Category: antitrust

Federal and State Merger Review Timing Needs Reform

Theodore A. Gebhard

[Note: The following article, published under my byline at LAW.COM  on June 30, 2026, is reprinted with permission from the National Law Journal © 2026 © 2026 Centellic. All rights reserved.]

Regulatory compliance imposes substantial costs on companies considering acquisitions or mergers.  At the federal level, transactions that meet certain thresholds are prohibited from closing until they have been evaluated by the antitrust regulators to determine whether competition is threatened.  The process can be lengthy and expensive, but in instances where the parties are ultimately cleared or have agreed to conditions that address agency concerns, they can move forward with the transaction as far as the federal antitrust regulators are concerned.

Increasingly, however, the path to closing is delayed by state regulators that wait until after federal review is complete before initiating separate investigations at the state level.  For example, this year a group of eight state attorneys general brought a lawsuit attempting to block the purchase of Tegna by Nexstar Media Group during the same week that the Department of Justice and Federal Communications Commission approved the transaction.  It has also been reported that several states are considering launching a challenge to Paramount Global’s planned acquisition of Warner Bros. Discovery despite the Justice Department’s decision to clear the deal following an extensive investigation.

The timing of these state challenges is problematic.  Even if the lawsuits are unsuccessful, they will have added months of delay, if not years, to the parties’ ability to integrate their firms and proceed with their business plans.  Moreover, until the litigation is completed, the parties must incur still more legal expenses, all the while facing uncertainty about the outcome, which can mean forgoing  strategic opportunities that otherwise would have been seized by the combined firm.

In addition to their own lawsuits under state law, some state attorneys general have also taken to challenging federally negotiated agreements during Tunney Act proceedings.   As a former Justice Department Attorney and FTC Policy Planning Director explains, under the Tunney Act, courts review DOJ antitrust settlements to assure the public that “the Justice Department followed proper procedures, disclosed sufficient information, and explained the rationale behind its decision.” Significantly, “[t]he courts have been unambiguous that the law prohibits them from substituting their judgment for the judgment of the Justice Department.”

In an ongoing Tunney Act matter, the attorneys general of nineteen states and the District of Columbia are challenging the adequacy of DOJ’s settlement agreement with Hewlett Packard Enterprise respecting its proposed acquisition of Juniper Networks. In their letter to the court, the state attorneys general allege that the “terms of the Settlement are themselves bizarre and raise suspicion,” and that the settlement may be a consequence of “lobbying pressure and secret side arrangements [that] substituted for antitrust legal analysis.”  If so, “the DOJ breached the public trust.”

In principle, these allegations, if true, may be proper Tunney Act concerns.  The state attorneys general, however, do not stop there.  They also challenge the substance of the settlement, which they claim fails to “address the harms alleged by the DOJ.” Here they claim that the DOJ abandoned its own factual record in arriving at the settlement.  In making this claim, the state attorneys general ask the court to substitute their analysis of the record for that of the DOJ’s, effectively asking the court to re-examine the substantive issues in the case.

In point of fact, the settlement is hardly a give-away to the parties. Among other things, the settlement requires that the parties undertake certain divestitures and enter into mandatory licensing agreements.  After months of investigation and negotiation, the DOJ concluded that these terms will be effective in disposing of the acquisition’s potential harm to competition.  One need not agree with this conclusion, but a Tunney Act proceeding is not the place to ask a court to reach an alternative conclusion.

In sum, when state objections to a transaction under state law do not emerge until after (or only shortly before) the federal antitrust review process is completed or when states challenge the adequacy of federal settlements, the result is a regulatory review system of sequential proceedings rather than a coordinated regulatory review process among federal and state actors. This situation begs for reform.  On both fairness grounds and cost mitigation grounds, parties subject to merger review should be able to identify a reasonable time frame for ending the process.

In this regard, federal and state enforcers should work to better coordinate reviews of specific transactions such that their respective reviews reach conclusions reasonably close in time, if not simultaneous.  Some options might include sharing information and data, identifying common competitive concerns, and agreeing on parameters that when present result in state deference to federal clearances or settlements. State attorneys general could also commit to inform the parties of their additional competitive concerns during the federal review process whenever possible.  None of these reforms would prevent states from bringing suits under state laws. They would, however, help to establish a clearer and more predictable enforcement framework.

The absence of a predictable time frame for governmental merger review neither serves the parties nor enhances in any meaningful way competition enforcement.  To the contrary, when federal and state reviews take place in sequential time periods, business uncertainty, legal expenses, and the costs of complying with information and data demands are significantly elevated. These consequences occur even if state attorneys general do not ultimately bring charges or prevail in court.  Better federal and state coordination in the timing of their respective reviews is needed, and the federal agencies and state authorities should work toward that end.

Theodore A. Gebhard is a former Antitrust Division economist and Federal Trade Commission senior attorney. He also was an antitrust practitioner at the Washington, D.C., office of a large international law firm and now consults on competition policy issues.  See more about Mr. Gebhard here.

Why the Paramount–Warner Bros. Discovery Deal Will Likely Clear Even Under a More Aggressive Antitrust Regime

Theodore A. Gebhard

[Note: The following article, published under my byline at LAW.COM on March 27, 2026, is reprinted with permission from the National Law Journal © 2026 ALM Global Properties, LLC.  All right reserved.]

The collapse of the Netflix–Warner Bros. Discovery deal ended its antitrust scrutiny, and the Department of Justice’s Antitrust Division has now turned to reviewing Paramount Skydance’s proposed acquisition of WBD. Notwithstanding a more interventionist enforcement environment and despite its size, this proposed transaction does not likely present a viable antitrust case

At roughly $110 billion in enterprise value, the transaction is substantial but comparable in size to other mergers approved by the DOJ, including the $165 billion AOL-Time Warner merger and the 1999 Exxon-Mobil merger, which would be $110 billion today. Although size can be a factor when it correlates with a large market share, Section 7 of the Clayton Act does not prohibit large deals as such. It prohibits only those acquisitions whose effect “may be substantially to lessen competition, or to tend to create a monopoly.” On this question, the answer respecting this transaction appears straightforward.

Start with market structure. The video marketplace today is fragmented, global, and intensely competitive. Traditional studios compete not only with each other, but with firms like Netflix, Amazon, Apple and YouTube—companies with far greater capital, integrated distribution, and diversified revenue streams. The combined enterprise would not approach market dominance, and case law suggests market share alone is not dispositive; courts require concrete evidence that a transaction is likely to lessen competition in practice, not merely in theory.

In Brown Shoe v. United States (1962), the Supreme Court emphasized that Section 7 demands a “practical, business” assessment of competitive effects—not a mechanical focus on size or structure. That principle has only strengthened over time.

The Supreme Court’s famed United States v. General Dynamics (1974) decision recognized that high market concentration alone isn’t illegal absent evidence of likely harm to competition. The U.S. Court of Appeals for the D.C. Circuit reinforced this approach in United States v. Baker Hughes (1990), holding that market concentration is merely a starting point, not the end of the analysis. And more recently, in United States v. AT&T Inc. (2019), the D.C. Circuit made clear that antitrust law requires proof of likely competitive harm—not conjecture based solely on market structure.

By standard antitrust analysis, it is difficult to see a strong case against this transaction. In the streaming market, subscriber counts and content libraries are fluid, switching costs are low, and competition for attention is constant. Scale alone does not translate into durable market power.

Equally important is the absence of a credible foreclosure theory. This is not a vertical merger combining content with a distribution bottleneck. Paramount does not control broadband networks, cable systems, or other chokepoints that would allow it to disadvantage rivals or raise its rivals’ costs. The combined entity will remain dependent on third-party distribution and licensing relationships in a market it does not control.

Nor does the deal present a plausible monopolization theory. However far enforcers may wish to extend Section 2, courts still require evidence showing the acquisition of durable market power by means of exclusionary conduct. A merged Paramount–WBD would still operate in a field defined by larger and better-capitalized competitors. It would not control the market; it would be trying to keep up in it.

The more compelling story is economic rather than structural. The cost of producing premium content has risen sharply, while revenue models have become less stable. Streaming has disrupted traditional windows, advertising markets are under pressure, and global competition has intensified. The ability to control and reduce costs is critical. This fact suggests that consolidation reflects adaptation rather than entrenchment.

In this regard, efficiencies are not an afterthought under antitrust law. Where a transaction reduces costs, eliminates duplication, or enables output that would not otherwise occur, procompetitive gains result. Sound antitrust analysis takes into account such gains. Combining Paramount and Warner Bros. Discovery offers precisely these outcomes: rationalization of overlapping operations, more efficient capital allocation, and the ability to invest at a scale required by the current market. Importantly, incorporating these efficiency gains in the analysis of whether the transaction is likely to injure competition is consistent with how the enforcement agencies have approached prior transactions in the sector, such as Disney-Fox and WarnerMedia-Discovery.

Here the DOJ will examine specific content markets, licensing practices, and potential spillovers into adjacent sectors. International reviews may impose additional conditions on the transaction. In addition, the political salience of any transaction implicating the ownership of news assets, although not altering the legal standard, can be expected to generate a level of attention beyond standard merger review.

The enforcement agencies bear the burden of showing likely harm to competition. A mere change in industry structure is insufficient to satisfy this burden. Given what courts have required, it is difficult to see how the DOJ could make such a showing in this instance. In addition to the aforementioned efficiency gains, the transaction does not eliminate a uniquely disruptive competitor, does not create control over a critical input, and does not produce a firm with a dominant market share. It combines two challenged players in a market where the most powerful competitors lie outside the traditional studio system.

Antitrust cases turn on evidence, not headlines. Headlines may focus on the size of a transaction, but sound legal analysis rightly rests solely on its competitive impact. Here the evidence points in one direction: a transaction that is unlikely “substantially to lessen competition.”

Theodore A. Gebhard is a former Antitrust Division economist and Federal Trade Commission senior attorney. He also was an antitrust practitioner at the Washington, D.C., office of a large international law firm and now consults on competition policy issues.  See more about Mr. Gebhard here.

Fighting an AI “Monopoly” Where None Exists

Theodore A. Gebhard

In a Wall Street Journal op-ed, former U.S. Attorney General William P. Barr complains that regulators have been “asleep at the switch over the past 25 years” with regard to oversight of Big Tech companies. (“Big Tech’s Budding AI Monopoly,” 05/28/2024.) Now Mr. Barr is especially concerned about these companies’ efforts to develop artificial intelligence. According to Mr. Barr, Big Tech companies not only dominate primary markets but also stifle the ability of smaller competitors to emerge in adjacent markets by, among other anticompetitive practices, pre-empting entry into those markets. He fears that the Big Tech companies will eventually monopolize the entire AI space.

The former Attorney General is unduly alarmed. What’s worse, he espouses unsound competition theories that, if allowed to undergird regulatory and antitrust enforcement, could result in reduced innovation and ultimately harm U.S. economic interests. To add our views to the discussion, my friend and former colleague, Asheesh Agarwal, and I submitted a Letter to the Editor, which the Journal published on June 7 (print edition) and can be accessed here. The published version is slightly shortened. I reproduce our original letter directly below.

—————————————————————————————-

On AI, General Barr Fights the Last War

In his recent op-ed, former Attorney General William Barr embraces outdated competition theories that could reduce innovation and undermine U.S. economic interests.  (“Big Tech’s Budding AI Monopoly,” 05/28/2024.)

First, Mr. Barr suggests that three companies, Microsoft, Google, and Amazon might establish an AI monopoly because they have market power in related sectors. Of course, it’s absurd to treat three fierce competitors as a “monopoly” of any sort, but setting that aside, Mr. Barr ignores many other AI competitors. Meta is spending tens of billions on AI and Elon Musk’s xAI is valued at $24 billion. And that’s just at home; the Senate estimates that China significantly outspends the U.S. on AI.

Second, Mr. Barr suggests that large companies shouldn’t invest in related markets because their resources and expertise might give them a competitive advantage. Queue Louis Brandeis and the Big is Bad crowd. Does Mr. Barr want large companies to reduce investment or commit to only internal innovations, without any acquisitions or hiring? Especially in dynamic tech markets, investment produces uncertain returns; to rely on antitrust enforcers to foresee the longer-term competitive effects assumes a crystal ball yet to be discovered. 

Finally, and surprisingly, Mr. Barr embraces the FTC and European Commission as champions of competition. As these pages have pointed out regularly, both agencies have promoted aggressive theories of antitrust liability grounded in speculative theories rather than evidence of harm to competition, usually targeting innovative American companies.

Instead, policymakers should encourage investment from all quarters — and avoid artificial constraints.

Asheesh Agarwal and Theodore A. Gebhard

The WSJ Continues Its Antitrust Errors

Theodore A. Gebhard

In a February 16 editorial, the Wall Street Journal comments on the Justice Department’s antitrust case against Apple in which the DOJ ultimately prevailed in a verdict handed down in 2013. 952 F. Supp. 2d 638 (S.D.N.Y. 2013) (“All Along the Apple Watchtower”) The thrust of the editorial speaks to the activities of the Special Master appointed by the trial judge, Denise Cote. Judge Cote appointed the Special Master to oversee Apple’s compliance with her Final Order. The Journal contends that the Special Master’s oversight activities have extended well beyond what is necessary to assure compliance and, in so doing, have imposed undue burdens on Apple. On these points, the Journal is correct.

The Journal, however, also comments on Judge Cote’s holding in which she found that Apple and five e-book publishers entered into an illegal agreement that resulted in higher e-book prices to consumers. Here the Journal, mischaracterized the agreement, and hence the court’s holding, by claiming that the agreement was simply intended to make it possible for consumers to read e-books on Apple’s I-Pad. This is a claim that the WSJ has previously made in editorials arguing that the DOJ is merely doing the bidding of Amazon, the largest sellers of e-books. (See my earlier Post here.) Whether or not there is a grain of substance to that claim is besides the point, however.

To add my own comments on the matter, I submitted a Letter to the Editor, which the Journal published on February 25 under the title, DOJ Is Right About Apple e-Books, and which I reproduce below.

——————————————————————————————

The Journal mischaracterizes the trial court’s ruling in the Justice Department’s antitrust case against Apple and five e-book publishers (“All Along the Apple Watchtower,” Review & Outlook, Feb. 17). Specifically, you say that the court found that “allowing consumers to read e-books on the iPad was an antitrust conspiracy.” Not so. The case was about agreements on a vital dimension of competition, namely price. It has long been a universally accepted proposition in both law and economics that agreements among competitors to set and regulate prices are anticompetitive. Thus, the court correctly found the agreements illegal. It is no justification that the agreements were intended to wrest control over the pricing of e-books from Amazon, the dominant player in e-book retailing.

Legitimate competition erodes a dominant firm’s position by offering consumers better prices or products. Here consumers received a worse deal. Indeed, the court found that the agreements led to an almost immediate 18% increase in the average price of e-books—hardly a boon to consumer welfare.

You are on more solid ground as regards the activities of the special master appointed to oversee Apple’s compliance with the verdict. (The publishers settled with DOJ before trial.) Even losing antitrust defendants deserve fairness and a reasonable post-verdict opportunity to show good faith efforts to comply with a court order. As you describe, there is ample evidence that this special master has overreached by placing burdens on Apple that are unnecessary to assuring adherence to the final judgment. As you urge, the Second Circuit should sack the special master or at least rein in his powers.

Theodore A. Gebhard

The Wall Street Journal Has Antitrust Law Wrong

Theodore A. Gebhard

In a recent editorial, the Wall Street Journal claimed that the Department of Justice was doing Amazon’s bidding in the DoJ’s antitrust suit against e-book publishers Apple, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster.  The DoJ alleges that the defendants conspired unlawfully to set prices for e-books. Amazon is the largest seller of e-books. Whether or not DoJ’s civil suit and Amazon’s interests are aligned is beside the point. The real issue is what the law says. In this regard, I found the editorial to be flawed in its understanding of antitrust law and analysis and submitted the following letter to the editor stating my position.

—————————————————————————————-

Although the Journal’s views on antitrust matters are usually spot on, your editorial “Amazon Loves Government” is that rare exception.  (Review & Outlook, Sept. 9, 2014)  You claim that the government is Amazon’s “chief patron” in its dispute with e-book publishers over the control of e-book pricing.  In point of fact, it is not government that favors Amazon, it is the law.  Antitrust law comprises the rules of the competitive game and exists to protect competition, not competitors. 

To be sure, the history of antitrust enforcement is replete with failures to meet this goal with many examples of false positives grounded in flawed economic theory or inadequate evidence of competitive harm.  As a former DOJ antitrust economist and FTC lawyer, I have personally witnessed several such examples.  Regrettably, the risk of false positives still exists, particularly when the enforcement agencies push the boundaries of antitrust liability theories.  The FTC’s “pay for delay” generic drug entry cases, for example, beget such risk.

By contrast, the Amazon matter is grounded in the universally accepted proposition in both law and economics that agreements among competitors respecting a vital dimension of competition such as price or service are anticompetitive.  As you point out, the current dispute with Hachette is an outgrowth of the DOJ litigation against five publishers and Apple alleging such anticompetitive agreements.  Although the publishers settled with DOJ without admitting guilt, a federal court found Apple guilty of participating with the publishers in a horizontal price-fixing conspiracy.  According to the court, the result was an almost immediate 18% increase in the average price of e-books.  One can only conclude that Amazon’s presence was a boon to consumers.

Theodore A. Gebhard

Evolutionary Understanding of the Sherman Act

Theodore A. Gebhard

In a series of letters published by the Wall Street Journal (Rockefeller, July 10; Boudreaux, July 14, and Libert, July 19), the authors discuss the original intent of the Sherman Act and contemporary policy.  In his brilliant polemic, The Antirust Religion, Edwin Rockefeller correctly questions the arrogance of mainstream economic “science” that undergirds modern antirust enforcement.  Boudreaux speaks to late 19th Century Congressional hostility to emerging large scale industrial enterprises and their efficiencies. Libert notes Senator Sherman’s concern about high prices to consumers. 

Senator Sherman’s original bill sought to prohibit “all arrangements, contracts, agreements, trusts, or combinations which tend to prevent full and free competition … or which tend to advance the cost to the consumer.”  That bill, reported out from Senator Sherman’s Finance Committee, was plainly intended to be “positive” law.  The actual Sherman Act, however, was drafted and reported out by the Senate Judiciary Committee and was intended to be a federalized version of the common law.  Agreements and combinations were unlawful to the extent that they were unreasonable under common law principles.

Although in the early years, the Supreme Court struggled to find its bearings on this point, the 1911 Standard Oil and American Tobacco decisions ultimately articulated the common law rule of reason.  It was short lived, however.  The sea change (which none of the authors above mentions) that brought about modern judicial interpretation of the Sherman Act was the Supreme Court’s 1918 decision in U.S. v. Chicago Board of Trade.  In that case, Louis Brandeis, writing for the Court, abandoned the common law and created a new instrumentalist rule of reason that sought to weigh pro- and anti-competitive effects.  Throughout most of the rest of the 20th Century, economists were ready, willing, and eager to ply their asserted science, with all of its assumptions and abstractions, to help enforcers and courts divine the truth about the competitive effects of business conduct.  Whether or not this development was positive or negative remains an open question.