Self-proclaimed policy wonk Senator Elizabeth Warren (D-MA) has a plan for everything — just don’t count on those plans helping anyone except politicians and bureaucrats. Her plan to ban so-called “anti-competitive mergers,” in fact, is far more likely to hurt Americans than to help them.
The Prohibiting Anti-Competitive Mergers Act, introduced in the Senate by Warren and in the House by Representative Mondaire Jones (D-NY), would make it illegal to complete any merger valued over $5 billion, or that results in a market share of 33 percent for sellers or 25 percent for employers. On top of that, it would subject any already consummated merger to review and require its break up if the merger resulted in a market share over 50 percent.
Warren’s legislation, particularly in setting the $5 billion ceiling for mergers, assumes that any merger that involves two big companies is necessarily bad, and necessarily harms consumers and workers. History tells us that that is false.
Take the 2013 merger of American Airlines and U.S. Airways, valued at $11 billion. That marriage was also opposed by antitrust crusaders, including the Obama administration’s Department of Justice and attorneys general from several states.
But that merger helped rescue the ailing American Airlines from Chapter 11 bankruptcy. How many pilots, flight attendants, operations, and maintenance workers have jobs and pensions today as a result of the merger? While some Warren-esque antitrust zealots might have opposed the pairing, it’s no wonder why American Airlines’ unions supported it.
Or look at the $13 billion merger of Sirius and XM back in 2007, which was blasted by antitrust hawks at the time for creating a monopoly. That claim looks silly in retrospect. While Sirius XM dominates the satellite radio industry, it is far from the only choice consumers have for audio entertainment, with ubiquitous smartphones and internet-based streaming services revolutionizing the market in recent years. That’s why even the combined Sirius XM just barely avoided bankruptcy, a fate that likely would have awaited at least one, if not both companies should the merger have been blocked. In other words, consumers would likely have fewer entertainment choices today if antitrust crusaders had their way in 2007.
There are more examples, but the broader point is this: Warren and others who advocate a departure from the consumer welfare standard are risking hurting the very people they mean to help. There’s nothing inherently wrong with “bigness” in the corporate world; it’s when that size is used to harm consumers that antitrust law should take effect.
Until consumers are experiencing real harm, government intervention in the economy is often misguided and overly confident in its ability to predict the state of the market even just a few years down the road.
Banning mergers on grounds of size alone, and particularly retroactively applying that size metric to past mergers and acquisitions, is only going to hurt workers and consumers. Congress should reject this misguided thinking and instead focus on codifying the consumer welfare standard into law.
