Trust in Justice

Exchange antitrust: The collapse of the joint Nasdaq OMX and IntercontinentalExchange bid for NYSE Euronext may signal that the US Justice Department is getting tougher. The merger of America’s two main listing venues always looked like an uphill battle from a legal point of view. But the DoJ’s quick and decisive move to block the deal suggests a long-promised hard line.

President Barack Obama vowed to reverse the Bush Administration's lax enforcement record. But his antitrust officials declined to move in court against controversial deals like Ticketmaster’s merger with Live Nation and the combination of United Airlines and Continental Airlines. That has annoyed critics like John Conyers, a Democratic congressman, who took the administration to task two weeks ago for failing to block any big mergers.

Nasdaq and NYSE are major players in at least three US markets, and the top two in US stock trading. A combination would have all but eliminated competition in those markets, according to the DoJ. In an analysis published just two weeks after Nasdaq and ICE made their offer for NYSE public, the department threatened to oppose the merger in court. So Nasdaq and ICE backed down.

Still, there were reasonable arguments for letting the deal go through - arguments that Nasdaq boss Bob Greifeld arguably relied upon too heavily. Some antitrust experts view stock exchanges as competing in a global market rather than domestic ones, and the presence of two big stock listing venues in the United States is unusual. Also, it isn't clear how a merger would have hurt consumers, who might in fact have benefited from greater economies of scale.

But the DoJ said the deal would have resulted in higher prices, fewer services and less innovation. And this was not the only transaction that the antitrust cops chose to block recently. Last week, they filed a civil lawsuit challenging the sale of a Tyson Foods plant in Virginia to poultry producer George's, saying the combination would reduce competition for farmers in the Shenandoah Valley.

Two blocked deals don't necessarily prove there's a new M&A crackdown. But they do suggest that big transactions like AT&T's proposed $39 billion cellphone tie-up with T-Mobile USA will get tougher scrutiny. Antitrust lawyers may have to manage their corporate clients' expectations accordingly.