Tuesday, January 17, 2017
Ok, so revolution is perhaps a bit overblown. But, we are about to undergo a significant change in antitrust enforcement in the context of merger and acquisitions - probably more significant than the change we saw after the transition from Bush to Obama. Under Bush, the DOJ/FTC took a - relatively speaking - hands off/free market approach to enforcement. That approach was generally consistently with the free market principles espoused by traditional Republican administrations. With Obama, the DOJ/FTC became much more active in - again not inconsistent with general Democratic positions.
Well, now, it seems we are in for something completely different.
While generally in line with Republican orthodoxy (see appointment of former FTC commissioner Joshua Wright to head up transition efforts), I doubt that we will be returning to a principled, hands-off approach to merger review.
Take two examples. First, there's AT&T/Time Warner. On the campaign trail, President-elect Drumpf made it clear that he believed such a merger would result in "too much concentration of power" and that his administration would not likely approve the deal. Clearly, CNN (Time Warner asset) attracted attention (negative) of the President-elect. Last week, one day after the press conference in which President-elect Drumpf ripped into CNN ("fake news!"), AT&T's CEO paid a visit to the President-elect at Drumpf Tower. Although he denies it, it's hard to imagine that the pending transaction did not come in conversation or that it wasn't at least obliquely part of the discussion. Clearly, AT&T understands that it has to be on the President-elect's good side if it wants the deal to be approved.
Second, there is the pending Bayer-Monsanto transaction. The $66 bn mega merger which is to create one of the world's largest agriculture conglomerates was announced last September. Since then, it has been subject to regulatory review. Last week, the CEOs of both Bayer and Monsanto made a pilgrimage to Drumpf Tower to discuss the deal with the President-elect. Today comes news that the Bayer and Monsanto are going to promise to create jobs in the US in exchange for regulatory approval.
So we have moved into wholly new territory: regulation by deal. If you want your high profile deal approved, forget what FTC/DOJ have to say, get an audience with President Drumpf and he will bless the transaction in exchange for some jobs or whatever else. It's the kind of move that is more common in the developing world than here or in Europe, but that's the new reality.