The tech deal behind DOJ drama

Politico

6 days ago

A major deal between two tech companies is threatening to tear the Department of Justice's antitrust division apart.
The DOJ this week reportedly fired two senior antitrust officials, and the story so far has been insidey, gossipy and shrouded in mystery about intra-Republican tensions.
The Wall Street Journal reports that the officials — Roger Alford and William Rinner, who had served in the department during President Donald Trump's first term — were fired for insubordination after weeks of discord within the division about a corporate acquisition. The firing also calls into question the future of antitrust chief Gail Slater's tech enforcement agenda.
Curiously, the deal at the center of the drama was — if anything — a run-of-the-mill antitrust case. Hewlett Packard Enterprise, a wireless network company, proposed to acquire another internet services company called Juniper Networks in 2024, for $14 billion.
Juniper was known for its innovations in incorporating AI into wireless systems, and like seemingly every other company in the tech world, HPE wanted to build more AI into its business. But the purchase rang antitrust alarm bells. Prior to the merger, HPE and Juniper were the second and third largest companies in the wireless network market respectively, behind Cisco.
The DOJ sued in January to block the merger — its first antitrust challenge under Trump's second term. And then, abruptly, it dropped the case and settled in June, after winning some relatively small-bore concessions from the companies.
According to the Journal, the firings were the result of an internal feud — and specifically, an argument over the potential influence of Trump-connected lawyers hired by HPE. This followed reporting by CBS that DOJ higher-ups had overruled Slater and her antitrust division to accept HPE's settlement offer and drop the suit.
The department, in a statement, wrote to DFD that the decision 'was based only on the merits of the transaction.' An official at the White House told DFD that the allegations of political meddling in the deal were 'inaccurate and untrue,' and that it had not held a meeting regarding HPE in the past several weeks.
So how did the HPE lawsuit end up the source of such internal drama? Legal experts told my colleague Nate Robson, when it was filed in January, that this was a pretty cookie-cutter case. The issue instead is the way that it ended, when the DOJ settled the case less than a week before it was set to go to trial.
'Settling close to trial isn't unusual,' said William Kovacic, chair of the FTC under President George W. Bush. 'Settling on weak terms is.'
When the DOJ filed its challenge to the acquisition with a federal court in San Francisco, the department seemed to have a strong case. It contended that the two companies were fierce competitors. The complaint noted that HPE had been lowering prices and improving products to maintain its lead — the kinds of benefits to consumers that antitrust law is supposed to promote.
Kovacic told DFD the department had convincingly alleged that the merger could lead to a 'significant increase in concentration' of power in a 'properly defined relevant market' in a way that would harm consumers. 'That usually is enough to create a presumption of illegality,' he said.
HPE hired two Trump-connected lawyers to press its case, according to both the Journal and CBS. In June, the DOJ abruptly settled with the two companies. The settlement stipulated that the merger could go through if HPE divested its Instant On business for campus network services. It would also have to license Juniper's AI Mist system for local wireless networks.
Some argue that those terms aren't quite commensurate with the DOJ's original concerns. 'The complaint on its face tells a pretty general story about harm to competition in the wireless solution market, including pretty big enterprise customers,' said Daniel Francis, who served as a deputy competition director at the Federal Trade Commission during Trump's first term. 'The proposed solution package seems much narrower.' (Francis, who worked with both Alford and Rinner during Trump's first term, called them 'straight shooters.')
The Instant On business primarily serves certain small and medium-sized organizations, not larger ones. Francis added that the particular AI application was only one component of the broader competitive concerns.
These legal oddities have fueled even more granular suspicions about politics driving the decision. A former official in the department's antitrust division pointed DFD to the signature page of the settlement agreement, which does not include any career antitrust attorneys.
'The moment I saw it, the moment many of my other former colleagues saw, it screamed [to us] as something strange happened here,' said the official, who asked not to be named due to confidentiality restrictions.
While this may indicate that career antitrust officials didn't have much say in the matter, it's at least plausible that there were solid, non-political reasons. Axios reported on Wednesday that intelligence officials intervened to persuade the DOJ that the merger would be critical for competing with China-backed companies. It's unclear how exactly this would impact national security, though HPE does contract with the Department of Defense.
However, this looks to some like a fig leaf. Douglas Farrar, an FTC official during the Biden administration, wrote on X that the intelligence community in his experience would 'never step in to stop a regulator from blocking an illegal deal.'
Kovacic said there needs to be a strong national security case for it to play a major factor.
'You've got to explain in what way the merger implicates those concerns,' said Kovacic. 'You cannot get your deal through simply by coming in and saying, 'China, China, China.''
The White House doubles down on AI exports
One of Trump's top tech officials made the case Wednesday for pushing American AI technology abroad despite the risks of it falling into the hands of foreign adversaries, POLITICO's Mohar Chatterjee reports.
Michael Kratsios, director of the White House's Office of Science and Technology Policy, argued at a national security event that increasing AI exports is the best way to compete with China.
'Everyone in the world should be using our technology, and we should make it easy for the world to use it,' Kratsios said during a speech at the Center for Strategic and International Studies. He added, 'If most countries around the world are running on an AI stack that isn't American and potentially ones of an adversary, that's a really, really big problem.'
Krastios further asserted that security measures like tracking shipments and verifying the identities of customers could keep restricted U.S. technology out of China's hands.
Kratsios's comments come as critics raise concerns over the administration's decisions to send chips to build data centers in the Middle East, and resumed sales of Nvidia's H20 chips to China.
EU deal leaves open questions on tech rules
After striking a trade deal Sunday to avoid a battle of tariffs, the European Union and U.S. now have differing views on how it would affect tech regulations, POLITICO Europe reports.
In broad strokes, the handshake deal places a 15 percent tariff on goods from the EU and calls for multi-billion-dollar purchases of U.S. military and energy products. Not mentioned in the agreement to the chagrin of some Republicans and tech leaders are strict EU laws that restrict AI development, content moderation and data collection.
European Commission President Ursula von der Leyen had previously said such tech regulations were not up for debate, and an EU official told POLITICO Monday that the bloc had not made any commitments regarding them. A day later, U.S. Commerce Secretary Howard Lutnick spoke of the EU's 'attack on our tech companies' on CNBC. 'That's going to be on the table,' he said.
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