There is yet another antitrust bill in Congress. The Prohibiting Anticompetitive Mergers Act, sponsored by Sen. Elizabeth Warren (D-MA) and Rep. Mondaire Jones (D-NY), seeks to prevent big tech mergers larger than $5 billion. While companies could appeal this automatic denial in court, they would have to prove the Federal Trade Commission, the Justice Department, or both acted in an “arbitrary and capricious” manner in denying a merger. That is an uphill climb that stacks the deck against companies, and may dissuade many from even trying.
Additionally, it would empower regulators to retroactively undo completed mergers if they result in the merged entity having a market share over 50 percent at some point in the future.
There are several problems with the bill. First, it might not stay on the books for long if it passes, because the U.S. Constitution prohibits ex post facto laws. Unwinding past mergers that were legal at the time they were approved almost certainly qualifies as ex post facto, and courts are unlikely to look favorably on any unwinding attempts if they are met with legal challenges.
Second, the 50 percent market share threshold for enforcement is arbitrary. Fifty percent of which market? Regulators are free to define that as narrowly as they choose. As I’ve noted before, any market can be a monopoly if you define it narrowly enough. The relevant market fallacy is already too common in antitrust. This bill would be an open invitation for regulators to abuse it even further. This is another area where regulators frequently run into trouble in court.
Third, good policy is predictable and stable. The Prohibiting Anticompetitive Mergers Act would be neither. Companies and investors need to be able to plan ahead to bring new innovations or pursue new ways to lower prices. If they try something only to have it undone by regulators after the fact, why even bother? This chilling effect is one of antitrust policy’s most significant costs, and it is often unseen.
Fourth, not everything is an antitrust issue. There is a reason so many startups seek to be acquired by big tech companies: overly burdensome financial regulations. The Sarbanes-Oxley and Dodd-Frank laws make it difficult for growing companies to raise capital on their own or go public. It is often easier for a startup to sell out to a bigger company that already has those resources in-house. If Sen. Warren and Rep. Jones want fewer big tech acquisitions, they should make financial regulations more reasonable, so smaller firms can get the capital they need while staying independent.
Those are just the start of the Prohibiting Anticompetitive Mergers Act’s problems. It is unlikely to pass, since Sen. Amy Klobuchar (D-MN) and Rep. David Cicilline (D-RI), two of Congress’ most powerful antitrust voices, conspicuously declined to support it. Even if it is more of a statement bill than a serious proposal, it is still important to nip it in the bud. There are better ways to make the economy more competitive.