Now that the dust has settled on President Donald Trump’s antitrust appointments, we are witnessing greater clarity on the new administration’s priorities and focus. Despite the hand wringing over content moderation and tech-censorship inquiries, what may be missed are substantial changes that are happening in merger policy and enforcement. While not as headline grabbing as big tech actions, sound merger policy is arguably the bread-and-butter of antitrust enforcement and undoubtedly necessary to help advance innovation in markets. Encouragingly, the current antitrust leadership has emphasized the need to bring back sensible merger policies.
First, settlements and remedies are back on the table to address potential competitive concerns. Once a staple to agency enforcement, the use of settlements to remedy harm was largely abandoned by the prior leadership. Second, the agencies once again recognize that mergers can create important efficiencies, including greater innovation. This recognition is critical, because the prior leadership attempted to ignore case law, longstanding agency practices, and economic research to contend that efficiencies are rare and should be either ignored or heavily discounted. This view was memorialized in the 2023 Merger Guidelines with the assertion that “procompetitive efficiencies are often speculative and difficult to verify and quantify, and efficiencies projected by the merging firms often are not realized.”
A potential litmus test for the new merger policy is whether the U.S. Justice Department (DOJ) will continue to challenge the proposed merger of Hewlett Packard Enterprise Co. (HPE) and Juniper Networks Inc. The trial is set for July 8.
Notably, the DOJ sued the companies on Jan. 30, during the transition between the Biden and Trump administrations under the interim head of the DOJ’s Antitrust Division. Issuing complaints during transition periods raises a potential concern. Specifically, there is an “ownership” problem where interim agency officials hand the incoming leadership a set of agency actions that are hard to reverse—even if the incoming leadership holds a different opinion. This potential is more notable, since interim heads are not confirmed by the U.S. Senate. Certainly, core administrative functions should continue during periods of transition, but major antitrust decisions should be deferred until permanent leadership arrives.
Regarding the merger itself, I have written previously on the complaint’s shortcomings. HPE and Juniper both offer a suite of services, including wireless software and hardware to deliver internet access to enterprises and campuses, as well as other networking solutions. The DOJ complaint narrows in on an “enterprise wireless networking solutions” market and asserts that, within that market, Cisco, HPE, and Juniper represent a combined 70% of sales.
Oddly, the DOJ never separately identifies the market shares for each supplier. Using information found in the complaint, one can back out the market shares: Cisco, HPE, and Juniper have shares equal to 36.5%, 27%, and 6.5%, respectively. Importantly, given the relatively low shares of a combined HPE-Juniper—depending on how the shares are actually calculated at trial—it is even possible that the combined entity would fall below the market share threshold established in the U.S. Supreme Court’s Philadelphia National Bank decision to presume anticompetitive harm. This raises significant litigation risk for the agency if it must meet its burden of production at trial to show a detrimental impact on consumers without a presumption of harm.
Yet even within the DOJ’s narrow market definition and structural approach to antitrust, a combined HPE and Juniper represent only one-third of all sales. For its part, HPE argues that there are eight other competitors. Additionally, the competitive overlap at-issue accounts for only 11% of HPE’s revenues—meaning the vast majority of its business lies outside the contested space. Further, the deal has already been approved in 14 international jurisdictions, including the European Commission and the United Kingdom.
Ultimately, the case will come down to how the court considers the potential procompetitive efficiencies. Unfortunately, as mentioned, over the past several years, the agencies have been quick to reject efficiency arguments. For instance, in the case of JetBlue and Spirit, the parties argued that they faced significant financial distress and needed the merger to solidify their financial health in order to effectively compete with the legacy carriers and Southwest. The DOJ dismissed these arguments as pretextual and litigation driven.
Ultimately, the parties were vindicated after they abandoned the deal in March 2024 in the wake of their loss in court. Specifically, Spirit filed for bankruptcy in November 2024 (from which it later emerged), and both have reduced their operations and workforce. This undoubtedly has left the legacy carriers and Southwest in a better competitive position. What this case study illustrates is that the agencies can get their predictions very wrong when they are quick to dismiss legitimate rationales for mergers.
Similarly, HPE has faced some financial headwinds—specifically, lower margins and workforce reductions. Additionally, as in the JetBlue/Spirit case, HPE and Juniper are not the market leaders, and a procompetitive rationale for the merger is to be able to more effectively compete with the leading incumbent supplier, Cisco, with greater innovation. With the growth of AI in networking solutions, combining HPE’s and Juniper’s intellectual property creates a strong likelihood of greater differentiation and innovative networking products and solutions.
According to one detailed assessment, Cisco’s resilient incumbency is most likely to be displaced around the integration of AI with networking systems. The logic is that there are two primary reasons why an enterprise purchases new networking equipment and software. The first is to refresh an existing infrastructure due to equipment age. This is where incumbency advantages are the strongest. The second reason is when innovation justifies new spending and replacement. This second reason is where a company such as HPE/Juniper has a real opportunity to displace incumbency and bring more intense competition. In sum, the assessment concludes that “it would seem that blocking the merger helps Cisco.”
Ultimately, within merger enforcement, efficiency-based arguments need a seat at the table. The first step is to reverse course on the hostility to efficiency arguments in merger analysis. The HPE/Juniper merger presents an important test case.
More broadly, however, a second step is to revisit the limiting doctrines placed on efficiencies altogether. For instance, I have written on the need to revisit the out-of-markets efficiencies doctrine, which is used by plaintiffs to artificially restrict the set of efficiencies that “count” in merger analysis. This restriction, as it currently stands, unreasonably handicaps defendants, which is a key concern given the recent tilt in antitrust enforcement to favor plaintiffs.
A reformed approach would count “interdependent” efficiencies, which offers more flexibility to courts to consider adjacent or related markets, while being mindful of mitigating the administrative burden. This reformed approach is particularly salient when (a) agencies are unwilling to address competitive issues with remedies and settlements, and (b) there are likely even larger efficiency gains from a merger if adjacent and related markets are considered.
