‘HPE and Juniper are successful companies. But rather than continue to compete as rivals in the WLAN marketplace, they seek to consolidate — increasing concentration in an already concentrated market’ said Acting Assistant Attorney General Omeed A. Assefi of the Justice Department’s Antitrust Division.
The U.S. Department of Justice is suing to prevent Hewlett Packard Enterprise’s $14 billion acquisition of Juniper Networks, claiming the blockbuster deal will “reduce competition and weaken innovation.”
The complaint, filed in the Northern District of California, alleges that the proposed transaction would eliminate “fierce head-to-head competition between the two companies, raise prices, reduce innovation, and diminish choice for scores of American businesses and institutions” in violation of Section 7 of the Clayton Act.
“HPE and Juniper are successful companies. But rather than continue to compete as rivals in the WLAN marketplace, they seek to consolidate — increasing concentration in an already concentrated market,” said Acting Assistant Attorney General Omeed A. Assefi of the Justice Department’s Antitrust Division in a press release. “The threat this merger poses is not theoretical. Vital industries in our country — including American hospitals and small businesses — rely on wireless networks to complete their missions. This proposed merger would significantly reduce competition and weaken innovation, resulting in large segments of the American economy paying more for less from wireless technology providers.”
[RELATED: DOJ Challenge To HPE-Juniper Would Derail ‘Formidable’ Cisco Alternative: Partners]
The DOJ said the proposed transaction between HPE and Juniper, if allowed to proceed, would further consolidate an already highly concentrated market — and leave U. S. enterprises facing two companies commanding over 70 percent of the market: the post-merger HPE-Juniper and market leader Cisco Systems Inc.
“This substantial lessening competition in a critically important technology market poses the precise threat that the Clayton Act was enacted to prevent,” said the DOJ.
The DOJ said HPE recognized Juniper as a “disruptive force” that had grown rapidly from a minor player to among the three largest enterprise-grade WLAN suppliers in the U.S.
Further, the DOJ alleged that the “competitive pressure” from Juniper forced HPE to “discount” its offerings.
“HPE recognized and tracked Juniper’s growing significance and engaged in a campaign, including mandatory training for its engineers and salespeople, to “beat” Juniper when competing for contracts,” said the DOJ in a press release. “Indeed, just a month before the proposed acquisition was announced, front-line HPE salespeople were concerned that “[t]he Juniper threat [was] dire” because in dozens of opportunities Juniper was “trying to unseat HPE.”
The HPE acquisition of Sunnyvale, Calif.-based Juniper, which was announced one year ago, has been welcomed by some partners as a turning point in the networking industry, which has been dominated by Cisco with its highly regarded network router and switching portfolio for more than three decades.
When the blockbuster deal was first announced, Cisco partners told CRN that the deal could serve to “light a fire” under Cisco, which has been focused on building out its security and AI profile in recent years.
C.R. Howdyshell, CEO of Advizex, a Fulcrum IT Partners company and a top HPE and Aruba partner, said he believes the DOJ suit misses the mark given the market dominance of Cisco.
“Cisco has absolutely dominated the networking market for three decades,” he said. “The ability to compete more effectively against Cisco is what created a great amount of optimism for this deal from both customers and partners.”
Howdyshell said he expects the DOJ lawsuit to cause many customers to “freeze or postpone” HPE and Juniper networking product purchases.
“This represents a significant challenge to both HPE and Juniper,” he said. “This is going to trickle down to the channel. We are in unchartered territory. We will be working closely with HPE and looking forward to a positive outcome.”
