At a Crossroad: Balancing Market Power, Competition, and Global Rivalry
Before we begin:
Shein is working 24/7 on it’s charm offensive while it pursues its London listing plans: My letter to FT last month titled “Letter: Shein’s pursuit of London listing shows City’s allure” can be found here:
Czech central bank head wants it to buy billions of euros in bitcoin: My letter to FT published today titled “Letter: Central banks shouldn’t chase speculative returns” can be found here:
Onto our discussion for today:
Regulators often find themselves in a paradox when evaluating mergers that create dominant domestic entities. On one hand, a merger that gives a company a 60-70% market share could lead to higher prices, reduced innovation, and market foreclosure, harming consumers and competitors. On the other hand, in a globalized economy, companies must scale up to compete with larger international players—many of whom benefit from government backing or operate in jurisdictions with weaker antitrust enforcement.
This is the fundamental dilemma at the heart of modern competition policy: Should regulators prioritize domestic market competition, or should they allow consolidation to create national champions capable of standing up to global rivals?
The answer is not straightforward. History is littered with cases where regulators blocked mergers to preserve competition—only to see domestic firms weakened against foreign competitors. Yet, there are also instances where unchecked consolidation led to monopolistic pricing, regulatory capture, and stagnation in innovation.
Case 1: The Siemens-Alstom Block—Europe’s Strategic Misstep?
A prime example of this tension is the 2019 Siemens-Alstom merger, which sought to create a European rail giant capable of competing with China’s state-backed CRRC Corporation—the world’s largest train manufacturer.
The European Commission (EC) blocked the deal, arguing that it would stifle competition in the European high-speed train and rail signaling markets. Yet, many industry experts saw this as short-term thinking, as CRRC has since expanded aggressively into Europe, undercutting Siemens and Alstom in several major contracts.
Critics argue that the EC’s rigid adherence to competition law ignored the geopolitical reality that China was flooding global markets with subsidized rail technology. By prioritizing internal European competition over global strategy, regulators may have sacrificed long-term competitiveness for short-term price discipline.
Case 2: The AT&T-T-Mobile Block—A Justified Intervention?
Contrast this with the DOJ’s 2011 decision to block AT&T’s $39 billion acquisition of T-Mobile, which would have consolidated the U.S. telecom market from four major players to three.
Unlike Siemens-Alstom, this was a purely domestic battle—there was no foreign competitor threatening AT&T or T-Mobile. The DOJ successfully argued that the deal would reduce competition in wireless services, leading to higher prices and less innovation.
History proved the DOJ right:
T-Mobile thrived as an independent player, investing aggressively in 5G and pushing AT&T and Verizon to lower prices.
U.S. wireless consumers benefited from a more competitive market.
When T-Mobile finally merged with Sprint in 2020, the market had evolved, and the deal made more sense.
This shows that blocking a merger can be justified when competition is truly at risk—without a foreign competitor distorting the playing field.
Case 3: NVIDIA-Arm—The Global Stakes of Competition Policy
The failed NVIDIA-Arm merger in 2022 presents a more complex scenario. NVIDIA, the U.S. chip giant, sought to acquire Arm, a British semiconductor firm whose designs underpin virtually every smartphone processor. The deal would have given NVIDIA significant control over global semiconductor infrastructure.
Regulators in the U.S., U.K., and Europe blocked the deal, citing risks that NVIDIA could restrict access to Arm’s technology for competitors, leading to market foreclosure. The collapse of the deal was widely seen as a victory for competition, preventing NVIDIA from monopolizing key chip designs.
However, the unintended consequence was that Arm remained independent but financially weaker, while China aggressively expanded its own semiconductor capabilities. Some now argue that the West may have handicapped its own semiconductor industry at a time when it needed to scale up against China.
HPE-Juniper: The Next Big Test
Which brings us to Hewlett Packard Enterprise’s (HPE) $14 billion acquisition of Juniper Networks, now facing a DOJ challenge. The deal would make HPE a formidable competitor to Cisco Systems, giving it a strong foothold in high-performance networking and AI infrastructure.
But the DOJ argues that the merger would reduce competition, creating a duopoly where HPE-Juniper and Cisco control over 70% of the U.S. networking market. The agency contends that this would lead to higher prices and stifle innovation, mirroring its arguments in past antitrust cases.
Yet, HPE’s counterargument is compelling:
The biggest global networking player is China’s Huawei, which has captured a significant share of global telecom infrastructure despite U.S. sanctions.
The European market is dominated by Nokia and Ericsson, leaving U.S. firms at a strategic disadvantage.
If HPE cannot scale up through Juniper, the only viable U.S. competitor to Cisco will remain fragmented and vulnerable.
This raises the same question posed in the Siemens-Alstom case: Are regulators so focused on protecting domestic competition that they are handicapping U.S. firms against global rivals?
The Regulatory Crossroads: What’s at Stake?
The HPE-Juniper case is more than just a tech merger—it is a defining moment for U.S. antitrust policy. If the DOJ blocks the deal, it signals a return to strict domestic market competition enforcement, prioritizing price effects over geopolitical concerns.
But if HPE prevails, it could reshape the landscape for tech M&A, allowing U.S. firms to build scale in strategic industries without immediate antitrust roadblocks.
The key lesson from past cases is that not all consolidation is harmful. While AT&T-T-Mobile was rightly blocked, the Siemens-Alstom decision weakened European competitiveness. The NVIDIA-Arm case prevented market foreclosure but may have left Arm vulnerable.
For HPE-Juniper, regulators must ask:
Does allowing this merger strengthen the U.S. networking industry against foreign rivals?
Would a duopoly with Cisco truly be harmful, or is it a necessary consolidation to compete globally?
Is the risk of domestic price increases greater than the risk of ceding market power to foreign competitors?
Will the U.S. Repeat Europe’s Mistakes?
If history is any guide, the DOJ may win in the short term but lose in the long run. If the merger is blocked, Cisco remains dominant, and U.S. firms continue to fight Huawei with one hand tied behind their backs. If the deal goes through, regulators will have to closely monitor competition effects—but at least the U.S. will have a scaled-up networking champion.
The global economy is shifting toward an era of economic nationalism, where governments actively support domestic champions rather than letting market forces dictate outcomes. The U.S. cannot afford to apply outdated antitrust thinking in industries where China and Europe are actively supporting their own players.
The HPE-Juniper case is a test of whether U.S. regulators understand this new reality. A rejection could be the Siemens-Alstom mistake all over again, leaving American firms weaker in a strategic industry.
If the DOJ blocks this deal without a clear alternative strategy, it may win the battle for competition—but lose the war for technological dominance.
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