Capitol Blending

Democratic control of Congress probably won't roil the M&A waters — much.

January’s airline-merger hearings by the Senate Commerce, Science and Transportation Committee seemed to signal a new sheriff in town. Daniel Inouye, the Hawaii Democrat installed as chairman after Republicans lost control of both houses of Congress last November, presided while the CEO of Delta Air Lines attacked US Airways’s hostile bid for his company and the US Airways CEO defended it. The questioning strongly suggested that the committee didn’t much like the proposed deal, which US Air later withdrew.

At an earlier hearing, Senate Judiciary Committee chairman Patrick Leahy (D–Vt.) cast a stern eye on brand-name drug-makers’ attempts to delay competition from generics. Staffers suggested that the bidding war for pharmaceutical distributor Caremark Rx — being waged between Express Scripts and drugstore chain CVS — was ripe for a review by Judiciary’s antitrust subcommittee, whose new chairman, Herb Kohl (D–Wis.), is particularly interested in how deals could affect drug competition and pricing. And some predict incoming committee chairs will put other industries, including energy, media, and telecommunications, under the microscope.

“There are lots of ways that Congress can touch a merger,” says Bruce Hoffman, former deputy director of the Federal Trade Commission’s Bureau of Competition and now a partner with Washington, D.C., law firm Hunton & Williams. If lawmakers get tough on perceived anticompetitiveness in certain fields, “you may see reviews in those areas slow down,” he adds. “The agencies don’t want to be too far out of step with Congress.”

Bipartisan Islands

For the most part, though, longtime Capitol Hill watchers predict that any changes in mergers-and-acquisitions oversight will be touches rather than knockout blows.

When it comes to how government regulators act, “I think the enforcement decisions will stay put,” says Roger Fones, a former member of the Department of Justice’s antitrust division and now a partner with law firm Morrison and Foerster. “The fact that Congress has changed doesn’t really change the administration on the DoJ side.”

The reason is that congressional committees, either under Democratic or Republican control, often conduct themselves as balanced panels whose main function is to let the public see what is going on in the executive branch — whether in antitrust matters or other areas. (Both Republicans and Democrats at Senator Inouye’s January hearing expressed doubts about a US Air–Delta deal, for example.) Furthermore, the DoJ, the FTC, the Federal Communications Commission (FCC), and other groups with statutory power to block mergers don’t view Congress as much of a watchdog.

“Antitrust agencies are not very politically responsive to either end of Pennsylvania Avenue, and merger analysis does not change much from administration to administration,” according to Hoffman, who agrees that “overall, there’s not likely to be any significant change in enforcement policy.”

Explains one senior staffer on the antitrust subcommittee of the Senate Judiciary Committee: “In a very partisan Congress, we have been able to be a little island of bipartisanship.” And even as relationships between majority and minority members are still being worked out on Senate and House panels, other committees are striving for much the same balance.

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