The long-awaited remedy phase of United States v. Google concluded on September 2, 2025, when U.S. District Judge Amit P. Mehta delivered a carefully calibrated ruling following his August 2024 finding that Google illegally monopolized search. The decision stops short of breaking up the company yet aims to curtail anti-competitive behavior via behavioral constraints.

Key Remedies Imposed

Despite Google’s resounding defeat last year in the U.S. Department of Justice’s case targeting its search monopoly, Judge Mehta only handed down a mixed bag of remedies aimed at propping up search engine rivals and limiting the exclusive nature of its distribution contracts Judge Mehta’s decision imposes several targeted limitations while allowing Google and its partners like Apple to retain significant benefits:

1. Ban on Exclusive Deals
   GOOGLE may no longer enter or maintain exclusive contracts for distributing Google Search, Chrome, Google Assistant, or the Gemini app.
   This curtails Google’s ability to lock competitors out through tied default arrangements.
2. Conditional Revenue-Share Restrictions
   Agreements conditioning revenue-share benefits on distribution or placement of Google’s apps beyond one year are barred. This means Apple and Google can enter annual contracts and maintain the same relationship.
3. No Divestiture of Chrome or Android
   The court rejected calls to mandate a sale of Chrome or Android, finding such remedies too disruptive and poorly tailored to the offending conduct.
4. Allowed Payments Remain in Place
   Google can still pay partners for preloading and default placement, avoiding what the court saw as potentially harmful disruptions to the broader ecosystem.
5. Data Sharing Mandate
   Google must share certain search index and user-interaction data with “qualified competitors,” though not advertising data.
6. Syndication Services for Rivals
   Competitors can buy search and text-ads syndication from Google on commercial terms, though scope and duration are narrower than DOJ sought.
7. No Choice Screens Required
   The court ruled against mandating user-facing choice screens, citing poor precedent and lack of proven pro-competitive effect.
8. No Keyword Bidding or Granular Ads Data Required
   Google won’t be forced to restore exact-match bidding or share granular ad data with advertisers.
9. Transparency in Auctions Required
   Google must publicly disclose material changes to its ad auction systems, enhancing visibility into pricing practices.
10. Rule-Out of Public Education or Publisher Policy Remedies
    Proposals such as nationwide campaigns or forced changes to publisher policies were rejected as unrelated to monopolistic acts.
11. No Anti-Retaliation or Self-Preferencing Clauses
    The judge found these provisions vague or unsupported in evidentiary record.
12. Technical Committee and Timeline
    A six-year remedy term will take effect 60 days after the final judgment, with a Technical Committee appointed immediately to oversee enforcement.

At-a-Glance Table

Analysis

1. “Slap on the Wrist”?

Google avoids structural break-ups and retains flexibility to pay for placement—meaning its dominance in search is likely to persist.

2. But Not Toothless

The restrictions on exclusive contracts and the mandated data sharing add meaningful friction to entrenched practices. These could empower startups and AI-based rivals to gain footholds.

3. Generative AI Changes the Equation

Judge Mehta explicitly noted that the rise of generative AI—such as ChatGPT and Perplexity—factors into the calculus, making overly drastic remedies more dangerous and unnecessary.

4. DOJ and Advocates Push Back

Though the DOJ hailed the ruling as a critical step toward reigniting competition, advocates like DuckDuckGo CEO Gabriel Weinberg critiqued it as inadequate, warning consumers will still “suffer.”

Meanwhile, groups like the American Economic Liberties Project lambasted the court’s approach as a failure of enforcement.

5. Echoes of Microsoft Case

The ruling evokes the 2001 Microsoft settlement: no breakup, but behavioral constraints plus a compliance committee.

Conclusion

Judge Mehta’s remedies against Google represent a measured middle ground — disrupting key anti-competitive behaviors while preserving existing infrastructure. Whether this balance suffices to revive competition in search hinges on how well rivals can leverage access to Google’s data and syndication offerings—and whether antitrust enforcers and Congress step in if results disappoint.

Google and the DOJ may appeal, but the decision allows both sides to claim a victory. It could be years before the remedies take full effect. And, as an aside, Apple, who benefits from sharing revenue with Google can also claim victory.

Andre Barlow

abarlow@dbmlawgroup.com

202-589-1838

Allegations in the Biden DOJ’s Complaint

The DOJ’s lawsuit, filed in the U.S. District Court for the Southern District of New York, alleged that the proposed acquisition would harm competition in the market for business travel management services, particularly for global and multinational companies in the United States. Key points from the complaint include:

1. Market Concentration and Oligopolistic Structure:
   • The DOJ claimed that the merger would combine Amex GBT, the largest business travel management company globally (with $28.2 billion in transaction volume in 2023), and CWT, the third-largest (with $14 billion in transaction volume), significantly reducing competition in an already concentrated market. The complaint described the market as “oligopolistic,” with Amex GBT, CWT, and BCD Travel (the second-largest player) controlling at least 70% of the market for travel management services for global companies with annual travel budgets of at least $30 million.
   • The DOJ argued that the merger would reduce the number of major players from three to two in this segment, giving the combined firm a dominant share and limiting competitive options for large businesses.
2. Harm to Competition:
   • The complaint highlighted that Amex GBT and CWT were fierce competitors, particularly for large businesses with complex travel needs. CWT had recently pursued innovative strategies to improve service and reduce prices, winning significant bids against Amex GBT. The DOJ alleged that the merger would eliminate this head-to-head competition, leading to higher prices, reduced choices, and stifled innovation for U.S. businesses.
   • The DOJ emphasized that few other companies could provide travel management services at the scale required by global and multinational firms, making the loss of CWT as an independent competitor particularly harmful.
3. History of Consolidation:
   • The lawsuit noted that this would be Amex GBT’s fifth acquisition of a travel management company since 2018, further consolidating an already concentrated market. The DOJ argued that this pattern of acquisitions exacerbated anticompetitive effects.
4. Narrow Market Definition:
   • The DOJ defined the relevant market narrowly, focusing on travel management services for global and multinational companies with significant travel budgets (e.g., over $30 million annually). This definition excluded smaller travel management companies and online tools, which the DOJ argued were not viable substitutes for the specialized services provided by Amex GBT and CWT. Amex GBT criticized this as a “gerrymandered” and “contrived” market definition, arguing it failed to account for broader competition in the evolving travel industry.

Context of the Case

• Timing and Political Context: The lawsuit was filed on January 10, 2025, just 10 days before the transition from the Biden administration to the Trump administration on January 20, 2025. Amex GBT described the filing as a “politically motivated” move by the Biden DOJ to push one final anti-merger challenge, noting that the transaction was not set to close until March 2025, giving the incoming Trump administration time to review it. Interestingly enough, the Biden DOJ did not challenge Capital One/Discover or HPE/Juniper even though the waiting period for HPE/Juniper was set to expire in January of 2025.
• Amex GBT’s Defense: Amex GBT argued that the DOJ’s complaint relied on outdated market views, ignoring post-pandemic changes in the travel industry, such as the rise of online tools and competitors like BCD Travel and Navan Inc. The company asserted that the merger would enhance innovation, create synergies, and provide greater value to customers, suppliers, and employees.
• International Scrutiny: The UK’s Competition and Markets Authority (CMA) also reviewed the merger, initially raising concerns about competition for multinational clients with travel budgets over $25 million. However, by February 2025, the CMA provisionally concluded that the deal posed no significant competition concerns, reinforcing Amex GBT’s position that the DOJ’s case was flawed.

Dismissal of the Case

On July 29, 2025, the DOJ moved to dismiss the lawsuit, exercising its “prosecutorial discretion” in a court filing before Judge Jed Rakoff in New York. The trial, scheduled for September 2025, was thus avoided, and the merger was allowed to proceed. Several factors contributed to the dismissal:

1. Change in Administration:
   • The case transitioned to the Trump administration, with Gail Slater appointed as head of the DOJ’s Antitrust Division. The Trump administration is perceived as more business-friendly and less aggressive on antitrust enforcement compared to the Biden administration. The dismissal aligned with a potential shift in priorities, as the Trump DOJ viewed the merger as less harmful or prioritized other enforcement activities. “The Antitrust Division, alone, made the decision to dismiss the case after a robust investigation,” Assistant Attorney General Gail Slater said in a statement. “The Division must also consider the enforcement trade-offs inherent to thoughtful and effective use of its limited taxpayer-funded resources.”
   • DOJ’s antitrust lawyers reviewed the transaction after Slater joined the agency in March. That review determined that new technologies are emerging to challenge travel suppliers like Amex GBT and CWT, making the merger less likely to harm competition.
2. Prosecutorial Discretion and Resource Allocation:
   • The DOJ cited “prosecutorial discretion” in its filing, with Antitrust Division head Gail Slater stating that the decision followed a “robust investigation” and considered “enforcement trade-offs” due to limited taxpayer-funded resources. This suggests the DOJ may have determined that pursuing the case was not the best use of resources, especially if the evidence of anticompetitive harm was less compelling under further review.
3. Weakness of the Case:
   • Arguably, the DOJ’s case was “flimsy” due to its narrow market definition. The market for travel management services has evolved, with online tools and new competitors like Navan Inc. increasing competition. Amex GBT’s claim that at least six travel management companies could serve large customers as effectively as CWT may have undermined the DOJ’s argument that the market was being reduced from three to two players. Indeed, the DOJ’s complaint indicates that the top three players only have 70% or the market so clearly other competition exists.
   • The UK CMA’s provisional clearance of the merger in February 2025 likely bolstered Amex GBT’s argument that the deal did not significantly harm competition, putting pressure on the DOJ to reconsider its stance.

Conclusion

The Biden DOJ’s lawsuit against the Amex GBT-CWT merger centered on allegations that it would reduce competition in a concentrated market for global business travel management, risking higher prices and less innovation, which could have impacted large global corporation customers. Large global enterprise customers with over $30 million travel budgets, however, have numerous options and can typically take care of themselves. The case was dismissed in July 2025 by the Trump DOJ, citing prosecutorial discretion and resource considerations. The dismissal was likely influenced by a combination of a weaker case upon further review by Slater’s team, which was supported by the UK CMA’s findings and a shift in administration priorities.

Andre Barlow

202-589-1838

abarlow@dbmlawgroup.com

The settlement aimed to restore competition by ensuring that key assets, such as HPE’s Instant On business and Juniper’s AI Ops for Mist source code, remained available to competitors. The divestiture of the Instant On business to a DOJ-approved buyer within 180 days and the licensing of Mist AI software were designed to maintain competitive dynamics in the wireless local area network (WLAN) market, preventing the merged entity from dominating over 70% of the market alongside Cisco Systems. Industry perspectives, including comments from solution providers, suggest that these measures were seen as minor concessions that preserved the deal’s benefits while fostering competition, particularly against Cisco, by enabling a stronger, AI-driven networking portfolio for HPE.

To be sure, the effectiveness of these measures in fully restoring competition depends on the execution of the divestitures and licensing, as smaller competitors may still face challenges matching the scale of the merged HPE-Juniper or Cisco. That said, the licensing Juniper’s Mist AI software source code to independent competitors is a notable concession in the DOJ’s settlement with HPE and Juniper. This move was designed to facilitate new entry and maintain competition in the wireless local area network (WLAN) market.

The Mist AI software is a key component of Juniper’s portfolio, powering its cloud-managed, AI-driven networking solutions that optimize wireless performance and user experience. By requiring HPE to license this source code to competitors, the DOJ aimed to lower barriers for new or smaller players to develop competitive WLAN solutions, potentially fostering innovation and preventing the merged HPE-Juniper entity (with over 70% market share alongside Cisco) from stifling competition. This licensing could theoretically enable entrants to build or enhance AI-driven networking products without the need to develop comparable technology from scratch—a significant hurdle given the complexity and cost of AI-driven network management systems.

The effectiveness hinges on how accessible and affordable the licensing terms are in the future so the DOJ’s oversight will be very important. New entrants will likely need more that just access to the source code, they will need the technical expertise, infrastructure, and market reach to capitalize on the code. The settlement also required HPE to divest its Instant On wireless business to a DOJ-approved buyer within 180 days. This divestiture ensures that a standalone competitor retains a foothold in the market, potentially amplifying the competitive impact of the Mist AI licensing by giving an existing player immediate market presence. Fortunately, many of the competitors in the WLAN enterprise grade are actually significant competitors already.

This is clearly a strategic compromise that preserves HPE’s ability to compete with Cisco and globally while addressing DOJ concerns in the domestic market. The licensing of Mist AI could indeed spur innovation by enabling competitors to offer AI-driven solutions, potentially leading to new entrants or strengthening existing ones like Extreme Networks, Arista, Fortinet, or Ruckus. In short, giving up the Mist AI source code is a significant concession in that it creates an opportunity for new entry by lowering a key technological barrier. Whether it truly restores competition depends on how competitors leverage this access and navigate the broader market challenges. It’s a step toward leveling the playing field, but not a guaranteed win for new entrants against the industry’s heavyweights.

Lessons Learned

The recent settlement in the HPE-Juniper merger case offers insights into the DOJ’s approach to antitrust enforcement. Although the allegations in the complaint lacked a clear resolution, the settlement reflects a pragmatic decision by the DOJ to accept an imperfect remedy for a case with weak grounds for a full challenge.  The DOJ hailed the settlement as a victory, describing it as a novel approach to addressing unique challenges in merger cases. Notably, the DOJ considered the procompetitive benefits of the merger, particularly in the context of global competition. The agreed-upon remedy includes HPE’s divestiture of its global Instant On campus and branch WLAN business and at least one perpetual, non-exclusive license to Juniper’s Mist source code. This remedy modestly reduces market share in the enterprise-grade WLAN solutions market, but allows for new entrants to expand their enterprise grade WLAN offerings.  In addition, the divestiture and licensing must be completed within 180 days, with the possibility of 60-day extensions if needed, indicating the DOJ’s flexibility in finalizing the agreement.  This is also a departure from recent practice.  

Assistant Attorney General Slater’s stance against accepting inadequate remedies may still hold when a challenge is strongly supported by evidence. However, in this case, she demonstrated willingness to negotiate a less-than-ideal remedy for a merger that likely did not warrant being blocked. This decision aligns with the investigating staff’s view that the deal should not have been challenged initially.  The decision to settle rather than litigate, despite a weak legal case due to Juniper’s modest 6.5% market share, reflects a strategic choice to preserve agency credibility while enabling the merger and also aligns with the Trump administration’s “America First” agenda.

The key takeaways are that the DOJ is open to settling weaker cases with tailored remedies; the DOJ will consider procompetitive benefits, such as global market competitiveness so that can influence outcomes in future deals; and the DOJ is willing to use flexible timelines and pragmatic remedies reflecting a balanced approach to antitrust enforcement.    

Andre Barlow

202-589-1838

While Congress has been grabbing the headlines by holding numerous hearings and introducing various legislative proposals aimed at lowering drug prices, the Trump Administration has introduced some consumer-friendly changes to Medicare that should change the way drugs are priced for seniors and encourage the use of generics and biosimilars.  First, the Centers for Medicare & Medicaid Services (“CMS”) proposes to change how insurance plans and PBMs conduct drug utilization management and structure drug formularies.  Second, the U.S. Department of Health and Human Services (“HHS”) proposes to eliminate the rebates that pharmacy benefit managers (“PBMs”) receive from drug manufacturers and to encourage that any rebates go directly to seniors at the point of sale.

These significant reforms are necessary as the stakes are high.  Since 2006, Medicare Part D spending has more than doubled to roughly $100 billion per year in 2017, and it is expected to climb as a growing and aging population of baby boomers becomes Medicare eligible.  Today, despite making up a modest proportion of Part D prescriptions, brand drugs account for some 84% of total Part D spending.  Generics, meanwhile, which make up most of the Part D prescriptions, account for only 16% of the total spending and saved the Part D program approximately $82 billion in 2017.

Those savings, however, could have been higher.  The formulary construction and contracting practices of both PBMs and Part D plans have cost seniors billions of dollars.  Part D plans have a lot of flexibility to design drug formularies and tier structure.  Historically, generics were placed in lower generic tiers and brands were placed in higher brand tiers.  This meant that seniors’ copays for generics were less than those for branded drugs so their out-of-pocket costs were lower when they purchased generic drugs.  Over time, Part D plans started to place generics in higher brand tiers.  And, in 2016, CMS announced a change to the formulary structure that explicitly allowed Part D plans to create a non-preferred tier, with higher copays, that could include both brands and generics.

The CMS change emboldened Part D plans to place generics and brands in the higher tier.  As a result, seniors have been faced with higher “branded” copays and out-of-pocket costs for generic drugs.  Indeed, recent studies from Avalere estimate that since 2015, seniors have paid nearly $22 billion in additional out-of-pocket costs for their prescription drugs, and seniors are paying approximately $1,000 more in out-of-pocket costs per year than they should be.

The change to formulary structure is costly enough, but matters become worse when PBM and plan incentives are considered.  Because of misaligned incentives that exist in the drug supply chain, PBMs and Part D plans seek out rebates based off escalating list prices of brand drugs.  Instead of offering seniors the best quality medicines at affordable prices, they are incentivized to implement plans designed to steer seniors from lower cost generics to branded drugs by comingling them on the same drug formulary tier.

The Administration’s proposal (1) to reverse CMS’s Part D formulary guidelines that allowed the practice of comingling generics on brand tiers and (2) to require plans to automatically include generic and biosimilar medicines on generic formulary tiers immediately after launch is a great first step in lowering drug prices for seniors.  According to HHS, besides raising seniors’ out-of-pocket costs, in 2017, this practice led to the federal government unnecessarily spending $9 billion on brand-name drugs that have a generic alternative.  HHS claims that if these prescriptions were dispensed as generics, the Medicare program would have saved $3 billion.  Moreover, implementing the current CMS proposal is estimated to save seniors approximately $4 billion in out-of-pocket costs per year.

The Administration’s proposal to eliminate rebates is also critical to lowering the cost of drugs for seniors.  The PBM market is not competitive: it lacks transparency and choice, while conflicts of interest abound.  Perversely, rebates create an incentive for PBMs to actually support higher list prices for brand drugs and sales of brand drugs over lower cost generics, which often result in higher copays for seniors.  It has been estimated that rebates cost seniors up to 30% more for their drugs.  Significantly, rebates have more than doubled in the last five years Indeed, rebates have more than doubled in the last five years and in 2018, pharmaceutical manufacturers paid $166 billion in rebates and price concessions to PBMs, insurers and the supply chain.  The PBMs pocket some of the rebates and pass some of the discounts to the Part D plans.  Seniors, who are purchasing drugs with high copays, though, do not see any significant benefits from the discounts so encouraging that discounts actually be passed on to them at the pharmacy counter is another major step in the right direction.

Implementing both of the Administration’s proposals is vital to the current and long-term success of the Medicare Part D program as they will have the effect of lowering Part D prices to seniors and the federal government.  They will also increase utilization of less expensive generics and biosimilars.  Medicare has been largely successful at moderating cost growth where there is generic competition, so regulations that make generics and biosimilars more accessible is critical to ensuring that patients have access to the therapies they need at lower out-of-pocket costs.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com

The Laws Should Reduce Patient Out-of-Pocket Spending by Eliminating Gag Clauses and Increase Drug Pricing Transparency

It is important to eliminate pharmacy gag clauses that prevent pharmacists from informing consumers of lower priced alternatives.  In a competitive market, we would expect providers would have the ability to guide consumers to the best products at the lowest cost.  The fact that PBMs had a practice of preventing pharmacies from disclosing this information means competition was not working as it should.

As consumers face rising prescription drug costs, the laws prohibiting PBMs from inserting provisions in their contracts with pharmacists that keep pharmacists from telling consumers about lower cost alternatives or that the cash price for a prescription drug may be less expensive than their insurance co-pay, should be welcomed by consumers.

The only purpose of the gag clause was to conceal the costs of prescription drugs from consumers at the pharmacy, causing consumers to pay more, with the only clear benefit going to the PBM’s bottom line.

Unfortunately, most consumers are not provided with a full set of information when purchasing a prescription drug.  It is not obvious to a consumer that sometimes the cheapest way to buy prescription drugs at the pharmacy is to pay cash rather than to use her insurance plan.  When those situations arise, a pharmacist should be allowed to do the right thing so consumers can make an informed purchase and save money.

Consumers have a right to know the costs of their prescription drugs.  Gag clauses serve no procompetitive purpose and their elimination is an important step towards increasing drug pricing transparency for consumers.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com

The panelists included representatives from Association for Accessible Medicines (Jeff Francer), Mylan (Marcie McClintic Coates), Patients for Affordable Drugs (David Mitchell), and AARP (Leigh Purvis).  Watch the briefing here:  https://www.youtube.com/watch?v=9K3RQHB-oTE

They explained how one of most promising areas of drug research is the creation of generic biologic medicines, or biosimilars.  These drugs have great potential and often offer the best treatments for serious diseases such as cancer, multiple sclerosis, rheumatoid arthritis, and others.  Yet, today, there are only four biosimilars on the market in the United States.

What exactly are biologic medicines and biosimilars? Biologics are medicines extracted from a variety of natural sources–from humans, animals, or microorganisms. They include a great number of products such as vaccines, blood components, gene therapy, tissues, and recombinant therapeutic proteins. Biologics are fast becoming the future of pharmaceuticals.  Biologics make up 40% of drug spending in the United States and 70% of all drug price increases from 2010-2015.  This statistic demonstrates the growing importance of biologics and just how expensive they are.  Indeed, biologics are the cutting edge of current research, but they are often costly, sometimes as much as thousands of dollars per treatment. That renders them unaffordable even for those with comprehensive health insurance.

Enter biosimilars–biologic medicines that are approved by on data showing they are very similar to existing brand name biologics (called the reference products). Companies that make biosimilars must prove that their new drugs are just as safe and effective as the reference products. Some biosimilars can be designated as interchangeable with the reference products, which means they can be substituted for the brand name biologics.  And since biosimilars rely on information from the original drugs and don’t have to go through expensive new clinical trials, they are far less expensive than the original brand biologics.

The President’s Blueprint to lower prescription drug prices underscores the importance of expediting competition for generic and biosimilars to increase patient’s access to more affordable drugs.  The renegotiation of NAFTA, however, threatens to create new barriers and delay biosimilars from entering and competing in the United States.  Today, the United States has a 12-year market exclusivity period for brand name biologics, during which a biosimilar cannot be approved.  A biosimilar cannot be filed within the first four of those years.  The U.S. Federal Trade Commission has even found that exclusivity for biologics is unnecessary because biologics continue to keep most of their market share and price even after patent expiration.  Thus, there has been a push to reduce the exclusivity period in the United States so that patients could gain access to these important drugs sooner.  But, it has come to light that the renegotiation of NAFTA could very well create a situation that continues to delay generic and biosimilar access and may even alter companies’ decisions to pursue biosimilar markets altogether.  USTR recently announced an agreement with Mexico that would provide 10 years of data protection for biologics and an expanded scope of products eligible for protection.  The panelists claimed that the international trade agreement would set a floor in the United States.  The key to lowering drug prices for patients is by increasing competition through more access to safe, affordable generics, and biosimilars in the United States and around the world.  An international trade agreement with a 10 year exclusivity period would limit Congress’ ability to increase competition and reduce the costs of biologic drugs in the future.

Congress must vote to approve a revised NAFTA. Contact lawmakers now to oppose the inclusion of monopoly protections for brand-name drugs that keep prices for patients higher for longer and delays competition from more affordable generics and biosimilars.

Click on the link to take action.  https://p2a.co/5bmfkK5

Andre Barlow

Background

On November 21, 2017, the U.S. Department of Justice’s (“DOJ”) Antitrust Division filed a complaint in federal court block AT&T’s acquisition of Time Warner Inc. (“Time Warner”).

On February 16, 2018, the DOJ and AT&T faced off at a hearing in front of Judge Leon regarding AT&T’s discovery requests related to internal communications between the White House and the DOJ and its identification of Makan Delrahim, the Assistant Attorney General (“AAG”) of the DOJ’s Antitrust Division, on its witness list for trial. AT&T’s discovery requests were in line with one of the company’s affirmative defenses in its Answer to the Complaint, namely that: “Plaintiff’s claim reflects improper selective enforcement of the antitrust laws.”

In front of Judge Leon, AT&T simply asked for a privilege log of communications between the DOJ and the White House, if any exist. The DOJ could have ended the discovery dispute by simply answering that no communications exist. But, the DOJ claimed that the discovery requests were actually broader and made a legal argument that the discovery is barred.

AT&T’s selective enforcement defense asserts that the DOJ singled out its deal.  First, the DOJ hasn’t litigated a vertical merger in 40 years. Second, in 2011, the DOJ approved Comcast’s JV with NBCUniversal, a vertical deal that raised largely the same concerns at issue in AT&T/Time Warner. Of course, that deal was resolved through behavioral remedies, which happens to be a pet peeve of Delrahim. The DOJ is not interested in resolving the current deal without a structural remedy.

The DOJ raised the issue of filing a motion to strike the selective enforcement defense, objecting to the discovery demands and objecting to Delrahim being put on the witness list. The DOJ argued that under the law, it is a high hurdle to obtain such discovery. First, AT&T has not been singled out. Despite not litigating a vertical merger case in 40 years, the antitrust agencies have challenged numerous vertical mergers over the years and have forcing parties to abandon their deals or enter into settlement agreements resolving the antitrust concerns.  Moreover, AT&T compares its case to Comcast/NBCU, which the DOJ actually challenged.

Judge Leon’s Ruling:

Judge Leon did not rule on the DOJ’s motion to strike the selective enforcement defense.  However, he might as well have.  He denied AT&T’s motion to compel the DOJ to provide privilege logs of communications between the White House and the DOJ and quashed AT&T’s discovery requests for those same communications.

Judge Leon focused on the Supreme Court’s decision in United States v. Armstrong to determine if the defendants should be able to obtain discovery related to the selective enforcement defense. Judge Leon said the D.C. Circuit has recognized that “prosecutors have broad discretion to enforce the law, and their decisions are presumed proper absent clear evidence to the contrary.” United States v. Slatten, 865 F.3d 767, 799 (D.C. Cir. 2017)(citing Armstrong). Order at 3. Judge Leon noted that it is a rigorous standard that defendants must meet to obtain discovery.  Under the standard, defendants must put forward evidence of discriminatory effect and intent. Order at 4.

Judge Leon stated that defendants “fall far short” of the necessary demonstration of selective enforcement. He went further to say that “it is difficult even to conceptualize how a selective enforcement claim applies in the antitrust context,” because of the uniqueness of each merger enforcement action. Order at 5. He noted that comparing Comcast/NBCU to A&T/Time Warner was unavailing given that the DOJ actually filed an enforcement action against Comcast and while there was a remedy for that deal, the FCC was involved to monitor it. Order at 5. He then hammered the defendants for trying to claim that the DOJ’s action against a vertical merger was somehow discriminatory when it is clear that this is not the first time the government has brought a vertical case. “While it may, indeed be a rare breed of horse, “it is not exactly a unicorn.” Order p. 6.

Observations:

According to Judge Leon, the selective enforcement defense may not be applicable in antitrust enforcement cases.  Undoubtedly, all antitrust defendants feel like they are being singled out as they point to past deals within the same industry that were approved by the antitrust agencies. But, the antitrust agencies have made it clear that each merger raises its own unique set of facts.

In raising the selective enforcement defense, AT&T was questioning the DOJ’s prosecutorial discretion. It had little, if anything, to do with the substantive claims that are being brought against the company. Antitrust is about law enforcement. The case is brought in front of a federal judge, and the court will decide whether the deal is anticompetitive.

The DOJ does not typically need to explain why it brings an enforcement action other than the deal raises competitive concerns that may substantially lessen competition. It can choose to challenge one merger but not another even when they raise similar issues. Further, it is entirely permissible for a new administration to change its merger enforcement priorities as well as how it remedies problematic mergers. The decision to sue-to-block rather than adopt conduct remedies is up to the DOJ’s own discretion even though that decision may have the appearance of being essentially ideological or political.

Judge Leon understands that every merger is unique to its own facts, not all mergers within the same industry should be treated similarly, and remedies used in one merger may not be appropriate in the next merger. Moreover, he was not about to compare AT&T to Comcast when he has not had the opportunity to study the facts related to the merger at hand. Based on the law, he made the right decision to keep everyone focused on the substantive antitrust issues.  Judge Leon is going to decide this case based on the economic realities of the video distribution and content markets and not on President Trump’s public battle with CNN.  While Trump’s political campaign promises may cast a shadow over the DOJ’s motivation for bringing the case, it should not influence the court’s decision on whether the acquisition is illegal or not.  Judge Leon will make the ultimate decision on whether the deal is anticompetitive and is unlikely to be distracted by the political noise.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com

It is common practice in the early stages of litigation to be overly inclusive when identifying witnesses for trial, and just because Delrahim is named does not necessarily mean that he will testify. However, when alleging selective enforcement as a defense, AT&T will necessarily need to put on proof of the improper discrimination behind the DOJ’s decision to block its deal with Time Warner, and presumably no one would be in a better position to testify as to the DOJ’s decision than the actual decision maker: Delrahim.

In addition to its witness list, AT&T has also requested internal communications between Delrahim’s office and Attorney General Jeff Sessions, including emails, phone calls and other communications between the White House and officials at the DOJ.

The DOJ can certainly object to providing this information, and will likely do so. Putting an attorney on the stand is fraught with potential privilege and attorney work-product issues.   More importantly, the DOJ likely will move to strike AT&T selective enforcement defense, which should render Delrahim’s testimony and communications irrelevant.

Selective enforcement is notoriously difficult to prove, or even allege. The DOJ has extremely broad “prosecutorial discretion” in deciding to challenge a deal. If the DOJ challenges AT&T’s selective enforcement defense, AT&T will need to offer some form of proof that the DOJ based its decision to challenge this deal on some improper, discriminatory motive. AT&T is relying on President Trump’s opinionated tweets and public statements and arguably, the tweets here could support an argument that the DOJ is retaliating against CNN for exercising First Amendment rights.  Indeed, AT&T’s selective enforcement defense asserts that Delrahim, for political purposes, singled out its deal, in contrast to the DOJ’s 2001 decision to approve Comcast’s deal with NBCU, which raised similar vertical concerns. However, Judge Leon could just as easily rule that the President’s mere tweets, without more, is not enough to support a claim for selective enforcement because the DOJ has broad prosecutor discretion and has legitimate competition concerns about AT&T’s acquisition of Time Warner.  In that scenario, Judge Leon would block Delrahim from being called to testify, and further block production of his office’s communications with the White House.

However, this is not to say that AT&T strategy is not sound. Even if its defense of selective enforcement is stricken, it adds yet another ground for potential appeal. Furthermore, it undoubtedly puts unwanted pressure and publicity on the DOJ and the White House questioning the motives in challenging the deal. No one at the DOJ wants even the merest chance of a Court digging through its communications and second guessing its decisions in deciding which deals to challenge.   And in the current political climate, insinuations questioning the DOJ’s objectivity and bias could have a lasting negative impact on the DOJ, even if only in the court of public opinion.

A new Administration is entitled to change its merger enforcement priorities and how it remedies problematic mergers. The DOJ’s decision to sue-to-block rather than adopt conduct remedies is a matter of its own discretion, and does not constitute “selective enforcement” even where it may have the appearance of being ideologically or politically motivated. The federal courts have made clear that it is permissible for the executive branch to change enforcement views and priorities to reflect the changing politics of different presidential administrations.

The Antitrust Division is not the only part of the DOJ that has been making changes in its enforcement of the laws. Other parts of the DOJ have been aggressively enforcing the immigration and drug laws that were going unenforced. Even the Federal Trade Commission is making changes to how it resolves anticompetitive pharmaceutical mergers. For example, Bruce Hoffman, acting director of the Bureau of Competition at the Federal Trade Commission (FTC), recently announced that the FTC will no longer accept divestitures of inhalant and injectable pipeline drugs in pharmaceutical mergers. Going forward, to resolve competitive concerns raised by actual drugs potentially competing with pipeline drugs, the FTC will require the merging parties to divest the actual inhalant and injectable drugs that are currently being marketed. Historically, the FTC had accepted divestiture of pipeline assets to remedy potential competition concerns.

The selective enforcement defense is a distraction to the DOJ and to AT&T.  AT&T needs to keep its defense focused on the substantive antitrust issues where it is on solid ground. Consumers are increasingly willing to cut the cord entirely as they look to virtual MVPDs like Sling TV, Youtube Live, and PlayStation Vue as well as subscription video on demand services (“SVODs”) such as Amazon Prime (80 million U.S. subscribers) and Netflix (109 million subscribers worldwide), demonstrating that the video distribution and content markets have become ever more dynamic – and competitive. And the lines between MVPDs, virtual MVPDs and SVODs are blurring. AT&T should stay focused on the dynamic market that currently exists and is continuing to evolve.  For example, Youtube Live has now signed an agreement with Time Warner for content.

Judge Leon will make the ultimate decision on whether the deal is anticompetitive.  Judge Leon is unlikely to rule in favor of A&T with regards to the selective enforcement defense, unlikely to have Delrahim testify and unlikely to force the DOJ to provide AT&T with discovery relating to the defense.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com

FTC Seeks to Unwind Merger of Prosthetic Knee Manufacturers

On December 20, 2017, the FTC filed an administrative complaint to unwind the merger of Otto Bock HealthCare North America, Inc., (“Otto Bock”) and FIH Group Holdings, LLC (“Freedom”), two manufacturers of prosthetic knees equipped with microprocessors that adapt the joint to surface conditions and walking rhythm.  In September 2017, the parties simultaneously signed a merger agreement and consummated the merger without the FTC having an opportunity to review the deal.  Apparently, the merger was not HSR reportable.  According to the FTC, the merger eliminated direct and substantial competition between head to head competitors that engaged in intense price and innovation competition.  While the litigation is ongoing, the parties agreed to a Hold Separate and Asset Maintenance Agreement, which prevents them from continuing the integration of the two businesses.  The FTC did not allege any violation of the HSR ACT.

DOJ Requires a Divestiture Remedies in Consummated Asset Deal

On December 21, 2017, the DOJ announced a settlement that required TransDigm Group Inc. (“TransDigm”) to divest two airline passenger restraint businesses that it had acquired from Takata Corp. in February of 2017 for $90 million.  Due to the transaction’s structure, it was not HSR reportable so the DOJ did not have the opportunity to review the deal.  Nevertheless, the DOJ investigated the transaction and found that it had eliminated the only meaningful competitor to TransDigm in the market for commercial airplane restraint systems, including traditional two-point lap belts, three-point shoulder belts, technical restraints, and more advanced inflatable restraint systems such as airbags.  According to the DOJ, competition between the two companies led to lower prices and more innovation in the industry.  To resolve the concerns, the DOJ required a structural remedy to an already approved consortium.

DOJ Settles Parker-Hannifin Lawsuit

In September 2017, the DOJ challenged Parker-Hannifin’s consummated acquisition of CLARCOR Inc. alleging that it had eliminated head-to-head competition between the only two domestic manufacturers of fuel filtration systems and filter elements. The DOJ challenged the transaction after it had allowed the initial waiting period under the HSR Act to expire in mid-January 2017.  The HSR was filed during the holidays and expired around the inauguration.  There was no allegation that the parties withheld 4(c) documents or did anything unusual to prevent the DOJ from conducting a thorough review.  The DOJ had everything it needed to make a decision to issue a second request.  Apparently, the DOJ simply missed the overlapping businesses in the initial review period and allowed the waiting period to expire.  In December 2017, the DOJ announced a settlement with Parker-Hannifin that required a structural remedy, the divestiture of the fuel filtration assets.

Lessons Learned

No deal is ever done.  These enforcement actions demonstrate that the antitrust agencies are committed to challenging completed deals that substantially lessen competition.  These enforcement actions by the antitrust agencies send a strong message to corporate executives and antitrust counsel that antitrust risks do not end once a deal is consummated, and that a transaction is not free of antitrust exposure simply because the transaction is not reportable under the HSR Act or that the HSR waiting period was allowed to expire without contact from the antitrust agency.  Corporate and private counsel would like assurances that the HSR waiting period provides closure to the antitrust review.  Apparently, the expiration of the HSR waiting period does not end the antitrust review.  Given these examples, corporate executives must have its antitrust counsel assess the antitrust risk of closing a transaction that has some antitrust exposure for a post-closing investigation and challenge.  These examples show that consummating deals that raise serious antitrust concerns may lead to defending against lengthy and costly investigations; defending against litigation; and reorganizing to the government’s demands of divestitures even after some initial integration has taken place.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com

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?