Ediberto Roman: The HPE-Juniper Merger Should be Approved

Roger Alford, a former Trump Department of Justice aide has recently joined a minority of U.S. Senators criticizing Attorney General Pam Bondi’s decision to settle the HPE-Juniper antitrust case, allowing the two companies to merge. The controversy surrounding this most discussed antitrust case of summer has focused on whether competition in the market for enterprise networking will suffer if the merger goes through.

During an address to the Technology Policy Institute in Aspen, Colorado, on August 18, Alford said he “hope[s] the federal court overseeing the Justice Department’s proposed resolution blocks the HPE/Juniper merger,” which Alford believes was lobbyist motivated.

Blocking it would be mistaken. But here’s the problem: whether a merger is promoted by “lobbyists” is simply not the basis to reject a merger on antitrust grounds. The focus of antitrust laws is whether the corporate acts harm competition, not whether one group or another support a merger. 

Corporate lobbying is standard practice in Washington, and any advocacy efforts that occurred in this case should not and does not disqualify an otherwise sound merger. The appropriate antitrust inquiry here is whether the merger creates a monopoly that will harm competition.

The market data in this case suggests it won't. Under United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001), the D.C. Circuit made clear that antitrust enforcement focuses on whether a merger substantially lessens competition, not whether it merely increases the scale of competitors. 

Moreover, the complaints concerning the merger here do not come close to antitrust violations. The DOJ’s own complaint notes that Cisco, HPE, and Juniper collectively dictate about 70% market sales in the “enterprise wireless networking solutions” market. But Cisco is a competitor, not part of HPE or this merger. Cisco holds 36.5%, HPE 27%, and Juniper 6.5%. Even if the HPE-Juniper merger proceeds, the combined HPE-Juniper market share represents half (35%) of the traditional 70% of the relevant market that approaches being considered market power for antitrust purposes. Thus, the post HPE-Juniper merger would merely result in a stronger competitor to Cisco in a healthy competitive market.

Moreover, even if somehow market power was achieved as a result of HPE-Juniper merger, which it does not, there is no evidence of anticompetitive conduct from these companies, which is required to establish an antitrust violation. In other words, market power alone does not violate antitrust laws. Anticompetitive conduct is also needed. As the classic antitrust adage observes, in a free market system, one can and should build a better mousetrap, but one should not be condemned for doing so, especially if no anticompetitive practices were undertaken. Accordingly, in the HPE-Juniper context, the merger will neither result in market power nor was it resulting from anticompetitive conduct that would violate our antitrust laws.  

Critics argue the deal could harm smaller competitors. Nonetheless, as the Wall Street Journal editorial board observed, these so-called “small fry” include companies such as Fortinet, with a market capitalization of $82.6 billion, and Arista, at $149.2 billion. Both companies already compete across a range of technologies with HPE ($28 billion) and Juniper ($11.8 billion). Competition remains fierce among several well-capitalized players. This aligns with precedent in Brown Shoe Co. v. United States, 370 U.S. 294 (1962), in which the Supreme Court ruled that the fact that several competitors exist in the market as well as the opportunity for entry to the market eases antitrust fears.

The DOJ also cites a narrow U.S. submarket for high-end enterprise wireless networking solutions, where HPE’s Aruba and Juniper’s Mist product lines directly competed. In this view, the merger would eliminate one of the few close rivals to Cisco, potentially reducing choice and innovation for certain enterprise customers. The subsequent DOJ settlement addresses these concerns by requiring HPE to divest its Instant On line and license Juniper’s Mist AI software to independent competitors, preserving competition in this specific segment. 

This narrow market segment represents just a fraction of the overall enterprise networking business, and overall, the merger positions HPE-Juniper to be a stronger competitor to Cisco, which would benefit enterprise customers through more fierce competition at scale. In United States v. Oracle Corp., 331 F. Supp. 2d 1098 (N.D. Cal. 2004), the court acknowledged that potential efficiencies as well as the existing presence of multiple robust competitors may trump theoretical losses due to consolidation.

Further, examining the merger within the global competitive framework only creates a stronger case to support the merger. This global perspective has been largely absent from much of the public debate. Huawei, the Chinese telecom giant banned in the U.S. over national security concerns, controls roughly 30% of the global telecom market, which is a huge national security threat to the United States as well as to its allies. By contrast, the number one American player holds just 6% of the global market, Juniper has 2%, and HPE does not even register a notable share. When viewed globally, the competitive concerns look overblown: U.S. companies need scale to compete effectively with Huawei and other international rivals. 

Courts have also recognized that antitrust thoughts can include consideration of extraterritorial competitive dynamics, as noted in FTC v. Staples, Inc., 970 F. Supp. 1066 (D.D.C. 1997), where potential global competition factored into whether a domestic merger substantially lessened competition.

National security considerations should be central to antitrust decision-making, particularly in high-tech sectors. Enterprise networking products form the backbone of vital infrastructure, from cloud computing to government networks. If American businesses stay fragmented, they will neither create next-generation networking technologies nor use them in large volumes, making domestic markets more import-intensive, including from adversaries. For this reason, the U.S. intelligence community urged the DOJ to support the HPE-Juniper merger.

Accordingly, the HPE-Juniper merger is an uncomplicated case: It does not substantially lessen competition. The world market remains vigorous, with more than one competitor to fight for customers and to drive innovation. National security and U.S. technological leadership, meanwhile, demands that domestic firms achieve sufficient scale to compete globally. DOJ approval of the merger is consistent with antitrust ideology as well as strategy. The federal court reviewing the settlement should approve the deal.

Professor Ediberto Roman is a prolific scholar publishing in the country's top newspapers, blogs, and law journals. His primary areas of scholarly focus include constitutional law, administrative law, business regulation, antitrust, and immigration.  He is frequently asked by the media and government officials alike to opine on important issues of the day. This Expert Opinion is exclusive to Broadband Breakfast.

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