T AT&T Inc

By Brent Kendall 

AT&T Inc.'s $85.4 billion deal to buy Time Warner Inc. sails toward two cresting waves of opposition: resurgent antitrust enforcement in Washington and politicians fired by a new bipartisan populist rage.

It is too early to know how regulators will treat the AT&T-Time Warner deal. But after several quiet years, President Barack Obama's antitrust team has switched into high gear in response to a recent spurt of deal-making. This trend is likely to continue in the next administration, as both presidential campaigns have signaled unease with the AT&T deal and with economic consolidation more broadly.

Justice Department antitrust enforcers say they have sunk eight would-be deals over the past year and are currently waging court fights over three more, including two big health-insurance mergers. In all, the Justice Department has stopped 43 deals over the past eight years, more than double the mergers blocked by the preceding Bush Justice Department.

The Federal Trade Commission, which shares antitrust duties with Justice, recently waged multiple challenges against hospital mergers and is considering whether to allow a combination of two of the country's largest drugstore chains, Walgreens Boots Alliance Inc. and Rite Aid Corp.

Senate Judiciary Committee Chairman Chuck Grassley (R., Iowa) on Monday called for a "robust review" of the AT&T deal. Sen. Patrick Leahy of Vermont, the top Democrat on the committee, said the panel should hold a hearing on the deal "without delay."

Given the current merger fever, the antitrust views of the next president's nominees for attorney general, FTC head and Justice Department antitrust chief are likely to get a lot of attention.

Democratic presidential nominee Hillary Clinton has sent signals during the campaign that her administration would be active in antitrust enforcement.

Republican Donald Trump has said he would not only fight the AT&T deal, but would also try to unwind a major media merger previously approved by the Obama team: Comcast Corp.'s 2011 acquisition of NBCUniversal.

The Obama administration came into office promising a new day for antitrust after what it portrayed as a somnolent Bush era, but for the first few years its record was hard to distinguish from that of its predecessors, in part because of a soft deal market.

That changed sharply last year, and it has continued in 2016 as many head-turning mergers have been announced. That is especially true in agriculture, where a trio of large deals, including Bayer AG's deal for Monsanto Co. and the proposed merger of Dow Chemical Co. and DuPont Co., have prompted concerns in farm states.

Republicans are often skeptical of government intervention, but several GOP leaders have raised concerns about industry concentration, while others have notably refrained from criticizing the Obama administration.

"I'm afraid that this consolidation wave may have become a tsunami," Sen. Grassley told agriculture executives at a congressional hearing last month.

Sen. Mike Lee (R., Utah), chairman of the Senate antitrust subcommittee, has expressed concern about several mergers, including the agriculture deals, the AT&T transaction and brewer Anheuser-Busch InBev NV's takeover of SABMiller PLC.

"The Republican Party is shifting from the party of big business to the party of populism, and that's a big deal for antitrust," said University of Iowa law professor Herbert Hovenkamp. "There's an inherent suspicion of things that are big, and it's not limited to big government."

Democratic leaders, for their part, are facing pressure from fiery figures like Sen. Elizabeth Warren (D., Mass.). "Today in America, competition is dying," Ms. Warren said in a major antitrust speech this summer. "Mergers are outrunning enforcement."

As the economy picks up steam, many companies have made bold moves to get bigger fast, and that has lit a fire under competition regulators. But a recent wave of deals shows assertive antitrust enforcement hasn't deterred companies from testing the waters.

More than five multibillion-dollar deals were announced this past week, totaling $207 billion in deal volume globally -- and making it the biggest week since 1999, according to data provider Dealogic. Beyond the AT&T-Time Warner deal, the data include British American Tobacco PLC's proposed deal to buy the rest of Reynolds American.

"The message doesn't seem to have sunk in," said William Kovacic, a former Republican chairman of the FTC and now a law professor at George Washington University. "People keep trying to climb that mountain to higher and higher reaches of concentration."

Companies that attract a government antitrust lawsuit face months of uncertainty for their businesses and employees, and often costly deal termination fees if they lose.

Among the failures in recent months was Halliburton Co.'s attempt to buy oil-field-services rival Baker Hughes Inc. The Justice Department sued in April, and officials said the deal was so problematic it never should have left the boardroom. The companies abandoned their plans a month later, and Halliburton paid a $3.5 billion breakup fee to Baker Hughes.

It is unclear whether a similar fate awaits other mergers -- not just the AT&T deal but Aetna Inc.'s would-be combination with Humana Inc. and Anthem Inc.'s proposed acquisition of Cigna Corp. Those two mergers would turn the top five national health insurers into three giant companies, and the Justice Department sued in July to block them. Court rulings on both deals are expected in early 2017.

"I was at the agency for 17 years, and I cannot think of another period where there was this much litigation occurring," said William Stallings, a former Justice Department antitrust lawyer now with Mayer Brown LLP.

Enforcers are also voicing more skepticism of "fixes" that companies may propose to convince the government that competition will continue after a merger, for example committing to sell some of their assets to a third party.

In structuring its deal for Time Warner, AT&T showed it has to some extent learned from its 2011 bid to buy T-Mobile US Inc., which was blocked by Washington -- forcing it to pay billions in breakup fees. This time around, AT&T agreed to a much smaller fee of just $500 million if the Time Warner deal suffers a similar fate.

Write to Brent Kendall at brent.kendall@wsj.com

(END) Dow Jones Newswires

October 25, 2016 02:47 ET (06:47 GMT)

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