Dive Brief:
- Federal officials said they would review the need to update laws aimed at curbing anti-competitive mergers and acquisitions, noting that structural changes in industries such as technology could call for an overhaul of antitrust policy.
- FTC Chair Leena Khan said on Tuesday that the investigation by the Federal Trade Commission (FTC) and the Department of Justice (DOJ) “is to ensure that our merger guidelines accurately reflect modern realities and that we can help us deal with illegal deals.” Prepare to enforce the law against force.”
- Regulators want public comment on the competitive landscape of several sectors, with “unique features of digital markets” such as “zero-priced products, multi-party markets and data aggregation that are currently [M&A] The guidelines do not address in detail,” according to an FTC announcement,
Dive Insights:
The CFO and his C-suite colleagues pushed M&A to a new high in 2021 as the economy recovered from the shock of a pandemic and record monetary and fiscal stimulus boosted liquidity. Many CFOs sought through acquisitions to help their companies recover from months of lockdown and persistent supply chain disruptions.
According to Refinitiv, the declared value of deals worldwide increased 64% last year to $5.9 trillion, compared to $3.6 trillion in 2020. The FTC said merger filings with the FTC and DOJ more than doubled during this period.
According to a recent survey of 345 corporate dealmakers in the US by KPMG, a widespread labor shortage, abundant investment capital and low interest rates are likely to fuel dealmaking further this year. A third of survey respondents said they want to use M&A to acquire talent.
President Joe Biden has made antitrust a key initiative in his attempt to halt a trend in industry consolidation and what he says is the erosion of competition that is affecting workers, small businesses and consumer.
Federal regulators and lawmakers on both sides have called for action on companies that dominate their markets. They accuse several large technology companies, including Amazon, Apple, Facebook and Google, of anti-competitive practices and trying to curb their market power.
“While the current merger boom has resulted in heavy fees for investment banks, evidence suggests that many Americans have historically lostWith less opportunities, higher prices, low wages and innovation of backwardness,” Khan said.
“Just as we must revise our theories and models to fit new facts and evidence, we must ensure that our merger guidelines accurately reflect the realities of the modern economy,” she said. Major changes in technology and the economy have “changed the way businesses compete and grow, creating new interconnections and mobility across multiple dimensions.”
The DOJ and FTC have updated M&A rules several times since 1968, when the DOJ first published guidelines to provide transparency on the standards for federal review of transactions.
Current guidelines differentiate between horizontal (within the same market) or vertical (within the same supply chain) transactions.
The DOJ and the FTC seek public comment during the next 60 days on “whether the distinction between horizontal and vertical transactions reflected in the guidelines should be revisited in light of trends in the modern economy,” the FTC said.
