US Justice Department sues to block HPE purchase of JuniperUS Justice Department sues to block HPE purchase of Juniper

HPE and Juniper are the second and third largest providers of enterprise-grade WLAN solutions in the US, says the DoJ, and alleges that the $14 billion acquisition “would eliminate fierce head-to-head competition between the companies, raise prices, reduce innovation, and diminish choice for scores of American businesses and institutions, in violation of Section 7 of the Clayton Act.”

The complaint states that Juniper has been a disruptive force among the three largest enterprise-grade WLAN suppliers, and has introduced tools that have materially decreased the cost of operating wireless networks. This competitive pressure, it is claimed, has forced HPE to discount its offerings and invest in its own innovation.

The DoJ says the proposed transaction would further consolidate an already highly concentrated market and leave it with two companies commanding over 70% of it - the merged HPE and market leader Cisco. “This substantial lessening competition in a critically important technology market poses the precise threat that the Clayton Act was enacted to prevent,” it said.

It is also claimed HPE “engaged in a campaign, including mandatory training for its engineers and salespeople, to ‘beat’ Juniper when competing for contracts.” The complaint states that a month before the proposed acquisition was announced, “front-line HPE salespeople were concerned that “[t]he Juniper threat [was] dire” because in dozens of opportunities Juniper was “trying to unseat” HPE.”

We’re told that one former HPE executive reminded his team that “there are no rules in a street fight” with Juniper and encouraged them to “kill” Juniper when going head-to-head for sales opportunities.

“HPE and Juniper are successful companies. But rather than continue to compete as rivals in the WLAN marketplace, they seek to consolidate — increasing concentration in an already concentrated market,” said Acting Assistant Attorney General Omeed A. Assefi of the Justice Department's Antitrust Division. “The threat this merger poses is not theoretical. Vital industries in our country — including American hospitals and small businesses — rely on wireless networks to complete their missions. This proposed merger would significantly reduce competition and weaken innovation, resulting in large segments of the American economy paying more for less from wireless technology providers.”

HPE and Juniper Networks responded to the filing by saying: "We believe the Department of Justice’s analysis of this acquisition is fundamentally flawed and we are disappointed in its decision to file a suit attempting to prohibit the closing of the transaction. We will vigorously defend against the Department of Justice’s overreaching interpretation of antitrust laws and will demonstrate how this transaction will provide customers with greater innovation and choice, positively change the dynamics in the networking market by enhancing competition, and strengthen the backbone of U.S. networking infrastructure.

“Consistent with the conclusions reached by all other major antitrust regulators who have reviewed the deal, this transaction brings together two complementary networking offerings and will create a networking player with the scope and scale to more effectively compete with global incumbents. This proposed acquisition will provide customers of all sizes with a modern, secure network built with AI and for AI to ensure a better user and operator experience, and will create more competition, not less.” 

Antitrust specialist and independent commentator Matt Stoller said of the news: “There are going to be a lot of angry libertarians and antitrust lawyers who are going to talk about how the Antitrust Division is helping China by not allowing these two great companies to combine. But the truth is that such a merger would be bad for America. HPE and Juniper compete over pricing, features, and service, and such a merger would, as consolidation did for Boeing and Intel, lead to stagnation and failure.

“The fight for more innovation is particularly important, because Chinese tech giant Huawei is a fierce competitor in the space, and though it can’t sell in the U.S. due to security concerns, having nimble domestic companies is important in terms of ensuring the U.S. is competitive in technology globally.”

HPE confirmed previous reports that it intended to buy Juniper Networks in January last year, unveiling the $14 billion deal designed to bolster its networking business.

"The combination of HPE and Juniper advances HPE's portfolio mix shift toward higher-growth solutions and strengthens its high-margin networking business, accelerating HPE's sustainable profitable growth strategy," it said at the time.

Previously there was scrutiny of the deal in the UK – in June The Competition and Markets Authority opened a probe expressing concerns that the tie-up could impact on competition in the UK, seeking to ascertain whether the deal could "result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services."

Later in August it cleared the deal and in the same month the EU did the same, deciding that it raised no competition concerns.