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For more than two years, the Justice Department’s Antitrust Division has been trying to shake the perception that it’s been snakebitten. In this case, the fangs, as it were, were those of Judge Vaughn Walker and his 2004 opinion clearing the way for software maker Oracle Corp.’s merger with PeopleSoft Inc. over the objections of the Justice Department’s trust-busters. Since that decision, in which Walker found that the Justice Department didn’t prove that the deal was anti-competitive, the department hasn’t gone to trial to block a proposed merger. In the past year alone � the fourth-largest in history for mergers and acquisitions, according to Thomson Financial � AT&T Inc. received the Justice Department’s unconditional go-ahead to acquire BellSouth Corp. in a deal that creates a telecom behemoth with $117 billion in revenue; Whirlpool Corp. nabbed Maytag Inc., merging the first- and third-largest makers of home appliances; and agriculture-technology giant Monsanto Co. announced a bid to buy Delta & Pine Land Co., the country’s largest cottonseed producer. “Ever since the Oracle-PeopleSoft decision, the common observation has been that the division has been fearful of taking strong positions against mergers,” says Albert Foer, who heads the American Antitrust Institute, echoing a view privately expressed by a number of antitrust lawyers. It’s a perception that Thomas Barnett, the head of the Antitrust Division, isn’t happy about. “I don’t agree with it,” Barnett says, before ticking off what he views as the division’s major merger challenges over the past year: a pretrial settlement with a dairy company protecting competition in milk sales to a number of schools in Kentucky and Tennessee, a consent decree with Mittal Steel Co. requiring it to sell a Canadian tin plant as part of its purchase of Arcelor S.A., and another consent decree requiring the sale of six generating plants as part of a merger between two power companies � a deal later blocked by New Jersey state officials. Those actions, of course, are hardly of the magnitude of Oracle-PeopleSoft, the challenge to which Barnett helped oversee as a deputy to then-antitrust chief R. Hewitt Pate. And Barnett, who was confirmed as the division’s assistant attorney general in February, is sensitive to criticism that his division hasn’t been vigorously protecting consumers or playing an active role in public policy. Late last month the Justice Department issued a release touting the Antitrust Division’s achievements during his first year on the job. (Before his confirmation, Barnett served as the division’s acting chief for several months.) The release highlights the division’s continued crackdown on international price-fixing cartels (which netted nearly $500 million in criminal fines in 2006), its streamlining of the merger review process, and the division’s recent spurt of activity before the Supreme Court (the high court has granted cert in seven antitrust cases over the past two terms, an unusually high number) as evidence that its lawyers have been anything but inactive. Barnett also says the division is close to finishing a long-overdue report on antitrust and intellectual property law with the Federal Trade Commission, an agency whose views in that area the Justice Department publicly critiqued in a Supreme Court brief last summer. Despite those activities, it’s the division’s merger-enforcement activity � or relative lack thereof � that is most notable to many antitrust lawyers in private practice. Behind the cautious approach, say these practitioners, is more than just conservative economic thinking about the role of government in the marketplace, but a fear of bringing another big case to trial and losing. “People don’t like to lose big cases,” says Renata Hesse, who worked on the Oracle-PeopleSoft case before leaving the Justice Department for Wilson Sonsini Goodrich & Rosati last year. “When you lose a big case, it makes you step back and look at how you’re doing things.” “The buzz around town was that, after losing the case against Oracle-PeopleSoft that had strong customer support, the division got very worried about its ability to put on an effective merger case at trial,” says William Randolph Smith, who heads the antitrust group at Crowell & Moring. Others are more sanguine in their assessment. “It seems pretty clear that the Antitrust Division is much more cautious in challenging mergers than they have been at times in the past,” says Donald Russell, a former Justice Department antitrust lawyer with Robbins, Russell, Englert, Orseck & Untereiner. “[But] I certainly don’t think that the caution that they’re showing now is out of the mainstream.” Barnett argues that the lack of trials challenging mergers is an indication that the government is succeeding in its efforts to educate companies about the types of mergers likely to pass muster. He also says most concerns can be dealt with through less confrontational means, such as consent decrees. Still, nothing would prevent the department from going to trial if need be. “We apply the law,” he says. “And if we think there’s a problem, we pursue it.” Washing the market One case in which the Antitrust Division’s legal and economics staff saw a problem was in Whirlpool’s $1.8 billion purchase of Maytag, a deal proposed in August 2005. The newly combined company, which produces much of Sears’ Kenmore line as well as the brands Jenn Air, KitchenAid, Amana, and Magic Chef, controls as much as 70 percent of the U.S. market for large home appliances such as washers and dryers � the kind of market share that has typically drawn government intervention. But Barnett decided to approve the deal, despite the staff’s recommendations. His reasoning: Other appliance manufacturers, particularly in Asia and Europe, were entering the U.S. market and were likely to generate sufficient competition to prevent consumers from being harmed by the Maytag acquisition. “We looked at who are the players in the market, was entry possible, if entry had already occurred how quickly could it expand,” he says. “The ultimate decision, which I take responsibility for, was that this transaction was not likely to substantially lessen competition.” “I think what the Maytag-Whirlpool decision does is send a clear message to companies that mergers that wouldn’t have gotten through several years ago should be reconsidered,” says David Balto, an antitrust lawyer who was policy director of the Federal Trade Commission during the Clinton administration. “The Oracle-PeopleSoft case has clearly had an effect on the Justice Department’s ability to litigate cases.” Although his critics see a link between the defeat in Oracle-PeopleSoft and the decision not to challenge Whirlpool-Maytag, Barnett is quick to point out that last year the Justice Department initiated 16 merger-enforcement actions � more than the previous two years combined. Still, none of those actions resulted in the DOJ going to trial, and last year’s figures are down substantially from 2000, when the DOJ challenged 48 mergers. Barnett’s decision in Whirlpool-Maytag was no doubt noted by executives for Monsanto, the world’s largest crop-biotechnology company, and Mississippi-based Delta & Pine, a leading producer of cottonseeds. In August 2006, Monsanto announced plans to buy Delta & Pine. The acquisition would give Monsanto a much larger platform with which to distribute its own varieties of hybrid and genetically altered seed cotton through control of a company with more than half the market for such seeds and, potentially, a dominant position in a rapidly growing industry. What’s significant about the deal is that the two companies first attempted it in 1999. Monsanto withdrew its merger offer to Delta & Pine that year, citing regulatory opposition after the Justice Department spent 18 months investigating the deal. “The Justice Department put some pressure on, and the deal fell through,” says the American Antitrust Institute’s Foer, whose organization has voiced concern about the merger. “But since that time the attitude towards mergers has become more lenient, and one doesn’t really know how far you can push these folks.” Barnett says that because the merger is pending, he can’t comment directly on the Monsanto-Delta & Pine coupling. But when questioned about the deal, he offers a clue to his thinking by referencing the Whirlpool-Maytag acquisition and raising the possibility that shifting market conditions could lead the Justice Department to reverse a stance taken years before. “Maytag-Whirlpool, that was a very dynamic market,” he says. “If the merger had been attempted five years ago it would have been in different market circumstances and might have led to a different result.” Awaiting the other shoe Before joining the Justice Department in 2004, Barnett, 44, had a successful antitrust practice at Washington’s Covington & Burling. In many regards, say those who have worked in the division, his approach to antitrust law differs little from that of either of his two predecessors in the job during the Bush administration: Pate, now in private practice at Hunton & Williams, and Charles James, now general counsel of Chevron Corp. One initiative Barnett has pushed is streamlining the division’s merger reviews � a process which companies have criticized for being lengthy and often opaque. “Most mergers are beneficial or at least don’t harm consumer welfare,” Barnett says. “Our goal on the merger-enforcement side is to improve the efficiency by which we identify those relatively few transactions that do threaten harm to consumer welfare.” Last month, in a move widely praised by antitrust lawyers who represent large companies, the Justice Department announced revisions to the process, placing limits on the amount of documents companies are required to produce. “I’m a big believer in transparency,” Barnett says. “And we try to be as transparent as possible.” With Democrats now in control of Congress, Barnett will have the opportunity to demonstrate that commitment to transparency. “We will make increased oversight of the antitrust agencies a priority,” says Jeff Miller, the Democrats’ chief counsel on the Senate Judiciary Committee’s Antitrust Subcommittee. Barnett says he welcomes the opportunity to testify in congressional hearings, where he’ll no doubt have further opportunity to discuss exactly when the Justice Department will be taking a stand as aggressive as it did in the Oracle-PeopleSoft case. Whether pressure from Congress will push the department into opposing a major merger in 2007 remains to be seen. But in the meantime, antitrust lawyers are hoping it’s not their clients who will be on the receiving end when the other shoe drops. “I’m getting calls from clients saying, �I want to do this deal and I don’t want you to tell me there are any problems, because there is no antitrust enforcement in Washington,’ ” says one D.C.-based antitrust lawyer, who spoke on condition of anonymity out of fear of retribution from the Justice Department. “ I would assume that they’re looking for a case to bring just to show they’re alive.” Editorial Assistant Attila Berry contributed to this article. Jason McLure can be contacted at [email protected]

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