Merger Challenges Stall as DOJ Reconsiders its Antitrust Approach

The US Department of Justice (DOJ) is facing growing scrutiny over its approach to merger enforcement, as senior officials increasingly favour negotiated settlements over court challenges, according to a report by Bloomberg Law.

The latest test of this approach involves aerospace manufacturer TransDigm Group Inc.’s proposed $960 million acquisition of Stellant Systems Inc., a deal that has raised concerns among antitrust officials and defence authorities.

Staff at the DOJ’s Antitrust Division have prepared a lawsuit seeking to block the transaction, according to people familiar with the matter. However, senior department officials, including Stanley Woodward, the DOJ’s third-ranking official who oversees antitrust matters, have not approved the legal action.

Instead, DOJ officials are currently engaged in settlement discussions with the companies, reflecting the Trump administration’s preference for negotiated outcomes rather than prolonged litigation, the report said.

The proposed acquisition has drawn attention because both companies are leading US manufacturers of specialised radar components used by the US Navy and Air Force. Defence officials have expressed concerns that the merger could leave the military dependent on a single supplier and potentially increase the cost of critical defence parts.

The TransDigm-Stellant transaction is the latest merger that the Antitrust Division has recommended challenging but requires approval from Woodward before the department can proceed with a lawsuit.

According to Bloomberg Law, Woodward has previously declined to approve at least two other merger challenges recommended by antitrust staff.

The situation remains fluid, with a decision on whether to file a lawsuit expected in the coming days, people familiar with the matter said.

TransDigm and Stellant did not immediately respond to requests for comment. The Pentagon said it does not comment on active or potential merger reviews.

The DOJ said in a statement that Woodward supports merger enforcement, including litigation, when appropriate, and that multiple factors are considered before deciding on enforcement action.

Concerns Over TransDigm Acquisition

TransDigm is one of the most active acquirers in the aerospace sector. If the Stellant acquisition proceeds, along with a previous 2024 transaction, the company would control a significant share of the market for high-powered microwave tubes used in military and space applications, including electronic warfare, radar and satellite communications.

The company is also a key supplier of parts for Pentagon aircraft and helicopters. It has previously faced criticism over pricing practices involving military contracts.

A 2021 report by the US Department of Defense Inspector General found that the Pentagon had overpaid TransDigm by at least $21 million for certain spare parts between 2017 and 2019. The Pentagon later said it lacked the authority to recover the money.

TransDigm’s then-chief executive officer Kevin Stein said at the time that the company had not violated federal acquisition laws or regulations in relation to its pricing.

Shift in DOJ Merger Policy

Woodward oversees a broad range of the DOJ’s civil enforcement work, including antitrust matters. Bloomberg Law reported that he has taken a more active role in the Antitrust Division’s operations compared with previous administrations.

During internal discussions on antitrust matters, Woodward has questioned the need for extensive merger reviews and reportedly suggested that blocking transactions could raise concerns relating to companies’ constitutional due process rights.

Under US antitrust laws, the DOJ and the Federal Trade Commission (FTC) review transactions valued above $134 million to determine whether they could harm competition.

Woodward recently assumed day-to-day control of the Antitrust Division after acting antitrust chief Omeed Assefi went on parental leave and decided not to return. The White House is also moving to nominate telecommunications lawyer Adam Candeub, general counsel at the Federal Communications Commission, as the next permanent antitrust chief, Bloomberg has reported.

The current administration’s approach represents a significant change from the Biden administration, during which the DOJ and FTC frequently challenged major mergers in court and largely avoided settlements.

Since the start of President Donald Trump’s second term, the DOJ has filed only one lawsuit seeking to block a merger while reaching settlements in more than a dozen cases. The FTC, however, has continued pursuing merger challenges, filing lawsuits against three deals and securing mixed results.

Bloomberg Law reported that Woodward believes clear violations of antitrust laws are relatively rare and that the department should focus on completing merger reviews quickly while using settlements to address competition concerns.

The policy shift has also coincided with the departure of several senior litigators and officials from the Antitrust Division. Tensions between Woodward and former Assistant Attorney General for Antitrust Gail Slater reportedly contributed to her unexpected departure earlier this year.

Previous Merger Challenges Rejected

Bloomberg Law reported that Woodward recently rejected a recommendation by antitrust lawyers to challenge the merger between automotive diagnostic companies Repairify Inc. and Opus IVS.

DOJ lawyers had raised concerns that the deal could increase costs for repair businesses and consumers by reducing competition in the market for diagnostic tools and software used to service advanced driver assistance systems.

Woodward reportedly declined to approve a lawsuit, citing concerns that the department could be wrong about the transaction’s competitive impact. The companies completed the deal on July 2.

In another case, Woodward rejected a recommendation to challenge the merger between RedSail Technologies LLC and Micro Merchant Systems Inc., two major providers of pharmacy management software.

The transaction was allowed to proceed with a letter warning that the DOJ could still challenge the deal in the future. Similar warning letters issued by the FTC during the Biden administration had drawn criticism from Republican antitrust officials. The merger was completed in February.

The DOJ also closed reviews of Nexstar Media Group Inc.’s acquisition of Tegna Inc. and Paramount Skydance Corp.’s acquisition of Warner Bros. Discovery Inc. without imposing conditions, despite objections from staff involved in reviewing the deals, according to people familiar with the matter.

The only merger challenge filed by the DOJ since the beginning of the Trump administration involved Hewlett Packard Enterprise’s $14 billion acquisition of Juniper Networks Inc. The department later reached a settlement before trial, with Woodward playing a key role in negotiating the agreement.

The settlement itself faced opposition from some DOJ officials, and several state attorneys general challenged the agreement. A federal judge is expected to decide whether the settlement should be approved or rejected.

 
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