The US Justice Department has thrown a wrench into Hewlett Packard Enterprise Co.'s (HPE) ambitious $14 billion acquisition of Juniper Networks Inc., filing a lawsuit to halt the deal over antitrust concerns. 

In a legal challenge unveiled Thursday in a California federal court, the agency argued that the merger would eliminate crucial competition in the enterprise wireless networking sector, potentially harming businesses, universities, and hospitals that rely on these technologies.

If the acquisition proceeds, the Justice Department warns, the market would shrink from three major players—HPE, Juniper, and Cisco Systems Inc.—to just two, consolidating roughly 70% of the industry under the control of HPE and Cisco. 

According to a report from Bloomberg, the complaint asserts that Juniper’s competition has previously driven HPE to innovate and cut prices, a pressure that could disappear if the deal goes through.‍

A Battle Over Innovation and Choice

"This transaction, if consummated, would eliminate head-to-head competition that has lowered prices and driven investment in network management software," the Justice Department stated, adding that without Juniper as an independent player, HPE would face less pressure to discount its products or introduce cutting-edge features.

The immediate fallout saw both HPE and Juniper’s stock prices dip by about 2% following the announcement.

Unsurprisingly, HPE and Juniper are pushing back. In a joint statement, the companies dismissed the Justice Department’s argument as “fundamentally flawed,” insisting that their merger would enhance—not hinder—innovation and competition.

“We will vigorously defend against the Department of Justice’s overreaching interpretation of antitrust laws and will demonstrate how this transaction will provide customers with greater innovation and choice,” the companies declared. “This transaction brings together two complementary networking offerings and will create a networking player with the scope and scale to more effectively compete with global incumbents.”‍

The Competitive Landscape: Who Stands to Lose?

At the heart of the Justice Department’s case is the idea that Juniper’s presence in the market has been instrumental in keeping HPE on its toes. According to the lawsuit, HPE’s internal communications reveal a long-standing rivalry with Juniper, with executives closely monitoring its growth and strategizing aggressive sales tactics to counter its rise. In one particularly candid exchange, an HPE sales leader reportedly urged his team to “KILL MIST!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!” referencing Juniper’s Mist wireless platform.

The agency also argues that many large organizations prefer HPE and Juniper’s offerings over Cisco’s, citing concerns over Cisco’s pricing, features, and reliability. If HPE swallows up Juniper, customers might find themselves with fewer viable alternatives in an already concentrated market.‍

HPE’s Chief Executive Officer Antonio Neri isn’t backing down. In an interview following the lawsuit’s filing, Neri dismissed the government’s claims as unfounded.

“We believe there is no case here,” Neri said, adding that the antitrust argument overlooks the fact that the $180 billion networking market includes several well-capitalized competitors such as Arista Networks Inc. and Fortinet Inc.

While the U.S. government is digging in its heels, regulators across the Atlantic don’t seem to share the same concerns. The European Union granted unconditional approval for the merger, concluding that the deal wouldn’t stifle competition. The UK’s Competition and Markets Authority followed suit with its own approval.