A group of Democrats in the House and Senate are imploring the country’s top antitrust enforcement cop to implement sweeping new changes to its merger-review protocol, according to a new letter viewed exclusively by MarketWatch.
The Federal Trade Commission, along with the Justice Department’s antitrust division, recently proposed changes to forms that companies proposing deals of a certain size must submit to the government, which critics say would suppress the market for mergers and acquisitions.
The new form will require companies to provide much more information to antitrust enforcers before they seek to consummate a deal. Most controversially, that would include narrative information about the strategic rationale for a transaction as well as studies, surveys, analyses and reports which were prepared by the company as it considered the deal.
“The new proposed [form] and associated instructions will facilitate efficient premerger review and ensure effective enforcement of antitrust laws,” wrote the lawmakers, including Sens. Elizabeth Warren, a Massachusetts Democrat, and Bernie Sanders of Vermont, an independent who votes with Democrats.
The letter, dated Sept. 27, was also signed by Democrats including Sen. Mazie Hirono of Hawaii, and Reps. Becca Balint of Vermont, Henry Johnson of Georgia, Rashida Tlaib of Michigan, Summer Lee of Pennsylvania, Lori Trahan of Massachusetts, Ilhan Omar of Minnesota, Mark Pocan of Wisconsin, Katie Porter of California and Greg Casar of Texas. No Republicans signed the letter.
The lawmakers lament the state of the U.S. economy today, arguing that the updated premerger process is necessary to combat growing concentration of industry and the digital transformation of the economy.
“Unchecked consolidation hurts consumers, small businesses, workers, and the economy,” the letter reads. “Consolidation leads to higher prices, less innovation, and reduced quality for consumers. It prevents small businesses from entering markets or competing fairly: for example it is twice as expensive for small businesses to borrow money compared to dominant ones, and there are fewer startups in states where a few companies dominate markets.”
The lawmakers note that since the current premerger notification process was instituted nearly 45 years ago, the required forms have not been updated, and only require companies to provide basic information that don’t “give regulators clarity as to whether a deal may substantially lessen competition.”
The FTC and DOJ proposed the changes in July, and then extended the period for accepting public comments on the proposal to Sept. 27, and it’s possible the final rule is amended before the agencies adopt it. There is no set timeline for when the FTC will vote to adopt any changes.
Some antitrust experts are skeptical that the proposed changes will hold up in court, if they are implemented as proposed.
“The proposed changes are likely to face a rocky path ahead,” wrote Justin Hurwitz of the University of Pennsylvania’s Center for Technology, Innovation & Competition, in a recent analysis.
“They appear to violate legislative intent that [the premerger process] not unduly delay transactions or require the production of materials the firms did not already create as par of evaluating the transaction.”
Hurwitz added that “the premerger notification process serves an important function, but it is a tax on on all mergers,” and predicted that the proposed changes will likely not “survive judicial review.”