M&A lawyers call out antitrust authorities as inflation remains high

Despite higher markups throughout the economy that are contributing to stubbornly high inflation, corporate lawyers and bankers are arguing for further concentration in the private sector, and they’re calling out the individual regulators at the Department of Justice (DOJ) and Federal Trade Commission (FTC) who they see as standing in their way.

“Jonathan Kanter at DOJ and Lina Khan at the FTC — they’re just anti-deal and in a sense they’re anti-the law. They think the law on antitrust is not robust enough, so they want to move the law to essentially be able to stop more deals,” Scott Barshay, an attorney with law firm Paul Weiss, told a conference at Tulane University on mergers and acquisitions (M&A) on Thursday.

“In this very narrow context of who’s going to be running the DOJ antitrust division and the FTC in the future, let’s just say our business will be a lot better if it’s somebody else,” he said.

“If there’s a deal with even a small amount of antitrust hair on it, there’s a very good chance they’re going to delay it and try and block it, and even if they fail you may have to go to litigation,” he added.

M&A lawyers bemoaned international regulators on Thursday, as well.

“It’s not just the U.S. antitrust regulators really that are … creating issues on deals,” Audra Cohen of white-shoe law firm Sullivan and Cromwell, which was reportedly involved in the private-sector bailout of First Republic Bank last week. “The [European Union], the U.K., foreign direct investment — there are so many regulatory hurdles when you’re looking at these transactions.”

Economists don’t agree on the extent to which inflation is being driven by profits and price-setting by firms, many of which openly boast about their pricing power during earnings calls with investors.

But studies by the University of Massachusetts Amherst, as well as the United Nations, paint a picture of a sellers’ inflation “that derives from microeconomic origins, namely the ability of firms with market power to hike prices,” according to the UMass study.

That market power can be a direct result of increasing concentration within or across industries — the sort of dealmaking that is practiced and advocated by bankers and attorneys in the M&A sector.

“Specific sectors of the U.S. economy, such as electricity, rental, and food, substantially contribute to overall inflation, and each of these sectors has experienced increasing concentration, which may exacerbate inflation, by, [among other things], facilitating price coordination,” economist Hal Singer and others wrote in paper for the Organization for Economic Cooperation and Development last year.

Kanter, the DOJ’s antitrust chief, has said a lack of private-sector competition is contributing to the inflation still harassing American pocketbooks.

“For more than 40 years, antitrust enforcement has not kept pace with the need to rein in anticompetitive mergers and business conduct. As a result, in too many sectors, a few powerful companies dominate products and services — many of which are core to the everyday experience of the American people and the global economy. We see this in higher consumer prices,” he said in remarks to the International Bar Association last September.

“As long as there have been monopolies, monopolies have sought to protect themselves with trojan horse regulation and scare tactics arguments,” he added.