The repaired President has vowed to "reinvigorate antitrust enforcement." But how a great quantity tougher can he get when the recession is forcing widespread consolidation?

By Michael Orey

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With the Jan. 22 appointment of Washington lawyer Christine Varney to head the Justice Dept.’s antitrust division, President Barack Obama has put in place the first of his two top cops to monitor corporate competition. Obama is expected to name someone to professorship the Federal Trade Commission concisely. The appointments come amid a hold an argument hind part before how much tougher the Obama team can afford to be on corporate dealmaking at what time the housekeeping crisis is forcing consolidation across a wide swath of industries.

Varney, 53, was a member of the Federal Trade Commission under President Bill Clinton from 1994 to 1997. However, she is no fire-breathing trust-buster. In fresh years, taken in the character of a lawyer at Hogan & Hartson, a leading law firm representing big corporations, Varney has headed the Internet practice group. Clients for that group included eBay (EBAY), AOL (TWX), and Fox Interactive Media (NWS). While at the FTC, according to Bloomberg News, she voted to charge Toys ‘R’ Us with pressuring manufacturers to keep favorite toys out of rival stores, and to bring consumer-protection claims against R.J. Reynolds Tobacco for advertisements that featured Joe Camel.

During his campaign, Obama promised he would "reinvigorate antitrust enforcement." In particular, he said his Administration would "step up write a critical notice of of merger activity and interpret sufficient engagement to stay or restructure those mergers that are likely to harm consumer welfare." But, as it has in so many other areas, the housekeeping crisis may exact a recalibration of those plans. With so frequent businesses financially hobbled, regulators may feel pressure to approve deals they would ordinarily oppose.

Antitrust attorneys predict that in the same proportion that economic provisions force perseverance consolidation, besides companies will make what is known as the "deficiency firm" argument to persuade mergers approved by one or the other the Justice Dept. or the FTC.

The bar is high for of that kind a claim. The parties to the merger have to demonstrate that the company being acquired is in imminent danger of losing game. And it sourness have no survey of a successful reorganization in bankruptcy or of being bought by means of another company that presents smaller of a competitive risk. Still, says Anthony W. Swisher, an antitrust specialist at Akin Gump Strauss Hauer & Feld in Washington, in the current environment "there are a lot of opportunities to make that case."

In 1995, Hearst, that operated the Houston Chronicle newspaper, won approval to buy its rival candidate the Houston Post, after the Justice Dept. determined the Post was a failing firm. With their bleak calling prospects in 2009, newspapers may once again exist making such claims as they try to merge their way out of trouble, predicts George L. Paul, an antitrust attorney at White & Case in Washington.

Retail supermarket chains, pharmacies, and hospitals are also likely to invoke the failing firm argument, Paul says. U.S. automakers would clearly be candidates as well, though Fiat’s plans to take a 35% stake in Chrysler, announced Jan. 20, complicates the picture.

When the failing company test won’t fly, there’s through all ages. the "flailing company" dispute. Under that, merger candidates contend that even attached the supposition that the ailing company isn’t on the incline of going out of business, it is so weakened that it is on a path to competitive paltriness.

This, too, is a hard sell to regulators, but as Swisher’sitting firm noted in a posting on its Web site, now may have being an opportune time for such a claim: "The household crisis is not something the agencies are likely to question, and its very real collision forward the financial viability of U.S. businesses is not open to debate."

Certainly a lighter regulatory be in contact has already been evident in the rapid-fire combinations among financial-services firms at the end of 2008. Many of the mergers might not have raised antitrust concerns anyway, lawyers speech. But at all essay to oppose or even procrastination the deals would have ignited a political onslaught.

"When the Treasury Dept. orchestrates something like that on a rush, emergency groundwork, one would not expect the Justice Dept. to get in the way," says Brian Byrne, a Brussels-based antitrust lawyer for Cleary Gottlieb Steen & Hamilton. One such deal his firm worked on, notes Byrne, was approved in just a day.