By Lisa Lee
A DOW JONES NEWSWIRES COLUMN
NEW YORK -(Dow Jones)- The new emphasis on antitrust enforcement by President Barack Obama's administration is a sharp reversal of the Bush-era free-market philosophy.
It will influence the growth ambitions of some perceived monopolies like Microsoft Corp. (MSFT) and Google Inc. (GOOG). However, worries about setting back corporate deals are overblown.
Assistant Attorney General Christine Varney stirred a hornet's nest of sorts by saying "the recent developments in the marketplace should make it clear that we can no longer rely upon the marketplace alone to ensure that competition and consumers will be protected."
For deal-makers, the question is how far will the government go in scrutinizing mergers in the future. But heightening scrutiny is easier said than done.
The U.S. Department of Justice, entrusted to scrutinize M&A deals, has to take into account litigation risk, says Daniel Wall, a partner at Latham & Watkins, who heads the firm's global antitrust and competition practice.
The fear is that losing cases, especially the high-profile ones, can set back antitrust enforcement.
In 2004, the DOJ was famously routed in its attempt to block Oracle Corp.'s (ORCL) hostile bid for PeopleSoft in the Federal District Court in San Francisco.
That was an embarrassing defeat.
However, there's no doubt that some Bush-era deals would have faced much tougher scrutiny if they had arrived in Varney's inbox.
The $1.8 billion Maytag-Whirlpool merger in 2005, a combination that resulted in up to 70% market share in large appliances in the U.S., is one case in point. The merger between the only two U.S. satellite radio companies XM and Sirius would likely have been challenged as well.
Another cumulative effect of the Bush administration's weak grip on antitrust issues is the U.S. telecom sector, which is now gravitating toward a duopoly of sorts of Verizon Communications Inc. (VZ) and AT&T Inc. (T), following a series of deals.
If there's one message that investment bankers should draw from Varney's comments it's that the weak economic environment, recent bank mergers notwithstanding, is not going to be an excuse to clear deals.
Antitrust rules are likely to better align with European Union regulations, which would lead to more certainty for those involved in the process, says Janet McDavid, partner at Hogan & Hartson. In Europe, the impact on the customer has always been paramount.
This actually bodes well for investment bankers who are often kept in limbo for months as deals get debated between Washington and Brussels.
Varney's straight-talking stance could ultimately create a more level playing field. At a time when most regulations across businesses are being harmonized at a global level, this is not a bad thing.
Bankers will just have to address the U.S. government's newfound sensibilities on competition.
(Lisa Lee is a columnist with Dow Jones Newswires. She has covered Wall Street and the markets as a journalist. Prior, she was a banker in LBO financing, healthcare investment banking and cross-border M&A. She also worked in the government as a Senate aide on international trade policy. She can be reached at 201-938-2317 or by email at lisa.lee@dowjones.com. To ensure continued access to the best of Dow Jones news and opinion on companies, sectors and deals for bankers and research analysts, please contact investmentbanker@dowjones.com.)
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