No merger settlement has ever been unwound through Tunney Act proceedings, but no merger settlement has been quite like the one involving Hewlett Packard Enterprise and Juniper Networks, where a key US government negotiator has criticized the consent decree that allowed the merger to close.
No merger settlement has ever been unwound through Tunney Act proceedings, but no merger settlement has been quite like the one involving Hewlett Packard Enterprise and Juniper Networks, where a key US government negotiator has criticized the consent decree that allowed the merger to close.Roger Alford, who was fired from his position in the Antitrust Division after objecting to the settlement, today offered a blistering assessment of the settlement, and called on the US District Court for the Northern District of California to exercise its authority to unwind the merger, which was completed last month, using the public interest review.
"I hope the court blocks the HPE/Juniper merger," he told an audience at a conference in Aspen, Colorado.* "If you knew what I knew, you would hope so too."
Alford, as principal deputy assistant attorney general, participated in the talks that ultimately led to the settlement, but was fired, he said, for "insubordination."
"As part of the forthcoming Tunney Act proceedings," he said, "it would be helpful for the court to clarify the substance and the process by which the settlement was reached. Although the Tunney Act has rarely served its intended purpose, this time the court may demand extensive discovery and examine the surprising truth of what happened."
The Tunney Act (Antitrust Procedures and Penalties Act) applies specifically to settlements and consent decrees entered into by the Department of Justice, to subject the agreements to a judicial process with public comment and review by federal district courts to ensure they are in the public interest.
After the proposed settlement, along with a competitive impact statement, are published, the public has a 60-day comment period before a court can approve it. The HPE-Juniper settlement was published in the Federal Register on July 10 (see here). HPE closed the acquisition of Juniper on July 2 (see here).
— Tunney Act precedents —
Considered a rubber stamp to the process, merger consent decrees are usually swiftly and easily approved during a Tunney Act procedure. However, in a few instances courts have demanded more information and have occasionally required the addition of new antitrust remedies or the insertion of new enforcement mechanisms into proposed consent decrees.
In 2019, before approving the merger between CVS and Aetna, DC-based Senior US District Judge Richard J. Leon held an evidentiary hearing (a “mini-trial”) before approving the proposed settlement. At that time, no federal court had ordered a Tunney Act hearing with testimony from various concerned non-parties. When pushed by the DOJ to approve the settlement, Leon said, the “court is not a rubber stamp,” though it ultimately approved the settlement.
After the DOJ’s challenge to ABI’s acquisition of Modelo in 2013, the parties submitted a new revised settlement requiring divestiture of Modelo’s entire US business to Constellation (including brewery capacity and long-term rights), which the DOJ described in filings and Federal Register notices before the court entered judgment.
In 2009, during the public interest hearing for an antitrust settlement regarding the Comcast/NBCUniversal merger, the aforementioned Judge Leon required that the settlement require the agreement’s signatories to provide updates to the court regarding online video distribution arbitration and that it mandate an annual court hearing about how well the settlement was functioning in practice. The intention behind these court-mandated additions to the settlement was to ensure that the judiciary would be able to provide oversight in this case and ensure compliance with the agreement.
In 2007, DC Judge Emmet G. Sullivan issued a lengthy opinion applying a deferential but substantive public-interest review and ultimately approved the decrees in SBC/AT&T and Verizon/MCI.
In 1996, in a Tunney Act proceeding involving the review of a merger divestiture settlement of the Thomson-West publishing merger, US District Judge Judge Paul Friedman denied the DOJ’s initial motion for approval of a proposed consent decree, explaining various deficiencies that he thought should be corrected in a new settlement, but Friedman did subsequently approve a revised consent decree that aligned with his preferences.
In US v. Microsoft (1995), Judge Stanley Sporkin ruled that a settlement entered by the DOJ with Microsoft to resolve allegations of anticompetitive practices under sections one and two of the Sherman Act was inadequate, and the settlement wasn’t in the public’s best interest. The DC Circuit Court of Appeals reversed Sporkin's ruling, stating that the decree was indeed in the public interest and it instructed another judge to approve it.
Though it didn’t involve a merger and it was ultimately reversed, Sporkin's decision showed the potential for judges to scrutinize antitrust settlements under the Tunney Act.
Much earlier, in the early 1980s, during Tunney Act proceedings regarding the DOJ settlement which forced AT&T to divest many “Baby Bell” companies, US District Judge Harold Greene successfully imposed a competition law remedy that neither AT&T nor the DOJ wanted, but which he said was mandatory for him to deem the settlement to be lawful — a seven year ban against AT&T doing any electronic publishing using its own transmission facilities.
Federal courts have never ultimately forced the government to reopen an antitrust case it intended to settle or declared the government’s choice to settle as an act of corruption worthy of the court’s rebuke and reversal, as Alford is urging a court to do in the HPE-Juniper case.
— HPE-Juniper settlement —
The Tunney Act is in the spotlight after US Senators Elizabeth Warren of Massachusetts, Amy Klobuchar of Minnesota, Cory Booker of New Jersey and Richard Blumenthal from Connecticut sent a letter to the court reviewing HPE’s $14 billion acquisition of Juniper and subsequent settlement (see here).
The settlement between the merging parties and DOJ requires HPE to divest its HPE Instant On Business, a line of Wi-Fi enabling products designed for small businesses. The Senators said the divestiture doesn’t resolve the government’s competitive concerns, and that they were concerned over news reports that the defendants retained lobbyists and consultants with ties to the White House and the Office of the Attorney General to obtain the settlement and allegations that officials in the Antitrust Division may have been sidelined because they opposed the “backroom negotiations” that led to this settlement.
“Section 16(f) of the Tunney Act grants the Court broad discretion to solicit information that may be helpful in assessing whether the consent decree at issue in this case is in the public interest,” they told the court. “At a time when concerns continue to emerge regarding apparent pay-to-play schemes at other Trump administration agencies, the public deserves a rigorous application of the law."
“The Tunney Act is a bulwark against deals that threaten to concentrate money and power in the hands of the few, out of view of and at the expense of the public. We therefore express our confidence that the Court’s ample authority under the Tunney Act, as supported by the statute’s plain meaning and legislative history, will allow it, in the interest of transparency, to undertake an independent examination into whether the consent decree in this case is in the public interest.”
The Tunney Act, named for lead sponsor Senator John V. Tunney, came from congressional alarm that President Nixon’s administration had approved a proposed merger following a lobbying campaign orchestrated by “corporate pressures,” the senators told the court.
In 1969, the DOJ had brought an antitrust suit challenging manufacturing company ITT Inc.’s attempt to merge with Hartford Fire Insurance Co. The DOJ agreed to settle the suit in 1971. Soon after, ITT offered to help fund the 1972 Republican National Convention and the deputy attorney general involved in the case was promoted.
This led some to wonder if the merger was approved as a result of secret negotiations unrelated to the antitrust review. In response, Congress passed the Tunney Act to make plain that a court reviewing a consent decree in an antitrust case “has an independent duty to assure itself that entry of the decree will serve the interests of the public generally.” Congress rejected the idea that a federal judge’s review of a consent decree should serve “merely … as a rubberstamp upon out-of-court settlements.”
The Tunney Act, officially the Antitrust Procedures and Penalties Act, was approved by Congress on a bipartisan basis and signed by President Ford in 1974.
Please e-mail editors@mlex.com to contact the editorial staff regarding this story, or to submit the names of lawyers and advisers.