DOJ Follows Familiar Playbook in Merger Challenge Focused on “Hot” Documents

Following a familiar playbook and relying heavily on market share presumptions and “hot” documents describing close competition, the U.S. Department of Justice (DOJ) filed a complaint to block Hewlett Packard Enterprise Co.’s (HPE) proposed $14 billion acquisition of Juniper Networks, Inc. (Juniper).¹ The DOJ alleges HPE and Juniper are the second and third largest enterprise-grade wireless local area network (WLAN) technology providers in the United States and that a merger between the two companies will result in the merged firm and market leader Cisco Systems commanding over 70 percent of the market despite Cisco accounting for a significantly larger proportion of the 70 percent. The lawsuit is the first merger enforcement action taken under the Trump Administration. The lawsuit also reinforces the prominent role of internal documents in agency merger complaints and how internal documents evidencing close competition between merging parties can create significant antitrust risk.

DOJ Focuses on Parties with Small Shares

According to the DOJ, enterprise-grade WLAN solutions consist of wireless access points, which send and receive network data to user devices (smartphones, laptops, printers, etc.), as well as the network management hardware and software needed to collectively manage the large number of access points enterprise customers typically deploy. The DOJ argues that enterprise-grade solutions are distinct from consumer-grade solutions, which are generally managed device by device and do not require network management tools. The DOJ alleges that HPE and Juniper engaged in fierce head-to-head competition for enterprise-grade WLAN solutions, resulting in reduced prices for customers and increased innovation between the companies. The DOJ’s key allegations are as follows:

• The DOJ alleges Juniper was a disruptive force in the market following its acquisition of Mist Systems in 2019. Mist developed a solution that differentiated itself from the market with tools optimized for remote cloud management and using AI and machine learning tools (AIOps) to streamline network operations and improve the experience for network operators and users. The combination of Mist’s innovative network management software with Juniper’s large sales force and distribution network sparked a significant increase in market share from 1.7 percent in 2019 to 6.5 percent in 2021. The Juniper/Mist deal also spurred competitors to focus on AIOps.
• The DOJ claims that in response to Juniper’s success in enterprise-grade WLAN technology, HPE executives started a “Beat Mist” campaign that included initiatives focused on targeted marketing, competitive pricing, and product innovation to better compete with Juniper. Examples of these initiatives include investments to incorporate AIOps technology into HPE’s network management software and the establishment of an HPE internal “Beat Mist” listserv to track competitive intelligence on Juniper.
• HPE and Juniper were described as the top two contenders for bids that offered steep pricing discounts to win business over each other for both new and existing customers. Despite arguing that HPE and Juniper engaged in frequent competition against each other, the DOJ only highlighted three instances of competition in their complaint spanning between 2021 to 2023. In one instance, the DOJ highlighted that the HPE sales teams sought approval for a significantly greater than normal discounts on hardware and software in a contest to win a bid against Juniper for a large research university in the Northeast. The DOJ highlighted another instance of the companies discounting deeply in a bidding contest for a large healthcare system that HPE lost which internal documents from HPE described as a “huge blow.”

To illustrate the extent of competition between HPE and Juniper, the DOJ relies heavily on colorful quotes from documents allegedly demonstrating HPE’s concerns about the competitive threat of Juniper and its need to recognize and counter the threat.

In addition to the loss of competition between HPE and Juniper, the DOJ alleges the merger will harm competition by facilitating price coordination among the remaining enterprise-grade WLAN providers. The DOJ argues that the enterprise-grade WLAN market is conducive to coordinated behaviors because:

• First, the market will be “dominated” by the combined firm and Cisco, and information about these players’ actions is widely known.
• Second, competitors often receive competing bid information from customers bargaining for discounts, and discounts in the industry are standardized.
• Third, players in the market all follow the same third-party market reports and seek advice from the same consultants.
• Fourth, gross-margins for enterprise-grade WLAN providers are “exceedingly high, giving vendors a strong incentive to prevent competition from leading to discounts that are too deep.”

HPE and Juniper have said they plan to litigate the case and will “vigorously defend against the Department of Justice’s overreaching interpretation of antitrust laws.”² The merger agreement between both parties requires the parties to defend any agency litigation and the agreement does not expire until October 2025, likely ensuring enough time for the litigation process.³ The parties argue that there is robust competition in the market with at least eight alternatives to their solutions, and that one player (presumably Cisco) holds more than 50 percent market share. They also describe their solutions as complementary and state that a combination of their solutions will offer enterprises a compelling alternative to “global incumbents” such as Cisco that will also serve as an “innovative catalyst” for the industry.

Key Takeaways

The complaint is noteworthy for the following reasons:

• Hot documents: The DOJ’s complaint again demonstrates that documents evidencing competition between merging parties will be used against the parties in litigation. Companies considering M&A with horizontal competitors should take care to understand what their internal documents, particularly from sales and marketing personnel, will say about each other when assessing the risk of a transaction.
• The role of Cisco: The DOJ’s complaint is noteworthy in that it avoids mentioning HPE and Juniper’s combined market share and instead states the merger would result in “the combined entities and Cisco making up 70% of the market.” Because Cisco will remain the market leader post-merger, the combined firm’s share cannot be more than 35 percent based on the DOJ’s acknowledgement that Cisco would remain the largest player in the market. In fact, HPE asserts in a press release opposing the DOJ’s decision that Cisco has more than 50 percent of the market, meaning the combined firms would have less than 20 percent of the market.⁴ At the same time, the complaint discounts the parties’ argument that the merger will help them better compete with Cisco by claiming many enterprise-grade WLAN customers “suffer from ‘Cisco fatigue’ due, among other things, to Cisco’s overlapping WLAN product portfolios—it sells wireless access points under two competing brands - and complex licensing practices.” It remains to be seen how the DOJ will resolve the tension between alleging Cisco’s leading market position as a feature of the market with its claims about “Cisco fatigue.” Nevertheless, this complaint suggests merging parties should be prepared to encounter skepticism when arguing to enforcers that a merger of two competitors is necessary to compete more effectively with a larger player.
• International divergence: The DOJ appears to stand on its own compared to its international counterparts in deciding to sue to block the proposed acquisition. HPE and Juniper note that antitrust regulators in 14 other jurisdictions have unconditionally cleared the deal. Of note, the EC unconditionally cleared the proposed acquisition in July 2024,⁵ and the CMA followed in August 2024.⁶ The DOJ’s complaint stands in contrast to recent transactions that saw a greater convergence and cooperation among international enforcers. In particular, the EU and CMA both found the merged entity would continue to face competition from a wide range of competitors. The CMA, for instance, emphasized that the parties faced significant competitive constraint from their closest competitor Cisco, who is “the clear market leader,” and a several smaller players “who are capable of supplying competing WLAN equipment of comparable scale and functionality to those of the Parties.”⁷ The DOJ, by contrast, dismisses these smaller players. The divergence between the U.S. and other jurisdictions may be explained, at least in part, by the role of Chinese competitors like Huawei. The DOJ’s complaint notes Huawei and other Chinese players are prohibited from supplying into the U.S. for national security reasons. The CMA also noted that Huawei and other Chinese competitors were not active in the UK (but cleared the deal anyway).

If you have any questions about this client alert or how these recent antitrust enforcement trends could affect your company, do not hesitate to reach out to Jamillia Ferris, Michelle Yost Hale, Matt McDonald, Brendan Coffman, Beau Buffier, Brad Tennis, or any member of Wilson Sonsini Goodrich & Rosati's antitrust and competition practice.

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[1] See United States v. Hewlett Packard Enterprise Co., et al, No. 3:25-cv-00951, Compl., (9d Cir. Jan. 30, 2025).

[2] https://www.hpe.com/us/en/newsroom/press-release/2025/01/hewlett-packard-enterprise-and-juniper-networks-strongly-oppose-department-of-justices-decision-to-file-suit-to-block-acquisition.html.

[3] https://www.sec.gov/Archives/edgar/data/1043604/000119312524005659/d107225dex21.htm.

[4] https://www.hpe.com/us/en/newsroom/press-release/2025/01/hewlett-packard-enterprise-and-juniper-networks-strongly-oppose-department-of-justices-decision-to-file-suit-to-block-acquisition.html

[5] https://ec.europa.eu/commission/presscorner/detail/en/ip_24_4101.

[6] https://www.gov.uk/cma-cases/hewlett-packard-enterprise-company-slash-juniper-networks-inc-merger-inquiry#cma-clearance-decision.

[7] https://assets.publishing.service.gov.uk/media/66e933ea24c4f1826d81bbde/Full_text_decision.pdf at 18-19.