Antitrust Law Daily Wrap Up, AGENCY NEWS: Baer moves up at Justice Department; Hesse expected to serve as acting antitrust chief, (Apr 6, 2016)

By Jeffrey May, J.D.

Bill Baer, currently the Assistant Attorney General in charge of the Department of Justice Antitrust Division, is expected to take over as Associate Attorney General for Stuart Delery, who has decided to step down from his post effective April 14. Delery has served in the number three spot at the Justice Department since September 2014, after leading the Civil Division for more than two years. Delery’s departure was announced yesterday.

With Baer's promotion, it is anticipated that Renata Hesse, Deputy Assistant Attorney General for Criminal and Civil Operations in the Antitrust Division, will assume the role of acting antitrust chief. Hesse previously served as acting assistant attorney general in charge of the Antitrust Division following the resignation of Acting Assistant Attorney General Joseph Wayland in 2012. At that time, Baer was awaiting Senate confirmation. Hesse was appointed to the post in November 2012, and Baer was sworn in in January 2013.

There has been no official word from the Justice Department on the leadership changes. Hesse did not comment on the topic today, when she addressed the American Bar Association Section of Antitrust Law Spring Meeting at the annual agency update with the assistant attorneys general. However, Attorney General Loretta Lynch alluded to the move in her remarks, delivered today at the Spring Meeting. Lynch said that she “look[ed] forward to working with [Baer] even more closely in the coming months.”

Merger enforcement. Lynch praised the work of the Antitrust Division under Baer's “tireless leadership.” In particular, she focused on the Antitrust Division's successful efforts to block anticompetitive mergers and acquisitions. Among the successes, she mentioned Comcast's decision to drop its merger with Time Warner and Electrolux’s abandoned acquisition of General Electric’s appliance division.

“Cases like Comcast and Electrolux point to the greatest challenge confronting the Antitrust Division, as well as our partners at the Federal Trade Commission: an unprecedented swell of mergers coursing through the U.S. economy,” Lynch said. “It isn’t just the number of proposed deals that makes this a unique moment in antitrust enforcement; it’s their size and their complexity.”

According to the attorney general, the number of proposed mergers valued at more than $10 billion was 67 in fiscal year 2015, more than double the number from the previous fiscal year.

Lynch noted that if no remedy will resolve the competition issues, then the Justice Department will prosecute its suits to the very end. According to the attorney general, one such deal is Halliburton Company’s proposed $34 billion acquisition of Baker Hughes Inc., which would combine the second and third largest oilfield service companies in the world. She called the transaction “a bad deal” and did not see a remedy that could fix its anticompetitive aspects.

Of course, merging parties and the Justice Department are usually able to work out settlements resolving competition concerns. Some large deals do not even raise competition issues.

On the topic of merger enforcement actions at the Spring Meeting's agency update, David Gelfand, Deputy Assistant Attorney General for Litigation, noted the remedy in the government’s challenge to the American Airlines and USAirways merger as a prime example of a remedy that restores competition. According to Gelfand, that settlement, which compelled divestiture of very valuable assets, has encouraged the entry of low-cost carriers at leading airports, including Washington's Reagan National Airport. The settlement has put more capacity into the system, in Gelfand's view.

As for mega-deals that do not raise significant competition concerns meriting a challenge, Gelfand pointed to AT&T Inc.’s acquisition of DirecTV. In July 2015, the Antitrust Division closed its investigation into the $48 billion deal after concluding that the transaction would not pose a significant risk to competition. Gelfand said that he didn't see a case and that there were legitimate benefits flowing from the transaction.

Parties to mergers that do raise competition concerns will need to convince the antitrust agencies that there is an adequate solution to allaying those fears. But just proposing divestitures as a remedy is not enough.

“The Department of Justice is not interested in settling for the sake of settling; we are willing to settle only when we have a high degree of confidence that an agreement will preserve competition and protect consumers in every market that a merger affects,” Lynch warned. “The more complex the deal—and the more markets it potentially endangers—the greater our skepticism that divestiture will safeguard competition.”

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