Mergers Ruin Everything

The title of this blog was taken from a Matt Stoller piece of the same name, found here. Matt runs a subscription-based blog that gives an in-depth analysis of merger policy and pending mergers.  His thesis is, as suggested, that mergers have caused more harm than good in this country.  I wholeheartedly agree and recommend Matt’s blog to anyone interested in the topic.

Antitrust laws were adopted at the beginning of the 20^th century. They were aimed at monopolistic combinations among businesses that created excessive market power.  Creative lawyers soon found a work-around.  The work-around waws to avoid agreements among different firms and, instead, combine firms through mergers.  This gave the single, merged firm the enormous market power that the antitrust laws prevented multiple firms from exercising through agreements.

The largest (temporary) antitrust victory in the past 25 years was in the DOJ’s effort to break up Microsoft for giving away its internet browser for free, as part of a bundled product, and for anti-competitive acts against the start-up operating system, Linux.  Thomas Penfield Jackson (1937-2013), of the DC District Court, was the trial judge.  David Boies represented the US Department of Justice through a separate engagement (Boies was not a DOJ lawyer).  Judge Jackson ordered the breakup of Microsoft.  But the victory was short-lived, as Microsoft commenced a vicious character assassination effort on Judge Jackson, causing his judgment to be reversed on appeal.  The case ultimately settled with a proverbial slap-on-the-wrist punishment for Microsoft.  This was the end of active antitrust enforcement—until just recently.

We now have a head of the Federal Trade Commission who is actually interested in antitrust enforcement: Lina Khan. The most important step she has taken so far is to initiate a review of FTC’s merger guidelines that have been enforced by every administration since President Reagan. She has also focused on the obvious anti-competitive conduct enjoyed by Amazon Prime. 

Finally, it is worth noting that the legal intellectual leader in favor of big business and against merger regulation, is retiring from the US Supreme Court soon—Justice Steven Breyer.  Justice Breyer strongly favored efficiencies offered by very large firm mergers and didn’t seem to care much about the collateral damage to smaller firms, and consumers, caused by mergers.  He is considered a “liberal” justice in most areas of the law.  But in decisions favoring big business—and mergers especially—he was anything but liberal.  But his favoritism for big business went overlooked, largely because he was nominally a “liberal,” and probably because he has an affable personality that shines through in oral argument.

With Justice Breyer retiring soon, and with a new FTC chairperson whose agenda is to return enforcement “teeth” to antitrust law, a new dawn may be approaching for smaller businesses.