Breakingviews: Mega-deal truce augurs gentler trustbuster norm

New competition cops are making their presence known. The U.S. Federal Trade Commission on Wednesday blessed the $35 billion merger of software developers Ansys and Synopsys, on the proviso that they offload some assets. It’s the sort of truce that the previous administration broadly rejected, and heralds a gentler, albeit stricter than expected, trustbusting regime.

Under Chair Lina Khan, the FTC consciously dismantled a looser antitrust policy ushered in during the late 1970s. Authorities ditched the practice of allowing companies to unite if they simply promised to abide by certain standards of conduct, or “behavioral remedies” in the vernacular. They sued under novel theories of how deals might harm consumers and rejected even the premise of using divestitures to prevent overlapping business lines.

Landmark court rulings reinforced the crackdowns, and more deals were abandoned before ever coming to light. Big transactions by technology giants Alphabet, Amazon.com, Apple and Meta Platforms withered, declining by roughly 60% from 2021 to 2023.

A new merger rulebook ultimately codified the changes, but CEOs and merger practitioners anticipated that President Donald Trump’s administration would wipe the slate clean. Instead, new FTC Chairman Andrew Ferguson embraced the updated guidelines, and on Wednesday he made clear that there would be no 180-degree turn.

The aggressive strategies pursued by Khan and her Department of Justice counterpart, Jonathan Kanter, did encounter blowback. Some of their challenges ended in divestiture agreements, however contentiously. Aggressive dealmakers also got help from the courts.

In an eight-page statement accompanying the conditional Synopsys approval, Ferguson and two colleagues stuck to a hard line while also calling Team Biden’s approach “hostile.” They rejected any “categorical refusal” to consider divestiture remedies. And although agency officials acknowledged that the FTC had become “too comfortable” with such caveats in the past, a tough new norm is taking shape.

Some recent agreements planned for nuanced philosophical changes. Cloud computing company Salesforce, for example, will pay takeover target Informatica about 4.5% of the agreed $8 billion purchase price if regulators block the deal. Cybersecurity provider Wiz wrung a 10% fee from buyer Google. Eighteen-month contract lengths add extra breathing room, too. With the rules of the road becoming clearer, there’s even a chance for a similarly modest rebound in M&A.