Not since the bygone days before the financial crisis has there been such a flurry of headlines about big deals.
On Wednesday, Office Depot and OfficeMax announced plans to merge in an all-stock deal worth roughly $1.2 billion that would combine the second- and third-biggest office supply retailers. Last week, there was Berkshire Hathaway’s $23 billion bid for ketchup king H.J. Heinz in addition to the mega-merger between U.S. Airways and American Airlines.
All this news has sent stocks up on Wall Street, where some are hailing the return of the blockbuster merger. But in Washington, a number of these deals first have to win the approval of antitrust officials — a crowd that looks increasingly tough to please going into President Obama’s second term.
In the past year and a half, the Justice Department has shown a new willingness to outright block big deals, either by going to trial or by persuading companies to scuttle their plans.
The government scored a big win at the end of 2011, stopping the deal between AT&T and T-
Mobile, which antitrust officials argued would have hurt consumers. The administration also successfully stopped H&R Block from acquiring a low-cost rival, going to court for the first time since 2004 to challenge a merger. And just last month, the division moved to block a proposed deal by beer giant Anheuser Busch InBev to purchase Grupo Modelo, saying it would harm competition.
There’s also a new antitrust cop on the beat. At the beginning of this year, the Justice Department’s antitrust division got its first permanent antitrust chief since August 2011. Fellow lawyers describe William J. Baer as “an antitrust attorney’s antitrust attorney,” someone who has spent his entire career thinking about this area of the law and who won’t be afraid to take cases to court where necessary.
Before joining the Justice Department, Baer worked at Arnold & Porter and served as director of the Federal Trade Commission’s competition bureau, which shares antitrust enforcement responsibilities with the Justice Department.
Expectations are high because Obama has promised since 2008 to “reinvigorate” antitrust enforcement.
In the first half of Obama’s first term, the Justice Department was measured, approving a number of big deals after adding some restrictions on how the companies could behave. The division ultimately gave the green light to controversial mergers such as the Ticketmaster deal with Live Nation, Comcast’s acquisition of NBC Universal from General Electric, and Google’s purchase of travel-software company ITA.
Critics who wanted more aggressive enforcement said the division was too timid about bringing cases to court. Some have also noted that despite the growing dominance of companies such as Google, antitrust enforcers have yet to build a monopoly case in the mold of the government’s long battle with Microsoft in the 1990s.
Daniel Crane, an antitrust professor at the University of Michigan Law School, said the Obama administration may not have leapt out of the gate in the first term because the economy was in a free fall. Crane has done research showing that during economic crises, antitrust enforcement tends to take a back seat.
“It’s very hard to mount a very vigorous antitrust campaign when you’re looking at a lot of businesses that are failing,” Crane said.
But now that things have stabilized, he added, “it would not surprise me to see more vigorous enforcement of antitrust in the second term.”