Mergers or monopolies? U.S. Chamber questions FTC guidelines

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The U.S. Chamber of Commerce has come out against the Federal Trade Commission and Department of Justice‘s recent release of its new merger guidelines.

The FTC and DOJ in July released guidelines that are aimed at preventing mergers and acquisitions that may impact competitiveness in a market.

U.S. Attorney General Merrick Garland said the changes are needed.

“Unchecked consolidation threatens the free and fair markets upon which our economy is based,” he said. “These updated Merger Guidelines respond to modern market realities and will enable the Justice Department to transparently and effectively protect the American people from the damage that anticompetitive mergers cause.”

But U.S. Chamber Chief Policy Officer Neil Bradley disagreed.

“The agencies peddle a false narrative on concentration in our economy, are quick to dismiss the benefits and efficiencies mergers create for consumers, and ignore the positive impact mergers have on innovation,” he said in a statement.

The problem with the issue, according to Mike Horvath, an attorney with Gross McGinley in Allentown, is that there is a strong political element to the issue.

He noted that the current administration has been trying to push merger and acquisition restraints through the courts for some time but has failed.

He said the FTC and DOJ guidelines are a new way to tackle the issue.

Business advocates, like the U.S. Chamber, see the move as being “anti-free market,” while supporters say it will make it harder for large companies to attack a smaller company.

Horvath said there is a great deal of value for some small businesses in mergers and acquisitions.

He said many entrepreneurs or small businesses create a business and build it up with the idea that they will merge with or sell to a larger company to “cash out” on the labor they put into developing the business.

They often count on that opportunity.

“These are businesses that are never going to be Microsoft or Coca-Cola,” Horvath said.

By placing barriers to them consolidating in the same industry, it’s hurting their chances to grow.

He said merger and acquisition activity is particularly important to industries like his. Law firms thrive on merging to grow market share and add services to their roster. Many smaller firms or solo attorneys find advantages to joining a larger operation.

But he said there is another issue to consider.

An example would be a concrete manufacturer buying up other manufacturers in a region so that those who use concrete would only be able to buy from one manufacturer.

His biggest concern with the guidance is that it paints too broad of a stroke and doesn’t take into account the major differences between small firms being acquired and manufacturers taking over the competition to monopolize a market.

“It seems like these guidelines apply to the Microsofts and Coca-Colas as much as smaller Lehigh Valley businesses,” Horvath said. “They’re not on the same playing field.”

Before any changes are made, he said serious questions need to be raised.

“We don’t want to see monopolies. But we get to the point where we have to ask where is the difference?” he said.