observers believe that the Obama administration intervened in the approval of American Airlines and U.S. Airways, however, there was no clear evidence that any direct intervention occurred.  The allegations never came anything close to the inappropriate behavior that went on way back when President Nixon was in office.

But what is fairly common is that each administration can shape its own antitrust policy.  Indeed, the Obama administration’s Antitrust Division was fairly aggressive with regards to merger enforcement.  The Hillary Clinton campaign ran on a progressive antitrust enforcement agenda and when the Trump’s nominees are put into place, we would expect that DOJ’s rulings will reflect the prevailing administration’s policy views on antitrust.  But the primary concern with these high level meetings is that the DOJ’s antitrust reviews should be free of direct intervention by the President.

For what its worth, Trump’s cabinet pick for attorney general, Senator Jeff Sessions, said he didn’t discuss the AT&T/Time Warner merger in his meetings with Trump ahead of his confirmation and that the DOJ’s antitrust reviews will not be influenced by politics.  As head of the DOJ, Sessions would supervise the Antitrust Division.  During Sessions’ confirmation hearing on January 12, he testified before the Senate Judiciary Committee that he has “no hesitation to enforce antitrust law.”  Said Sessions, “I have no hesitation to say certain mergers should not occur.”  He also said that he would not impose conditions on pending mergers that are unrelated to competitive concerns triggered by those transactions. Some of his quotes include “I believe it would be wrong to further some separate, discrete agenda that is not reasonably connected to the merger itself.” And “we should ensure we have the highest integrity in antitrust adjudications because they can have great impact,” Sessions said. “The law is not crystal clear about what’s lawful and what’s not lawful and what the antitrust division is required to do; and it leaves dangers, if not politicization of it, it leaves dangers of policy agendas getting embroiled in it.”

OK, so does CNN need to be divested or not?