Dems push for stricter antitrust rules amid merger boom

Dems push for stricter antitrust rules amid merger boom

Democrats are ramping up their attacks on major corporate mergers after a series of mega-deals from corporate giants. 

But Democrats aren’t just taking aim at the behemoth deals themselves: they’re looking at the specific government policies that permit them. Sen. Elizabeth WarrenElizabeth Ann WarrenLawmakers unveil massive bipartisan bill aimed at fighting opioid crisis Dems push back on using federal funds to arm teachers Admiral defends record after coming under investigation in 'Fat Leonard' scandal MORE (D-Mass.) on Wednesday directly attacked the Chicago school of economics — the principles that have significantly influenced how federal regulators evaluate mergers.


Warren and other Democrats say that these principles allow and, in some cases, encourage larger mergers, which they believe threaten competition and potentially hurt the public as well. 

Democrats’ criticism comes amid a new wave of mega-mergers in 2017, which Wall Street expects to continue into 2018. Over the past year, companies including AT&T and Time Warner, CVS and Aetna and Monsanto and Bayer have pursued multibillion-dollar mergers. Overall, billion-dollar plus mergers are up from a year ago.

The debate could have impacts on how mergers are treated down the road. Disputes over merger policy have already played a part in a controversy over how to handle AT&T’s $85 billion merger with Time Warner.

In her Wednesday speech, Warren said that adopting such laissez-faire frameworks for enforcing antitrust means government tools meant to increase competition in markets are “gathering dust.”

“With the growth of Chicago school economics in the 1970s and 1980s … instead of blocking mergers that posed significant threats to competition, [antitrust enforcers] signed off on settlement agreements that allowed bad mergers if the companies promised to take actions later on that were supposedly designed to protect competition,” she said.

The Chicago school of economics, named after the University of Chicago whose faculty, including economist Milton Friedman, were largely responsible for its intellectual underpinnings, preaches aggressively free market capitalism and an aversion to regulation.

Warren’s complaint lies with how the Chicago school, and contemporary federal antitrust policy in the government treats vertical mergers — deals between two companies that aren’t direct competitors, like Amazon’s recent $13.7 billion acquisition of Whole Foods or AT&T’s now-contested merger with Time Warner.

Generally, vertical mergers don’t cause problems within the Chicago school ideology of economics — or, as a consequence, with the Justice Department. When antitrust regulators raise concerns, a merger can still be allowed after companies agree to government stipulations meant protect competition.

Warren isn’t the only Democratic lawmaker scrutinizing the ideological underpinnings of antitrust law.

“I think the Chicago school has basically made consumer welfare the litmus test, the gold standard of antitrust policy,” Rep. Ro KhannaRohit (Ro) KhannaCivilian deaths in Yemen up by 164 percent: report Trump team must do more to end the ongoing crisis in Yemen Blue wave poses governing risks for Dems MORE (D-Calif.) who co-chairs the House Antitrust Caucus and represents Silicon Valley, told The Hill on Wednesday.

Khanna argued that antitrust policy should factor in the overall impact of consolidation on the public, including how a merger would affect product quality and price.   

“What we need to do is go back to our roots and that means considering the impact of mergers and economic concentration have on wages, job and communities,” he said. 

In Democratic leadership’s “Better Deal” plan, a series of economic policy reform proposals released in November that bend progressive, Democratic Minority Leaders Sen. Chuck SchumerCharles (Chuck) Ellis SchumerBredesen says he won't back Schumer for Senate Dem leader Trump, GOP regain edge in Kavanaugh battle READ: President Trump’s exclusive interview with Hill.TV MORE (N.Y.) and Rep. Nancy PelosiNancy Patricia D'Alesandro PelosiHillicon Valley: State officials share tech privacy concerns with Sessions | Senator says election security bill won't pass before midterms | Instagram co-founders leave Facebook | Google chief to meet GOP lawmakers over bias claims Collins defends ad showing opponent speaking Korean against claims of bigotry Hoyer questions feasibility of new threshold for Speaker nomination MORE (Calif.) advocated for antitrust reforms. 

“We propose establishing new merger standards that require a broader, longer-term view and strong presumptions that market concentration can result in anticompetitive conduct,” they wrote. 

Pelosi and Schumer specifically targeted the AT&T-Time Warner merger, which would win approval under most interpretations of Chicago school economics and the Justice Department’s usual policies. 

“If AT&T succeeds in this deal, it will have more power to restrict the content access of its 135 million wireless and 25.5 million pay-TV subscribers,” they wrote. “This will only enable the resulting behemoths to promote their own programming, unfairly discriminate against other distributors and their ability to offer highly desired content, and further restrict small businesses from successfully competing in the market.” 

But critics question the sincerity of the Democrats, who have made few meaningful attempts to reform antitrust policy when they’ve held power.

“During the Obama years we had some of the largest mergers ever approved. This kind of notion is that their antimerger sentiment under the Democrats is nonsense,” said Roslyn Layton, an economist at the conservative American Enterprise Institute think tank.

“Democrats often use mergers as a way to make policy,” she said, pointing to Democrats using antitrust provisions to adhere to policies like committing to follow net neutrality rules.

Republicans in Congress share Layton’s views. 

Sen. Orrin HatchOrrin Grant HatchGOP divide in Congress over Rosenstein's future Senate eyes Kavanaugh floor vote next week Republicans hire female attorney to handle Kavanaugh, Ford questioning MORE (R-Utah) has decried “hipster antitrust,” referring to insults against antitrust policy that aims to preemptively mitigate harms from mergers before they actually happen in the market. 

“From what I can tell, it amounts to little more than pseudo-economic demagoguery and anti-corporate paranoia,” Hatch said during a Senate floor speech in August.

“We hear calls from the left to replace the traditional consumer welfare standard of analysis. That would be not only misguided, but potentially destructive,” he said.