Antitrust

The Many Sins of the Tech Giants

The 400-page report just published by the Democratic leadership of the House Judiciary Committee is a damning review of the anti-competitive practices of the big tech companies—Amazon, Apple, Facebook and Google’s parent Alphabet.

The report finds that in various portions of the digital world these companies have amassed what amounts to monopoly control and have not hesitated to use it crush or absorb competitors. Comparing the tech giants to the oil barons and railroad tycoons of the late 19^th century, the report calls for aggressive measures such as breaking up the companies and doing more rigorous reviews of proposed mergers and acquisitions in the future.

Among the broader consequences of the rising power of the tech giants are, the report argues: a weakening of innovation and entrepreneurship, a decline in the number of trustworthy sources of news, and an erosion of safeguards for the privacy of personal information.

One aspect of the report that has not received much coverage is the brief discussion of the power of the tech giants in the labor market. This is especially relevant for Amazon, which as the report notes has become one of the largest employers in the country and is exercising monopsony power in sectors such as warehousing and “has wage-setting power through its ability to set route fees and other fixed costs for independent contractors in localities in which it dominates the delivery labor market. These entities are dependent on Amazon for a large majority—or even 100%—of their delivery business.”

Amazon has moved into the position previously held by Walmart—a shamelessly exploitative employer that depresses wages and worsens working conditions not only for its own workers but also for the entire sector in which it operates—and to some extent for the economy as a whole.

The report’s wide-ranging recommendations do not include any remedies for these labor issues, perhaps because they are outside the scope of the Judiciary Committee.

It is worth noting that there are already efforts underway to address the labor practices of the tech giants. Several unions as well as other groups are working with Amazon employees to agitate for better conditions, a process made more difficult by Amazon’s brazen anti-union practices and its widespread use of staffing services to evade its employer responsibilities.

There are also class-action lawsuits challenging unfair employment practices by Amazon and other tech giants. For example, Facebook recently agreed to pay $1.65 million to resolve litigation alleging that it misclassified workers to deprive them of overtime pay. A few years ago, Apple, Google, Intel and Adobe Systems together agreed to pay $415 million to resolve allegations that they conspired not to hire each other’s employees, thus suppressing salary levels.

Taking on the tech giants will require many lines of attack to address the harms they cause to users and employees alike.

Meddling in Mergers

President Trump’s effort to influence the outcome of the prosecution of his buddy Roger Stone represents another threat to the rule of law in the United States. Yet it is not just the rule of criminal law that is endangered. The Trump Administration has also been meddling with civil law, particularly in the area of antitrust.

This has been going on for a while. Early in his administration, the Trump Justice Department sought to block AT&T’s acquisition of Time Warner, mainly, it appears, because the president wanted to get back at Time Warner subsidiary CNN for its negative coverage of him. Even after a federal court ruled in favor of AT&T and allowed it to close the deal, DOJ continued its legal crusade. A year ago, some critics were arguing that Trump’s actions with regard to AT&T amounted to an impeachable offense.

Last year, DOJ did Trump’s bidding by opening an antitrust investigation of four automakers that had sided with California in a dispute over whether the state could maintain its stricter automobile emissions standards in the face of the administration’s move to ease those standards at the federal level. Recently, DOJ quietly dropped the probe after concluding that the companies had violated no laws—something that was clear from the beginning.

As with criminal cases, Trump is trying to use antitrust laws not only to harm his opponents but to reward his friends. Exhibit A here is the proposed merger of T-Mobile and Sprint. A federal judge has just ruled in favor of the deal, which will greatly reduce competition in a wireless industry that is already highly concentrated. One study found that it would also depress wages of workers at cellphone retail stores.

The case had been brought by attorneys general in 13 states and the District of Columbia concerned that the combination had received approval from the Justice Department and the Federal Communications Commission.

Those approvals came amid reports over the past year that the merger was being strongly promoted by the White House. Trump is very chummy with Masayoshi Son, the chair of Sprint’s Japanese parent SoftBank, who has cultivated close ties with the president by making lavish promises of new investments in the U.S. that are unlikely to materialize. SoftBank, in fact, is in bad shape financially, due to setbacks relating to its stakes in companies such as We Work and Uber.

Meanwhile, T-Mobile also stoked the administration’s enthusiasm for the merger by spending hundreds of thousands of dollars at Trump’s DC hotel.

When Trump does not have a personal stake in the matter, he seems willing to large mergers proceed. He made some noises about the combination of aerospace giants Raytheon and United Technologies but then dropped the matter. The deal is expected to close in the next few months.

Other big combinations have also been succeeding. Last year alone, Bristol-Myers Squibb acquired Celgene; Occidental Petroleum bought Anadarko; Walt Disney took over a big chunk of Twenty-First Century Fox; and so on.

What we are left with are two problems. On the one hand, we have an administration that is largely willing to left corporate concentration continue unchecked. On the other hand, we have a president who is willing to selectively intervene in deals to help friends and harm foes.

Both practices are exactly the opposite of what is in the public interest. The antitrust laws should be applied rigorously to control corporate power, and a president should refrain from meddling in deals, especially when it’s done for personal political reasons. But that’s not the way it works in Trumpworld.

The 2019 Corporate Rap Sheet

While the news has lately focused on political high crimes and misdemeanors, 2019 has also seen plenty of corporate crimes and violations. Continuing the pattern of the past few years, diligent prosecutors and career agency officials have pursued their mission to combat business misconduct even as the Trump Administration tries to erode the regulatory system. The following is a selection of significant cases resolved during the year.

Online Privacy Violations: Facebook agreed to pay $5 billion and to modify its corporate governance to resolve a Federal Trade Commission case alleging that the company violated a 2012 FTC order by deceiving users about their ability to control the privacy of their personal information.

Opioid Marketing Abuses: The British company Reckitt Benckiser agreed to pay more than $1.3 billion to resolve criminal and civil allegations that it engaged in an illicit scheme to increase prescriptions for an opioid addiction treatment called Suboxone.

Wildfire Complicity: Pacific Gas & Electric reached a $1 billion settlement with a group of localities in California to resolve a lawsuit concerning the company’s responsibility for damage caused by major wildfires in 2015, 2017 and 2018. PG&E later agreed to a related $1.7 billion settlement with state regulators.

International Economic Sanctions: Britain’s Standard Chartered Bank agreed to pay a total of more than $900 million in settlements with the U.S. Justice Department, the Treasury Department, the Federal Reserve, the New York Department of Financial Services and the Manhattan District Attorney’s Office concerning alleged violations of economic sanctions in its dealing with Iranian entities.

Emissions Cheating: Fiat Chrysler agreed to pay a civil penalty of $305 million and spend around $200 million more on recalls and repairs to resolve allegations that it installed software on more than 100,000 vehicles to facilitate cheating on emissions control testing.

Foreign Bribery: Walmart agreed to pay $137 million to the Justice Department and $144 million to the Securities and Exchange Commission to resolve alleged violations of the Foreign Corrupt Practices Act in Brazil, China, India and Mexico.

False Claims Act Violations: Walgreens agreed to pay the federal government and the states $269 million to resolve allegations that it improperly billed Medicare, Medicaid, and other federal healthcare programs for hundreds of thousands of insulin pens it knowingly dispensed to program beneficiaries who did not need them.

Price-fixing: StarKist Co. was sentenced to pay a criminal fine of $100 million, the statutory maximum, for its role in a conspiracy to fix prices for canned tuna sold in the United States. StarKist was also sentenced to a 13-month term of probation.

Employment Discrimination: Google’s parent company Alphabet agreed to pay $11 million to settle a class action lawsuit alleging that it engaged in age discrimination in its hiring process.

Investor Protection Violation: State Street Bank and Trust Company agreed to pay over $88 million to the SEC to settle allegations of overcharging mutual funds and other registered investment company clients for expenses related to the firm’s custody of client assets.

Illegal Kickbacks: Mallinckrodt agreed to pay $15 million to resolve claims that Questcor Pharmaceuticals, which it acquired, paid illegal kickbacks to doctors, in the form of lavish dinners and entertainment, to induce them to write prescriptions for the company’s drug H.P. Acthar Gel.

Worker Misclassification: Uber Technologies agreed to pay $20 million to settle a lawsuit alleging that it misclassified drivers as independent contractors to avoid complying with labor protection standards.

Accounting Fraud: KPMG agreed to pay $50 million to the SEC to settle allegations of altering past audit work after receiving stolen information about inspections of the firm that would be conducted by the Public Company Accounting Oversight Board. The SEC also found that numerous KPMG audit professionals cheated on internal training exams by improperly sharing answers and manipulating test results.

Trade Violations: A subsidiary of Univar Inc. agreed to pay the United States $62 million to settle allegations that it violated customs regulations when it imported saccharin that was manufactured in China and transshipped through Taiwan to evade a 329 percent antidumping duty.

Consumer Protection Violation: As part of the settlement of allegations that it engaged in unfair and deceptive practices in connection with a 2017 data breach, Equifax agreed to provide $425 million in consumer relief and pay a $100 million civil penalty to the Consumer Financial Protection Bureau. It also paid $175 million to the states.

Ocean Dumping: Princess Cruise Lines and its parent Carnival Cruises were ordered to pay a $20 million criminal penalty after admitting to violating the terms of their probation in connection with a previous case relating to illegal ocean dumping of oil-contaminated waste.

Additional details on these cases can be found in Violation Tracker, which now contains 397,000 civil and criminal cases with total penalties of $604 billion.

Note: I have just completed a thorough update of the Dirt Diggers Digest Guide to Strategic Corporate Research. I’ve added dozens of new sources (and fixed many outdated links) in all four of the guide’s parts: Key Sources of Company Information; Exploring A Company’s Essential Relationships; Analyzing A Company’s Accountability Record; and Industry-Specific Sources.

Facebook Joins the Multi-Billion-Dollar Penalty Club

It is a sign of how jaded we have become to corporate misconduct that the $5 billion fine imposed on Facebook by the Federal Trade Commission for privacy violations is being shrugged off by the company, by the market and by the public. Many are describing it as a slap on the wrist.

It’s true that a ten-figure penalty is no longer such a rarity. According to Violation Tracker, 35 parent companies have had to pay that amount in at least one case in the United States. Eleven corporations have been hit with billion-dollar-plus penalties more than once. Of these, nine are big banks: Bank of America, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Royal Bank of Scotland and Wells Fargo. The other two are BP and Volkswagen.

Bank of America, whose penalty total is far greater than that of any other corporation, has racked up seven ten-figure cases, including three in excess of $10 billion.

BofA’s rap sheet is perhaps the most persuasive evidence that escalating penalties are not having the desired effect of deterring corporate wrongdoing. Even at the higher levels, the fines are seen by large companies as a tolerable cost to pay for continuing to do business more or less as before.

The Justice Department and the regulatory agencies seem to be aware of this and are at least making noises about taking other steps to deter and punish miscreants.

In the case of Facebook that includes provisions in the FTC settlement that will put more responsibility on the company’s board to make sure that privacy protections are enforced. It also enhances external oversight by an independent third-party monitor.

All of this might be more impressive if Facebook had not already signed a previous settlement with the FTC in 2012 that was supposed to establish strong privacy protections—provisions that the company has clearly evaded.

Also contained in the Facebook settlement is a provision that will require Facebook CEO Mark Zuckerberg to personally certify that the company is adhering to privacy protections. This would only have an impact if it is rigorously enforced, with non-compliance putting him behind bars rather than just triggering another big payout.

There is also renewed discussion of stepped up antitrust enforcement, especially against the big tech companies. This would be more effective if federal authorities were willing to try breaking up the likes of Facebook, Alphabet/Google and Amazon rather than seeking limited restrictions on their market power. That approach has largely been shunned for the past two decades, ever since the effort to split up Microsoft collapsed and the DOJ had to settle for more modest remedies.

Prosecutors and policymakers continue to struggle with the issue of how to deal with large companies. Often it seems they are mainly concerned with little more than giving the appearance of getting tough. Only when faced with sustained public pressure will they come up with effective ways to rein in rogue corporations.

Oligopolies and Regulatory Compliance

There is growing awareness of the dangers posed by Amazon’s ever-increasing market clout, but the concentration of economic power is not limited to that online retailer. More and more U.S. industries have become oligopolies, and in some sectors the top two companies now have a market share in excess of 50 percent.

This concentration is made clear to me each time I revise the parent-subsidiary data in Violation Tracker. In the just-completed quarterly update, which will be posted next week, I had to make adjustments to reflect about three dozen instances in which one of the companies in our universe of some 3,000 parent companies completed the acquisition of another.

Among these deals: the purchase of Aetna by CVS Health, the acquisition of Express Scripts by Cigna, and the purchase of industrial gas giant Praxair by its competitor Linde.

But the one that stood out to me was the acquisition of oil refiner Andeavor by Marathon Petroleum. Andeavor is the name adopted last year by Tesoro, one of the largest petroleum refiners in the country. Over the last two decades it has bought refineries from large corporations such as Shell and BP, and in 2016 it purchased all of Western Refining.

Marathon Petroleum, which was spun off from Marathon Oil in 2011, has grown through previous deals such as the takeover of the infamous BP refinery in Texas City, Texas, the site of a 2005 explosion in which 15 workers were killed.

The marriage of Marathon and Andeavor will create the largest oil refiner in the United States, but at the same time it will join together two companies with very checkered environmental, safety and labor records.

Marathon’s operations, including those previously owned by BP in Texas City, have amassed more than $920 million in penalties, according to Violation Tracker. This total includes a $334 million settlement with the EPA and the Justice Department covering air pollution at refineries in five states, along with two dozen OSHA penalties.

Andeavor has accumulated $467 million in penalties, most of which comes from a single giant settlement with the EPA in 2016. It also has had about two dozen significant OSHA fines.

The combined company’s page in the updated Violation Tracker, which will include other new data, will show a total of nearly $1.4 billion in penalties. This will put Marathon in the dubious club of only a few dozen mega-corporations that have racked up ten-figure totals in Violation Tracker. It will put the company higher on that list than the long-time environmental miscreant Exxon Mobil.

Aside from the economic consequences, growing concentration may also be weakening regulatory compliance. As industries become increasingly dominated by large corporations with a history of breaking the rules, it is likely that those violations will become even more common. That’s another reason to get tough on oligopolies.

Dealing Boldly with Big Pharma

Three days after Donald Trump took office in 2017, the Pharmaceutical Research and Manufacturers of America trade association launched a multimillion campaign to bolster its image in the face of criticism from across the political spectrum of exorbitant drug price hikes. Under the banner of Go Boldly, PhRMA sought to persuade lawmakers and the public that biopharmaceutical producers were doing great things to improve our quality of life and were not just price-gouging crooks.

Two years later, the campaign is still in operation, apparently because the public has not been won over. That’s not surprising, given that Big Pharma is still behaving badly. Relieved that the Trump Administration’s drug cost initiative turned out to be toothless, major drug makers are implementing new rounds of price increases.

Promoting the idea that the industry is preoccupied with innovation is also being made more difficult by the announcement that Bristol-Myers Squibb is seeking to spend $74 billion to acquire rival Celgene. The deal would unite two companies that each have been struggling with their cancer treatments.

Bristol’s Opdivo drug has been losing ground to Merck’s Keytruda while Celgene has been experiencing setbacks in clinical trials and is facing a patent expiration in 2022 for its major product Revlimid. A marriage of the two companies would serve mainly as an excuse to eliminate jobs and raise prices, while doing little that would benefit patients.

The merger would also bring together two companies that have checkered legal and regulatory track records. According to Violation Tracker, Bristol has racked up nearly $1 billion in fines and settlements for a wide range of offenses. These include a $515 million settlement with the Justice Department of allegations relating to drug marketing and pricing; a $150 million settlement with the SEC concerning accounting fraud; a $14 million settlement of Foreign Corrupt Practices Act allegations; and a $3.6 million settlement of Clean Air Act violations.

It has also faced criminal charges, including one case in which it paid $300 million and got a deferred prosecution agreement to resolve allegations of accounting manipulation and another in which it pled guilty to lying to the federal government during an investigation of a secret agreement to thwart a generic competitor to its blood thinner Plavix.

For its part, Celgene paid $280 million in 2017 to resolve allegations that it promoted two cancer drugs for uses not approved by the Food and Drug Administration.

The prospect of one ethically challenged and market weakened drug company paying $74 billion to acquire another is emblematic of what is wrong with the U.S. pharmaceutical industry. It provides additional justification for aggressive reforms such as the bill introduced by Bernie Sanders and Ro Khanna that would allow the federal government to authorize generic alternatives to overpriced drug or the proposal by Elizabeth Warren and Jan Schakowsky that the federal government itself produce generic alternatives under certain circumstances.

If we want to Go Boldly, let’s do it with alternatives that empower patients not drugmakers.

The Benefits of Hubris

As customary restraints on corporations and high-level public officials increasingly fall by the wayside in Trump’s America, we may have to rely on the likelihood that their greed will cause them to go simply too far.

That’s what happened with Scott Pruitt at the EPA: he ultimately brought about his own undoing through his inability to limit his covetousness for things large and small. The unbridled pursuit of self-interest may yet bring about the downfall of other Administration figures such as Jared Kushner and Wilbur Ross.

In a remarkable development, overreach also appears to be dooming a major media merger: the audacious effort by Sinclair Broadcast to take over Tribune Media and achieve a virtual stranglehold over local television broadcasting in the United States.

Sinclair seemed to have it made. The company embraced Trump during the 2016 campaign and offered itself up as a propaganda arm of the new administration, hiring Trump crony Boris Epshteyn to produce unabashedly pro-MAGA commentaries that the company compelled its affiliates to air.

The acquisition of Tribune, announced in May 2017, would have given Sinclair an unprecedented share of the local TV market, yet it appeared that the deal would sail through the Federal Communications Commission now that the agency was headed by Trump-appointed regulatory zealot Ajit Pai. Among the rules Pai was eager to eliminate were those involving ownership limits.

Sinclair, however, overplayed its hand. Rather than rubber-stamping the deal, the FCC has just decided to refer it to an administrative law judge, a move that is widely expect to doom the merger.

The company gave the agency little choice when it engaged in a dubious maneuver in its proposal on how to satisfy remaining ownership rules. While claiming that it would divest 23 stations, Sinclair would actually retain operational control over those properties. The FCC’s order suggested that the company’s proposal may have included “misrepresentation or lack of candor.” Translation: Sinclair is a big fat liar.

An article in Politico, describing what it called “a tale of stunning hubris,” quoted a broadcast industry official as saying: “Sinclair’s style in Washington is Exhibit A of how to squander the most favorable regulatory environment in decades.”

While this is a major setback for Sinclair, the defeat of the merger is a boon for media diversity. It is also a hopeful sign amid the deregulatory onslaught and corporate empowerment that have marked so much of the first year and a half of the Trump Administration.

It would be preferable if public interest groups could defeat business abuses directly, but for now we may have to stand by and wait for corporate hubris to do the job for us.

Bayer and Monsanto: Another Dubious Chemical Industry Marriage

If the chemical industry spent as much time on product safety as it does on corporate restructuring, the world would be a healthier place. In 2015 DuPont spun off a bunch of its operations with tainted environmental and safety records into a new company called Chemours. Then DuPont engineered a merger with its longtime rival Dow Chemical, which had its own checkered history, to form DowDuPont. The combined company is now making more structural adjustments.

More changes are in the works in connection with the recently completed merger of German chemical giant Bayer and Monsanto. This is another case of a marriage between two highly controversial corporations.

Bayer was one of the German companies that combined in the 1920s to form IG Farben, which would go on to use slave labor during the Nazi period and was then split up after the Second World War. The largest of the resulting companies were Bayer, BASF and Hoechst (now part of Sanofi).

As Bayer has stepped up its U.S. involvement over the past two decades it has gotten embroiled in one scandal after another. In 1997 one of its subsidiaries based in New Jersey pled guilty to criminal price-fixing and had to pay a $50 million fine. In 2000 Bayer had to pay $14 million to the federal government and the states to settle allegations that it inflated prices on drugs sold to the Medicaid program. In 2001 it was accused of price-gouging on the antibiotic Cipro, which was then in high demand because of the anthrax scare. It later had to pay $257 million to settle a federal lawsuit on Cipro overcharging.

In 2003 documents emerged suggesting that Bayer was aware of serious safety problems with its cholesterol drug Baycol long before the medication was withdrawn from the market. In 2004 Bayer had to pay a $66 million fine in another criminal price-fixing case. A 2008 explosion at a Bayer pesticide plant in West Virginia that killed two workers led to regulatory penalties including a $5.6 million settlement with the EPA. A report found that management deficiencies played a significant role in creating the conditions that caused the explosion. Environmental and workplace safety fines have continued in recent years.

Monsanto, now absorbed into Bayer, was long one of the most hated corporations in the United States, due to the hardball tactics its employed in marketing genetically modified seeds and Roundup herbicides to farmers. It brought aggressive lawsuits against farmers accused of violating its patents. The company somehow managed to avoid antitrust charges, but in 2016 it was fined $80 million by the Securities and Exchange Commission for accounting violations relating to Roundup.

Bayer’s pursuit of Monsanto is part of its effort to brand itself as a life sciences company rather than merely a chemical producer. Its three main divisions are Crop Science, Pharmaceuticals and Consumer Health (the latter being what used to be known as over-the-counter medications such as aspirin, which Bayer is credited with inventing).

Of these, the most problematic is crop science. Bayer, along with DowDuPont and ChemChina (which bought Syngenta), increasingly dominate world markets for seeds, pesticides and related agribusiness products, giving them unprecedented control over the global food supply. This may give us a headache no amount of aspirin can relieve.

Bumble Bee CEO Gets Stung

Corporate critics, myself included, have long complained about the unwillingness of federal authorities to hold top executives personally responsible for illicit practices at the businesses they run. It was thus surprising but encouraging to learn that the Justice Department Antitrust Division has gotten a grand jury to return an indictment against the chief executive of Bumble Bee Foods for participating in a conspiracy to fix prices of packaged seafood sold in the United States.

The case against Christopher Lischewski comes in the wake of the prosecution of the company itself, which last year agreed to pay a criminal fine of $25 million, which under certain circumstances could rise to more than $80 million. The investigation has also ensnared several other individuals, including two at Bumble Bee, which is owned by the British private equity firm Lion Capital, and one at rival Star Kist.

We can hope that these cases are a sign that the Trump Administration’s Antitrust Division is taking its job seriously. Since Trump took office, the division has announced several large penalties against foreign banks such as France’s BNP Paribas for manipulation of currency markets, but this was the continuation of an investigation that began under Obama.

Some other Trump era cases have been pretty minor, such as the $409,342 fine imposed on an e-commerce company for fixing the price of promotional wristbands.

Price manipulation relating to consumer and industrial products is a perennial form of corporate misconduct. It is one of the main business offenses that regularly involves criminal charges and results in guilty pleas.

In Violation Tracker we document 241 Antitrust Division cases against corporations that resulted in more than $10 billion in penalties. Looking at the list, one is struck by the fact that so many of the defendants are foreign firms, including 11 of the dozen biggest fines.

This is not to say that U.S. companies don’t fix prices. Probably the most famous price-fixing case ever was the conspiracy to manipulate the electrical equipment market by the likes of General Electric and Westinghouse in the 1950s. U.S. agribusiness giant Archer Daniels Midland was at the center of a lysine price fixing scandal in the 1990s.

It may be that in recent years federal antitrust prosecutors have felt pressure not to go after domestic companies, or else that foreign corporations are emboldened by the pro-business climate in the U.S. to engage in more brazen behavior.

In any event, at a time of unprecedented concentration of ownership in many U.S. industries, there is bound to be plenty of price collusion going on that needs to be investigated.

Aetna’s Deception and the ACA Crisis

One of the decisive moments in the 2016 election campaign came last summer, when major insurance companies cut back their involvement in the Affordable Care Act exchanges after claiming they were losing money in the market. This was seized on by Trump and other Republicans to further denigrate the ACA and argue the need for repeal and replace.

Evidence has now emerged suggesting that the insurers’ claims were more of the lies that tainted the whole campaign and that those lies were motivated by an attempt to influence the federal government’s policy on mergers.

What was often overlooked during discussions of the health insurance industry last year was that the biggest concern of the major firms was the fate of their attempt to capture greater market share through giant acquisitions. Aetna was seeking to acquire Humana, and Anthem wanted to join forces with Cigna. The two proposed deals, worth about $85 billion, would reduce the number of major players to three (the other being UnitedHealth).

The Obama Administration and multiple states challenged the mergers, which ended up in court. Recently a federal district court judge sided with the Justice Department in the Aetna-Humana case; another judge is expected to rule soon on the Anthem-Cigna deal.

In his 158-page ruling on the Aetna matter, U.S. District Judge John D. Bates cited evidence indicating that the company’s decision to leave ACA exchanges in 17 counties in three states (Florida, Georgia and Missouri) was designed to “improve its litigation position.” In other words, its main reason for dropping out was not the profitability of those markets but rather the attempt to make it more likely that the Humana acquisition would be approved.

The opinion reveals (on p.125) that when Aetna met with officials at the Justice Department and the Department of Health and Human Services prior to the filing of the government’s complaint it “connected this lawsuit with its future participation in the exchanges” and threatened (p.126) to withdraw from those exchanges if the merger were not approved.

Also included in the opinion is an excerpt (p.127) from an e-mail in which Aetna CEO Mark Bertolini stated that “the administration has a very short memory, absolutely no loyalty and a very thin skin.” Asked in a deposition what he meant by that, Bertolini expressed resentment that the administration was opposing the merger despite Aetna’s role in supporting the ACA during the battle over its enactment.

The judge went on to cite (p.129) internal company e-mails in which, in the words of the opinion, “Aetna executives tried to conceal from discovery in this litigation the reasoning behind their recommendation to withdraw from the 17 complaint counties.” That effort was unsuccessful.

Overall, the court found that the exchange counties from which Aetna was withdrawing were a mix of profitable and unprofitable ones, thus undermining the claim that the move was purely a business decision.

While Aetna’s deception failed to sway the government or the lawsuit, it had a significant political impact amid a heated campaign. Now that the campaign is over and the ACA opponents prevailed, Aetna and the other insurance giants are staying silent as Republicans move to gut the law.

It’s unclear whether the firms expect the exchanges to survive in some form or they are rooting for a return to the old days of minimal regulation. In either event, it’s clear that companies like Aetna and Anthem are putting their desire for oligopolistic control above all else.