No such thing as a done deal

(breakingviews.com) -- U.S. antitrust regulators have time on their hands. The boom in mergers and acquisitions has subsided, so there will be fewer new cases for the bureaucrats to scrutinize even though, after an eight-year hiatus, they have the backing of a more interventionist administration.

So what to do? Perhaps they will revisit the past. Christine Varney, Obama's pick to run the antitrust unit at the Department of Justice, said she was "absolutely" open to retrospectively studying the effects of approved mergers in her nomination hearings this week.

The idea of re-examining completed mergers may seem a bit odd. A deal is a deal, no? Yet there's no statue of limitations on the matter. Remedies are similarly unconstrained.

It's not even extraordinary - the largely laissez faire Bush administration's Department of Justice filed a case in December against a company called Microsemi (MSCC) seeking to undo its completed acquisition of a rival.

Antitrust cognoscenti are bracing for the new administration to use this power more often. And it's not too hard to see where it might aim its fire. History suggests CVS Caremark (CVS, Fortune 500), company created by the 2007 merger of a drugstore chain with a pharmacy benefits manager, could be one of the first cases re-examined. Consider the parallels.

In the early 1990s, Merck (MRK, Fortune 500) agreed to buy pharmacy benefits manager Medco (MHS, Fortune 500). The transaction glided to approval under the first President Bush. A few years later, the Clinton administration reopened the case.

The Feds, with Varney taking a leading role as an FTC commissioner, claimed vertical integration of drug middlemen like Medco invited anticompetitive behavior. The government eventually succeeded in imposing sanctions. Merck subsequently spun off Medco because the government limitations on things such as data sharing meant there were no synergies between the two.

Fast forward to 2007. Drugstore chain CVS agreed to acquire Medco rival Caremark, and the merger won quick approval under President Bush. Now, a new Democratic administration is in power with Varney in the top position.

And various interest groups allied to the administration claim CVS Caremark's vertical integration is anticompetitive. They are pressing the Feds to impose firewalls to prevent information sharing between the two.

Of course, none of this may pan out. CVS Caremark says claims of anti-competitive actions have no merit and there are strong internal safeguards against improper data sharing. And Varney hasn't even been approved.

Yet CVS Caremark's board - as well as the boards of acquisitive companies ranging from AT&T (T, Fortune 500) to Whirlpool (WHR, Fortune 500) - shouldn't assume their mergers of the past won't become headaches of the future.