Courts Reject Two DOJ Merger Challenges as Another is On Trial


A brief setback for Biden’s war on anticompetitive deals?

The number of mergers globally in 2021, according to PwC, was the biggest on record with “more than 60,000 publicly disclosed deals breaking $5 trillion in value for the first time.” The consultancy predicted headwinds would slow deals down this year (e.g., inflation, interest rates, energy supplies caused by Russia’s invasion of Ukraine), and says they are even stronger than forecast.

Still, the world of large corporate mergers is buzzing, and some of it is not cooperating with President Biden’s 2021 mandate of cracking down on anticompetitive deals.

Courts recently rejected two major DOJ merger challenges: United States Sugar Corporation’s attempt to purchase its rival Imperial Sugar and United HealthGroup Inc.’s attempt to purchase Change Healthcare Inc. Both purchases were given a green light after courts thwarted the DOJ’s opposition. These are just a couple of the challenges brought recently by the DOJ in an effort to curb mergers that the Biden administration says are harmful to consumers, employers, innovation, and free and fair markets. Meanwhile, a bench trial of a third big challenge – this one dealing with an American Airlines / JetBlue “alliance” – is under way in federal court in Boston.

United Sugar Corporation

In a one-page ruling (the full opinion was under seal for third-party confidentiality reasons) released on Sept. 23, 2022, U.S. District Judge Maryellen Noreika of Delaware rejected DOJ’s attempt to block the proposed $315 million acquisition of Imperial Sugar by larger competitor United States Sugar Corporation. Florida-based United Sugar is the world’s largest vertically integrated cane sugar milling and refining operation. The DOJ sued in November 2021 arguing that consolidating these two large Southern-based sugar companies would eliminate competition, drive-up sugar prices and ultimately force reliance on foreign providers.

While the government could appeal, U.S. Sugar released a statement saying its acquisition of Imperial Sugar will enable them to “increase sugar production, enhance local Georgia economy and benefit our employees and customers.” The DOJ released a statement saying, “further consolidation in the market for this important kitchen staple will have real world consequences for millions of Americans.”

United HealthGroup Inc.

Another, much larger acquisition, was also given the green light earlier this week when Judge Carl Nichols of the District of Columbia cleared the way for the purchase of healthcare analytics company Change Healthcare by United HealthGroup Inc. While size was certainly a part of the discussion, the real concern in this case brought by the DOJ was the access to competitor healthcare costs and claims that may result in higher prices and further squeeze competition. Similar to the United Sugar Corporation merger, the DOJ hinted at an appeal in their response.

When originally announcing the lawsuit, Attorney General Merrick Garland said, “If America’s largest health insurer is permitted to acquire a major rival for critical heath care claims technologies, it will undermine competition for health insurance and stifle innovation in the employer health insurance markets.” The administration specifically called out the healthcare industry as one that presents antitrust concerns.

United HealthGroup was obviously pleased with the decision, stating their desire to move quickly. This includes the sale of Change Healthcare’s claims auditing subsidiary, ClaimsXten, to private equity group TPG Capital.

A July 2021 executive order by President Biden on Promoting Competition in the American Economy made it clear the administration, specifically the DOJ and FTC, would vigorously enforce antitrust laws in a wide-range of existing and emerging industries. President Biden noted why vigorous enforcement and crackdown of existing monopolies was so essential to the economy especially in the wake of COVID-19:
“What we’ve seen over the past few decades is less competition and more concentration that holds our economy back. We see it in big agriculture, in big tech, in big phrama. The list goes on. Rather than competing for consumers, they are consuming their competitors. Rather than competing for workers, they are finding ways to gain the upper hand on labor. And too often, the government has made it harder for new companies to break in and compete.”

Even though these two highly visible cases were lost (for now), the aggressive enforcement and review of potential antitrust violations continues to be a priority of the administration.

Up Next: American Airlines / JetBlue Alliance

Strategically referred to as an “alliance” rather than a merger, North America’s largest air carrier, American Airlines, announced a Northeast alliance with JetBlue to share revenue access, interchangeable loyalty programs, and airport gate shares in New York and Boston. The government’s challenge to the alliance, which started roughly 18 months ago, is now on trial before U.S. District Judge Leo T. Sorokin in Boston for being much more than an alliance. The government contends that this is effectively a partial merger and reduces competition. The airline industry is a frequent target for antitrust claims, especially under the Biden administration. The three-week trial just started but it may be months until Judge Sorokin renders a decision.

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