There is nothing inherently wrong with the merger of two companies. Many on the left have adopted the view that mergers and acquisitions somehow are a problem for our economy.
Nothing could be further from the truth.
It is simple economics to see that even large companies merge together to pursue profit maximizing strategies that benefit their shareholders and ultimately customers. There are mergers to establish “economies of scale” that create efficiencies and can produce more services or products at a lower cost. “Vertical mergers” occur when two companies in the same industry or service work in different stages of production or delivery of services and come together as one company. Such transactions can increase competition and allow companies to reduce prices, expand production, and gain access to customers and/or operational support.
Free markets work to the benefit of consumers. Efforts by the previous government to block mergers put unelected bureaucrats in the position of making business decisions based on politics.
The New Federal Trade Commission (FTC) Chairman Andrew Ferguson has said he will “stop [former FTC Chair] Lina Khan’s war on mergers,” promising to restore a sense of fairness and speed to merger reviews so that American mergers can cause “the economy to thrive, businesses can bring their new ideas to market, and we can grow our way out of this debt crisis.” Khan is an ideologue who saw herself as the CEO of American big business. She attempted to use the power of government to go after the most successful companies in our country for all the wrong reasons.
For decades, the FTC and Department of Justice were largely impartial arbiters of antitrust law, evaluating proposed mergers and acquisitions on the merits and established legal principles. Under the law, the agencies stepped in only when a review of the evidence indicated a transaction could harm competition, and therefore, consumers. That balanced approach, implemented over decades by antitrust leaders from both parties, was far more fair than the Biden administration’s politicization of the commission.
Instead of being an agency that used the traditional approach to analyzing mergers and acquisitions the law was perverted in an effort coordinated by Khan, Sen. Elizabeth Warren and their ideological allies to weaponize the agency against our most successful companies. Chair Ferguson’s statements suggest that he will seize on several opportunities to improve on the FTC’s approach to merger reviews and unlock the economy-boosting power of American mergers and acquisitions. If used, this power should be exercised sparingly.
Former Chair Khan undermined the consumer welfare standard, which held that mergers should be evaluated by their likely effect on measurable impacts such as higher prices, lower output or reduced quality or innovation. Instead, Khan introduced novel theories about the impact of mergers on equity, privacy, and other purported social goods. Ferguson has stated that he aims to bring “certainty and clarity” to the merger process, and he can do that by refocusing antitrust law where it belongs – to the benefit of innovation, competition and American consumers.
The fact is that companies have to worry about the FTC when contemplating a merger or acquisition. A faster, less burdensome review process makes sense. The Khan’s FTC was known for demanding additional information from merging companies, known as a “Second Request,” even in cases where the agency was not likely to undertake enforcement action. Second Requests imposed an immense costs and burden on businesses in the form of a de facto tax on mergers and acquisitions while having the intended consequence of delaying and deterring mergers.
In contrast to Khan’s practice of sitting on investigations of otherwise legal mergers while they withered on the vine, Ferguson has said that once his FTC knows that a merger does not violate the law, they would close an investigation. The previous lame-duck FTC was the most active in recent memory. Chair Ferguson has the opportunity to right these wrongs, to investigate and identify any such politically motivated merger investigations started in 2024 by Chair Khan at the behest of Sen. Warren and well-connected leftist special interests – and close them.
In a power grab move by the former Chair, she rescinded long-standing FTC policy that, except in exceptional circumstances, the FTC would not require settling parties to notify and submit subsequent deals to prior approval. This caused merger-chilling uncertainty, where parties had to consider that a merger might also burden future deals – even unrelated ones. Chair Ferguson can restore the prior policy by eliminating this abusive practice.
Ferguson can fulfill his promise of fairness and demonstrate that the FTC is no longer anti-business, by returning to a sound legal framework, streamlining the FTC’s review process, and unlocking mergers under review that will support innovation.
