The government has increased its control over mergers and acquisitions, with no concern over the health of small businesses. While some larger corporations have used their financial reserves to take control of competition, smaller companies merge to survive more often than not. The minimum limits will allow the government to interfere in the smaller businesses in a way that can lead to more of them collapsing, instead of allowing for the competition the Biden Administration claims. The people who defend this are academics and government officials who have rarely run businesses or even participated in the commercial realm.
Committee Letter
The House Committee on Small Business sent a letter to both the Federal Trade Commission and the Antitrust Division of the Department of Justice on this matter. Here is a snippet of what was sent.
“The House Committee on Small Business (the Committee) writes to inquire about the Federal Trade Commission’s (FTC) and the Department of Justice’s Antitrust Division’s (DOJ) jointly released Final Merger Guidelines (Guidelines) that significantly expand the amount and type of transactions subject to administrative antitrust investigation and challenge. These new guidelines will have a significant impact on small businesses—nearly half of which look to mergers and acquisitions (M&A) to grow—but it seems the FTC and DOJ failed to properly consider the impact the new Guidelines will have on small businesses. This comes at a time when small businesses are struggling to access capital across the board, through traditional financing methods as well as alternative capital access options.”
“Congress has charged the FTC and DOJ with administering antitrust statutes to promote open and fair competition, including by preventing M&A that would violate these laws. However, the revised set of Guidelines is significantly more hostile toward mergers than the set they replace. The Guidelines include several presumptions that would automatically designate some proposed M&A activity as harmful to competition and would trigger frequent extended review of transactions. By the FTC’s own estimate, these Guidelines could lengthen the process for merger filing by nearly 300 percent. By increasing uncertainty and the risk of time consuming, expensive, and burdensome investigations, the new Guidelines threaten to deter M&A transactions before they even get off the ground. The FTJ and DOJ present these Guidelines as providing transparency and reflecting a modern market reality, but it is clear they further an aggressive enforcement agenda that will deter deal making.”
“Nearly half of small business owners look to leverage M&A to grow, as merging with larger companies allow small businesses to connect with the capital, resources, and talent they need to scale. Acquisition is a major avenue for entrepreneurs and investors to achieve returns on investment. In 2020, nearly 90 percent of venture-backed startups exited their venture funding through an acquisition. The proposed Guidelines hindering these options is a looming threat that this exit strategy may no longer be available and will limit access to venture and other capital, thereby limiting innovation and growth.”
Merger Issues
Here, via a Regulatory Review article, is what the guidelines say.
"In certain circumstances, such as when a proposed merger reaches a specified monetary threshold, the companies that plan to merge must notify the Justice Department and the FTC. The agencies use the Merger Guidelines as a nonbinding tool to analyze transactions and determine whether to investigate the merger’s potential effects.
The new Merger Guidelines list 11 general guidelines, six of which are frameworks used to “assess whether a merger may substantially lessen competition or tend to create a monopoly,” and five of which express how to apply the frameworks in certain settings."
"One guideline, for example, asserts that the Justice Department and FTC will consider in their analysis whether a merger will eliminate “substantial competition” between merging companies. Another guideline states that the government will consider whether the merger may prevent another firm from entering a concentrated market at all."
"Merging parties can present evidence to rebut the government’s presumption that a merger will be harmful. The new Guidelines contain a section describing what types of evidence companies may present to do so, including evidence of procompetitive benefits of a merger or evidence that one of the merging parties would cease to exist absent the transaction. The Guidelines also include a section of “analytical, economic, and evidentiary tools” used in the government’s analysis of mergers."
"Since 1968, the Justice Department and the FTC have jointly issued guidelines to reflect the government’s evolving position on merger enforcement. Although not every new presidential administration issues updated guidelines, each new set of guidelines tends to account for economic, market, legal, and social changes that occur between updates."
"In 2021, President Biden issued an executive order warning that industries across the country have become more concentrated. He argued that the concentration has denied consumers and workers the opportunity to participate in an open economy and has led to increased inequality, weaker bargaining power for workers, higher prices, and lower quality goods and services. He encouraged the Justice Department and the FTC to exercise greater antitrust scrutiny."
"Leaders at the Justice Department and FTC responded not only by bringing novel legal challenges against mergers, but also by initiating an update to previous Guidelines to reflect “modern market realities, advances in economics and law, and the lived experiences of a diverse array of market participants.”
"In July 2023, the Justice Department and the FTC released a draft version of the Merger Guidelines for public comment. The draft garnered widespread attention, receiving over 30,000 comments and serving as the subject of numerous op-eds in major national newspapers."
"Some commenters on the draft Guidelines expressed concern about the federal government’s reliance on outdated Supreme Court precedent to support its policy changes. Commenters also argued that the agencies focused too much on increased concentration without sufficient focus on whether concentration had harmful effects."
"The final Guidelines reflect consideration of these strong initial reactions, limiting reliance on old case law and tamping down certain language."
"Nonetheless, experts acknowledge that the new Guidelines are more aggressive than previous versions. For example, the 2023 Guidelines specifically highlight circumstances that past guidelines did not focus on, such as serial acquisitions, potential competition, and multisided platforms."
Expert Opinion
The American Consumer Institute Center for Citizen Research has come out against the new regulations, with concise reasons why. Here, via a pamphlet they produced, are the reasons they are against them.
"The Proposed Merger Guidelines delineate theories that the Federal Trade Commission (FTC) and the Department of Justice (DoJ) have been using when considering mergers and acquisitions. Given the track record of losses before the courts when attempting to use these novel theories in complaints, the agencies should consider revising their strategy rather than doubling down through new guidelines."
"The draft guidelines appear to be unnecessarily restrictive when compared to previous agency merger guidelines. Guidelines 1 to 4 and 6 to 8 are concerned solely about market structure and not whether a merger would result in a “reasonable probability of substantially lessening competition,” which would support the claim of a Section 7 violation, consistent with prior court decisions. The draft merger guidelines omit the important qualifying terms – “reasonable probability” and “substantially lessening.” That omission serves to make merging firms an easy target for investigations, based on market structure, instead of anticompetitive conduct."
The Biden Administration entered into an area they continue to prove to be inept at dealing with, with it being backed by a political party that creates more and more inflation each time they are in control. The biggest headache is that people rarely have a chance to understand the impact of growing government until it is thrust on them. At the same time, the GOP, who claims to be against such actions, rarely takes action to erase them. It means that these crippling regulations are here for the foreseeable future.
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