California has a long history of skepticism toward big corporate mergers.
California Attorney General Rob Bonta says he is scrutinizing a possible acquisition of Warner Bros. Discovery that would create the largest entertainment company on earth.
But while big is oftentimes bad, that’s not always the case. Sometimes, big is actually helpful to consumers — for lower prices, higher efficiency, and even for public safety.
Another merger underway that is currently tied up in a California court speaks to this truism. It’s a merger that would result in another big company, yes, but one that legal experts have said present no antitrust concerns and that national security officials and intelligence analysts have said is essential for America’s national security.
In 2024, Hewlett Packard Enterprise (HPE) announced it planned to purchase Juniper Networks, creating a new tech powerhouse right here on American soil, one specializing in AI, cloud computing, and 5G.
The Justice Department sued to block the merger, accusing HPE and Juniper of “increasing concentration in an already concentrated market.” This struck the ire of legal analysts, who pointed out that the merger wouldn’t have even created the biggest American company domestically and that the transaction wouldn’t have even triggered the Philadelphia National Bank threshold for monopolization (30% of the marketplace or greater).
Only months later, the DOJ suddenly dropped the suit and announced a settlement.
The government became convinced that the HPE-Juniper merger was necessary for America's national security. The reason involves one of the most powerful multinational corporations on earth, Huawei, the Chinese giant that also specializes in cutting-edge tech.
According to recent reports, these national security concerns are part of the reason why Gail Slater, the DOJ’s former antitrust chief, left her position at the end of last month. Slater allegedly "claimed to [Attorney General Pam] Bondi that the US intelligence community had not raised any national security concerns about blocking the merger,” and when CIA Director John Ratcliffe provided such concerns, Bondi reportedly felt lied to.
The issue is that Huawei dwarfs the market share of every American tech company. Take, for example, the vital technology of 5G. In 2023, Huawei had a 31 percent share of the 5G market, while the next closest U.S.competitor had just a 7 percent share. Combined, all American 5G companies had a 21 percent share, barely one-third that of the single player Huawei.
So while there is concentration in the tech market, it’s Huawei that’s doing the concentrating.
The problem with Huawei controlling 5G isn’t just economic. In China, there’s very little distinction between business and the state, which effectively turns businesses like Huawei into arms of the Chinese state.
No surprise, then, that the State Department notes that “Huawei has a track record of spying, stealing, and supporting authoritarian regimes.” The FBI warns that Huawei-made equipment atop U.S. cellphone towers could be used to intercept top-secret government communications about nuclear weapons.
The DOJ began to understand that the United States needs a tech heavyweight that can push back against Huawei’s growing market share and creeping abuses, and opposition to the deal within the government quickly fell apart. HPE-Juniper can fill that void.
So what does California have to do with any of this?
Well, the final step in the HPE-Juniper merger is a review under a law called the Tunney Act, which is taking place in a district court right here in California, under the leadership of Judge P. Casey Pitts. And, of course, Attorney General Bonta will be there trying to stop the merger.
It’s fitting that this antitrust saga should end in a California showdown. But Bonta needs to layer some nuance over his skepticism of big business. For the sake of our national security, the court should let the acquisition stand.
Thankfully, no merger has ever been blocked under the Tunney Act, which functions as a kind of formality. The purpose of the review, contra Bonta, is not to relitigate ideological or policy disputes.
California has a lot to gain from letting this merger go through. China has a long history of meddling in Golden State affairs, everything from intellectual property theft to mass-purchasing land damaged in wildfires. Huawei’s research arm used to be based in Santa Clara.
It’s true that our state has a tradition of proactive antitrust enforcement, and especially when it comes to big tech. This dates all the way back to the famous antitrust lawsuit against Microsoft in the 1990s to which California was a party.
But responsible law enforcement doesn’t mean undermining national security or California’s own interests. With Huawei menacing our country, with the Department of Justice having changed its mind for a reason, our state needs to let the HPE-Juniper merger go.
There are worse things than a big American tech company. A big Chinese tech company, for starters.
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