Bill Baer was the ultimate Washington antitrust insider when he came to the Justice Department in 2013: At law firm Arnold & Porter, he had counseled the biggest U.S. companies, including deal machine General Electric Co., on getting mergers over the finish line.
So when Baer took over as head of the Justice Department’s antitrust division with a mandate to protect competition in the American economy, observers could have been forgiven for thinking another industry fox was taking his watch over the hen house.
But Baer is making good on a promise to protect American consumers, showing little hesitation to haul companies to court to stop mergers.
Last week, facing just such a legal challenge, oil-services firms Halliburton Co. and Baker Hughes Inc. dropped their $28 billion planned tie-up. Baer portrayed the deal uniting the No. 2 and No. 3 firms in the field as one of the worst he’s ever seen. It would have eliminated competition for so many products and services, he argued, that it was “unfixable.”
Now, as Baer’s career advances — he has just been named to the No. 3 position at the Justice Department — he still will be overseeing the antitrust watchdogs at his former division as they turn to a pair of proposed mergers that have the potential to radically reshape U.S. health care.
The department is considering the tie-ups of four of the biggest U.S. health insurers — Aetna with Humana, and Anthem with Cigna Corp. — two mergers that would leave the country with only three major insurers, down from five.
Judging by the department’s record under Baer’s leadership, the combinations might face hurdles in trying to convince the government to clear the transactions.
With Baer’s promotion, the antitrust division has been taken over by Renata Hesse, one of Baer’s acolytes. Hesse has helped lead the unit in its opposition to Comcast Corp.’s bid for Time Warner Cable Inc., which was abandoned by the companies, and lawsuits seeking to block the sale of GE’s appliance business to Electrolux AB, and the merger of American Airlines and US Airways. GE dropped its plans to sell the appliance unit to Electrolux during the U.S. antitrust trial. American Airlines ultimately worked out a settlement agreement allowing it to merge with US Airways.
“The Justice Department is increasingly adopting the Nancy Reagan slogan: ‘Just say no,’ ” said Deborah Garza, an antitrust lawyer at Covington & Burling in Washington who previously worked at the division.
Critics say enforcers aren’t going far enough. In a report last month, the White House Council of Economic Advisers noted several signs of declining competition in the U.S., including data that the biggest firms are taking home a greater share of revenue in numerous industries.
Returns on invested capital also are becoming increasingly concentrated within a small slice of the market, according to the report.
Chris Sagers, a professor of antitrust law at Cleveland State University, argues the Obama administration’s antitrust record is only average. Yes, there have been big challenges, but that’s because companies are proposing aggressive deals that pose risks to competition, he said. Enforcers should be bringing more cases and lowering the threshold for going to court to stop problematic deals, he said.
“There is a lack of political will, and it comes from the White House down,” Sagers said. “It runs throughout the federal government that we just don’t care about competition like we used to, and we’re just not as worried about the threat of concentrated markets and big companies as we used to be.”
When investigating mergers, Baer and Hesse have emphasized a common-sense approach to understanding how consumers might be harmed by the combination of two competitors. Baer has warned that he has seen some deals that are so bad for consumers they never should have made it out of the boardroom.
With eight months to go in the administration, the antitrust division has time to add to its record of merger challenges. At the top of the list are the health-insurer deals. Humana said Wednesday that it completed a submission to the Justice Department, moving closer to a decision by the government.
