One of the most effective ways for businesses—especially startups—to grow is through mergers and acquisitions. But in today’s political climate, success is suspect, and growth is punished. In the piece below, Market Institute President Charles Sauer explains how antitrust enforcers at the FTC and DOJ are taking an increasingly aggressive stance against M&A—and why that’s bad news for small businesses, tech innovation, and even consumers.
From Meta’s acquisitions of Instagram and WhatsApp to the failed Kroger–Albertsons merger, Sauer argues that the real losers of this heavy-handed approach are American workers and entrepreneurs—while the big winners are government bureaucrats and foreign competitors. With Trump’s antitrust team now embracing a watered-down version of Biden’s “neo-Brandeisian” crusade, the time to rein in the FTC is now.
Read the excerpt below:
“One way many businesses expand is through mergers and acquisitions. Some start-up businesses actually use the potential for being acquired by a larger company, which will give investors a large payday, as a way to attract investors. Mergers and acquisitions give a once-small company access to new resources and talent to help them develop new products while improving their existing offerings. The acquiring company can also benefit from the infusion of new talent with new ideas on how to improve operations.
Mergers and acquisitions are vital parts of a dynamic marketplace. Sadly, mergers and acquisitions are too often viewed as enemies of efficiently functioning free markets. Instead, they are viewed as a way for monopolies to crush small competitors. Therefore, regulators believe that small companies and consumers need aggressive antitrust actions to protect them from monopolies. This viewpoint ignores how small companies benefit from mergers. For example, Facebook (now operating as part of the Meta corporation) acquired Instagram in 2012 and WhatsApp in 2013. At the time of the acquisitions, neither company seemed like a potential social media giant on par with Facebook.
Today, thanks to the access to capital and talent gained through these acquisitions, Instagram and WhatsApp are among the top five most popular social media sites in the world. Yet, the FTC is seeking to force Meta to sell both these properties. Doing so would harm Meta’s workers, investors, and the billions of people who use Meta’s services. The winner will be Meta’s competitors, particularly foreign social media companies like ByteDance, owner of TikTok. Forcing Instagram and WhatsApp from Meta will discourage larger social media companies from acquiring smaller companies and helping them grow. This will reduce investment and innovation in American technology companies, creating a void that will be filled by Chinese and other foreign companies.
Mergers can also help small, medium, or even large businesses compete with their larger competitors. For example, grocery store chains Kroger and Albertsons considered merging. The merger would have enabled them to better compete with big box stores like Wal-Mart, Costco, and Target. Unfortunately, the merger was scrapped because of a challenge from the FTC. Once again, the winners are big corporations while the losers are workers and consumers. Aggressive antitrust enforcement was one of the hallmarks of the Biden Administration’s economic policy. Under Biden, the FTC and the Justice Department’s Antitrust Division adopted a “approach which justified challenging almost every merger or acquisition in almost any industry. Biden’s antitrust team brought so many lawsuits challenging mergers that some began referring to a “merger tax.”
Hopes that President Trump’s return to the White House would result in a more reasonable approach to antitrust was one reason stocks rose after his election. Unfortunately, Andrew Ferguson, Trump’s pick to head the FTC and Gail Slater, President Trump’s pick to head the Justice Department’s Antitrust Division, are pursuing a course that can charitably be described as “neo-Brandeisianism” lite. Chair Ferguson has continued the lawsuit against Meta, while Assistant AG Slater is continuing the Justice Department’s lawsuit against Google seeking to force it to sell the Chrome browser.”
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