The end was anticlimactic.
For months, U.S. District Judge Richard
Leon had sowed
uncertainty over the $70 billion CVS Health acquisition of
Aetna while he pursued a review known as a Tunney Act hearing,
examining whether the consent
decree CVS signed with the Justice Department’s antitrust
division was in the public interest. CVS had closed the deal with Aetna in
November 2018.
Most Tunney Act cases are pro forma. Not this
one. In April, Leon announced he would hold a hearing in June, which would
include opponents of the deal, stirring protests from the government and fears
in the CVS camp that he would try to kill or alter the deal, and on Wall Street
that he would undermine a consent-decree
process that eases the approval of many M&A deals.
Much of this turned out to be overblown.
Instead, Leon briskly approved the deal in a memorandum
opinion released last Wednesday, arguing that critics, like the
American Medical Association, had not succeeded in showing that the transaction
would harm the public interest. Shares of CVS (ticker: CVS) popped about 1% on
the news.
So what was this fuss about? The judge’s
22-page opinion argues that the Justice Department had failed to make an
adequate case for the consent decree, in which CVS sold Aetna’s Part D Medicare
assets to WellCare Health Plans . Leon had earlier complained that the decree involved
“less than one-tenth of 1% of the merger” and that the government was rushing
the consent decree. (A few months before, Leon had tangled with the Justice
Department over the AT&T [T] merger
with Time Warner. Leon rejected the government’s case against AT&T. The
Justice Department then appealed—and lost.)
“If the Tunney Act is to mean anything, it
surely must mean that no court should rubber-stamp a consent decree...” Leon
wrote. The 1974 Tunney Act mandates that the public has 60 days to comment on a
proposed consent decree, after which the government must publicly provide a
final response. In the opinion, Leon was withering on the Justice Department’s
response, which, he writes, “Left much to be desired. It is rife with
conclusionary assertions that merely reiterate the government confidence in the
proposed remedy, but shed little light on the reasons for that confidence.” The
government’s “perfunctory response” was “particularly disappointing in light of
the volume and quality of the comments to which it was responding.”
That helps explain Leon’s unusual decision to
delay approval to hold the hearing, with testimony from both opponents and
proponents of the deal. He insists that the hearing was designed to assist him
in evaluating the public record, and that he wasn’t relitigating the entire
deal. Tunney Act hearings are not trials, making it easy for Leon, who alone
could ask follow-up questions, to turn down a Justice Department request to
cross-examine witnesses.
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