Implications Unclear From Trump's DOJ Blocking HPW/Juniper Deal
Avoid reading too much into the merger policies of the new Donald Trump administration based on the rejection last week of Hewlett Packard Enterprise’s proposed $14 billion buy of Juniper Networks, industry experts said. DOJ sued to block the transaction, citing the competitive effects on the wireless local area network (LAN) industry (see 2501300063).
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Experts said the 22-page complaint appeared to be largely written by DOJ during the Joe Biden administration. Neither Pam Bondi, Trump’s nominee for attorney general, nor Gail Slater, nominee to lead DOJ’s Antitrust Division, are in place yet, they added.
The decision appears to be “just business as usual for the Biden team on the way out,” said George Hay, professor at Cornell Law School and an expert on antitrust policy.
HPE CEO Antonio Neri said on CNBC after the announcement that his company will contest the decision. “We’re going to fight this, and we believe we’re going to prevail because there’s no case,” he said, declining to draw big-picture implications. “The administration is in transition -- we don’t have yet the permanent people,” he added. “Deals like this are not big tech,” but rather “core tech.”
Judge Casey Pitts of the U.S. District Court for the Northern District of California, a Biden appointee, was selected this week to hear the case.
Summit Ridge President Armand Musey agreed the decision may prove to be “a holdover” from the prior administration. “There is a joke that the only important thing to know in antitrust is that Democrats believe four players are needed for a competitive market, Republicans believe you only need three,” Musey said.
But Public Knowledge Senior Vice President Harold Feld said he hopes the DOJ challenge may indicate that “antitrust will not be entirely a lost cause in this administration.” He noted that Makan Delrahim, who led the antitrust division in the first Trump administration, wasn’t “a pushover.”
“This is not an area where Trump has expressed any particular interest,” Feld said in an email. While we may think of the deal as involving “tech,” it’s really about hardware and networking, he said: “When Trump folks say ‘tech,’ they usually mean applications like Google or Meta. So the most likely explanation is this went through on automatic pilot because Trump doesn’t really have an opinion about it.”
Matt Stoller, research director at the American Economic Liberties Project wrote in his Substack newsletter that the case against the deal is simple -- “it’s wildly illegal.” There are only three major players in the wireless LAN market, “and combining HPE and Juniper will reduce that to two,” Stoller said. “Prices will go up and quality will go down. The remaining two players, Cisco and HPE, will sit fat and happy collecting rent, until Chinese firms are so much better and cheaper they will dominate the global market.”
The Trump administration is unlikely to oppose many mergers that would deter U.S. tech companies from competing with China, countered John Strand of Strand Consult. This could be “one case that got out the door before the lawyers could be fired,” he said in an email.
Evaluating the merger requires looking at “the global market,” Strand said: “I'm pretty sure that companies like Huawei and ZTE are happy with DOJ's decision. Competitive players often forget that it is not the number of players that determines competition in that market, but technological developments.”
Thousands of mergers are proposed annually, and “a few of them will be anticompetitive and conflict with antitrust law, while most others will not,” said Phoenix Center Chief Economist George Ford. “The problem with the Biden administration was that it could not reliably decipher between the two.” But that doesn’t mean “every investigation the administration undertook was pointless,” and “some may have had merit," he added.
The DOJ lawsuit shows that the Trump administration “is not going to act reflexively in a way contrary to the Biden administration in all respects, including with regard to competition matters,” said Free State Foundation President Randolph May. However, he said he's unsure that DOJ got the HPE/Juniper decision right. “With Cisco’s strong leading position in the wireless LAN market and the existence of other smaller competitors, both in the U.S. and abroad, it appears that the proposed merger may not substantially lessen competition in the overall marketplace.”