What They Are Saying: FTC/DOJ Merger Proposals Will Hurt Small Businesses, Raise Prices, Stifle Competition
Bipartisan former administration officials, competition law experts, economists, & academics speak out against new extreme proposals
Recently, the Federal Trade Commission (FTC) and Department of Justice (DOJ) proposed changes that would impact mergers and acquisitions – changes that competition, antitrust, and economics experts consider a departure from established law and fundamental economic principles.
Rather than supporting competition, these proposed changes will stifle free markets and ultimately harm consumers – while private equity continues to uplift small businesses and encourage market competition.
In public comment and news media, opposition to new FTC/DOJ merger and acquisition proposals continues to mount – revealing a broad consensus that excessive regulation would harm economic growth, businesses, and consumers. Here’s a closer look at what they’re saying:
Grounded in Flawed Logic, Proposed Merger Guidelines Unfairly Burden Businesses and Will Have Troubling Economic Consequences
- “Former Treasury Secretary Lawrence Summers warned that the Biden administration’s crackdown on mergers and acquisitions through a sweeping overhaul of rules the government uses to determine whether deals violate competition law ‘seems almost like a war on business.’ ‘These guidelines — by moving away from an emphasis on lower prices for consumers to broader abstractions — are a substantial risk. I wish that this stepping back and offering merger guidelines had been taken as an opportunity to rationalize the policy.’” – Lawrence Summers, Former Treasury Secretary and former Director of the National Economic Council during the Obama administration in Bloomberg
- “…[T]he new guidelines’ economic costs could be staggering. Consumers would pay higher prices when companies can’t combine to take advantage of large-scale efficiencies. Start-ups would lose a way to gain access to the resources they need to get their innovations to the masses. Smaller rivals would go out of business when they should be able to combine and stay competitive against a dominant competitor…These opportunity costs would deprive consumers of lower prices and new innovations…Since Khan’s FTC isn’t likely to win many cases under the new guidelines, about the only winners from her new guidelines will be lawyers.” – Ryan Young, Senior Economist at Competitive Enterprise Institute and Alex Reinauer, Research Fellow at Competitive Enterprise Institute in National Review
- “The Khan led FTC has taken myriad actions to attack free markets. The announcement on new guidelines on assessing acquisitions and mergers is yet another example of the FTC treating corporations as if they are criminal enterprises trying to shortchange the American public. The fact is that government does not create wealth. Government is good at taxing, regulating individuals and corporations. Government is bad at running the private sector.” – Jerry Rogers, RealClearPolicy
Proposed Merger Guidelines Rely on Outdated, Cherry-Picked Case Law and Forego Well-Established Economic Principles
- “The new draft guidelines depart sharply from previous iterations by elevating regulators’ interpretation of case law over widely accepted economic principles. The guidelines have long helped courts use economic reasoning to evaluate government challenges to mergers. They shouldn’t become a debatable legal brief or, worse, a political football.” – Jason Furman, Professor of The Practice of Economic Policy at Harvard University, and Carl Shapiro, Professor of Economics at the University of California, Berkeley and former economic adviser to President Obama, in Wall Street Journal
- “Judicial acceptance of prior guidelines was a result of the agencies’ reputation as honest brokers of judicial precedent. The proposed guidelines jeopardize that reputation by selectively interpreting the law, relying on outdated precedents, and disregarding more-recent case law…This selective bias toward outdated judicial opinions and economic knowledge isn’t likely to impress the courts. The disconnect will lead to deep skepticism, casting a pall over all arguments (even sound ones) made by the Justice Department and FTC antitrust attorneys. The agencies might discover that it would have been better to go to court without guidelines rather than with a contentious interpretation of the law.” – Gus Hurwitz, Academic Director of the University of Pennsylvania’s Center for Technology, and Geoffrey Manne, President of the International Center for Law & Economics, in Wall Street Journal
- “…[T]he current proposed guidelines elevate the holdings of outdated cases and passé economics to try to rewrite the law…The ideal market for consumers and workers is not a bunch of isolated, small companies that write new contracts every month. While sometimes problematic, mergers can be beneficial to consumers, especially when the merger is between two companies that are not competitors. The merger guidelines need to reflect that.” – Brian Albrecht, Chief Economist at the International Center for Law & Economics, in StarTribune
- “…[T]hese guidelines are no mere incremental shift toward more merger enforcement under current antitrust law—they’re a radical departure from that law and the economics and recent history of mergers in the United States. And they’re a perfect encapsulation of why antitrust hawks’ knee-jerk ‘Big is Bad’ mindset is so misguided.” – Scott Lincicome, Vice President of General Economics and Trade at the Cato Institute, in The Dispatch
- “…[T]he guidelines do not embrace modernity at all, relying instead on outdated case law and theories that have not been upheld by the courts. As identified by antitrust attorney Lindsey Edwards, the guidance intentionally ‘ignores decades of precedent’ in order to challenge more mergers.” – Rachel Chiu, Resident Fellow for Competition and Regulatory Policy at Committee for Justice, in Townhall
Proposed Premerger Notification Requirements Wrongly Increase Transaction Costs and Lack Substantive Rationale
- “…[T]he new rules demand much more, even from actions that raise no substantive antitrust issues…The new form, if adopted, will require companies to increase the average time for a business to complete the form from 37 to 144 hours…and spend $350 million more for executive labor and attorney’s fees. While there is no doubt that mergers have become more complex, that is likely due to the increased regulations that dissuade new companies from going public, making acquisition the preferable end goal for a new business. Therefore, increasing the costs of mergers as a solution is like a man trying to pay off his gambling debt by taking his salary to Las Vegas.” – Harry Kazenoff, Competitive Enterprise Institute
The Bottom Line
Experts agree: proposed merger changes are a concerning departure from fundamental antitrust law and free market principles – threatening economic growth, private sector vitality, and – ultimately – consumer welfare.
