Fair Play: The Deal of the Year Will Be Vertical

By Liz Crampton – Bloomberg Law
January 16, 2018
The merger wave that started in 2015 and spilled into following years mostly involved blockbuster deals of direct competitors. We saw rapid consolidation in agriculture, pharmaceuticals, and retail.

But that appears to be changing. This year promises to bring tough legal questions about the bounds of antitrust enforcement and what types of arrangements can harm competition as companies in varying industries absorb one another in more creative combinations.

Executive boardrooms and companies are experimenting with unusual pairings, especially in health care. CVS Corp. wants to buy insurer Aetna Inc., and UnitedHealth Group Inc., the biggest U.S. health insurer, will acquire doctors group DaVita Medical Group. These deals could test how antitrust officials evaluate adjoining markets with little overlap, and companies might be asked to prove that their proposed tie-ups don’t give them the ability to exercise inappropriate leverage over health services.

Then there’s the media. The biggest antitrust event this year is the Justice Department’s court trial, beginning in March, to stop AT&T Inc. from merging with Time Warner Inc. It is widely considered the most high-profile antitrust case in decades. The outcome could determine whether antitrust cops can stop future “vertical” transactions that don’t involve direct competitors.

If the judge believes the government’s case is weak, it could be a virtual green light for any creative deal between companies in adjacent markets. If the judge accepts the DOJ’s argument that the merged company would hold too much sway over must-have content like HBO, attorneys putting together other unpredictable transactions (Amazon-Target, anyone?) probably need to take a hard look at their plans.

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