Summers Says Tougher US M&A Rules Seem Like ‘War on Business’

[william]

Not sure how I feel about this. I know I don't like big business hostile takeovers or big mergers forcing the little guy out of markets but I'm very leery of the Fed getting involved.

“These guidelines — by moving away from an emphasis on lower prices for consumers to broader abstractions — are a substantial risk,” Summers said on Bloomberg.

The 13 new guidelines proposed Wednesday by the Justice Department and Federal Trade Commission are part of an effort to curb the rise of companies that seek to dominate their industries by buying up rivals.

Under the proposed guidelines, enforcers said they will examine multiple mergers if a deal is part of a series of acquisitions made by a company within the same market. Agencies also will focus on the impact on workers when a deal involves companies that formerly competed for labor.

The US Chamber of Commerce, the nation’s largest business lobby, which has been highly critical of Biden’s antitrust enforcers, condemned the new proposal saying it upends decades of bipartisan consensus that mergers aid the US economy.

What do you think?

MSN

 

[Publius]

Monopoly situations are difficult.
Guarding against this activity was fundamental to the debate when corporate entities were created.

I don’t know what the solution is but it always must be guarded against.
But any law passed on the issue can be very damaging if not openly and fully debated

 

[teekay99]

I am generally not a big fan of government intervention either, except when it comes to monopolies and antitrust issues.

The fewer players there are in a market, the more like a monopoly the players behave. Some cases (say public utilities such as gas, water, or power) will be close to monopoly for practical reasons.

But for "general" goods and services where multiple suppliers are present, while monopolies might provide an advantage due to economies of scale, or provide other non-price competition benefits, they inherently lack the marginal cost competition that leads to innovation that help drive down marginal costs. (Profit-maximizing monopolies not bound to municipal or government oversight will generally charge a price were their marginal costs equal their marginal revenue. And since there is no one else competing in the market to drive down marginal costs, well, it's easy to see how innovation might stagnate.) Additionally, in a monopoly situation, elasticity of demand (i.e. the existence of substitutes) is significantly reduced or eliminated.

I think in some cases we've allowed M&A to go too far. US airlines are a good example (though I would say they are more of an oligopoly as the US market is dominated by the big 4: American, United, Delta, Southwest). One of the original purposes behind the Reagan administration's deregulation of airlines was to allow price competition to drive down ticket prices. That happened. And then the airlines started merging (for a multitude of reasons) and prices have gone back up. So it could be argued that the mergers of US carriers defeated a goal of airline deregulation.

So in my humble opinion, I am open to exploring these rules further. Yes they should be fully debated and explored so as not to create an overreach.