Merger moratorium takes center stage in antitrust debate

The debate over whether to declare a moratorium on mergers during the coronavirus pandemic is intensifying on Capitol Hill.

The dispute, which comes as big tech companies are already under antitrust scrutiny, has pit Democrats like liberal firebrand Rep. Alexandria Ocasio-Cortez (N.Y.) against Republicans such as Rep. Jim Jordan (Ohio), co-founder of the conservative House Freedom Caucus.

But while lawmakers argue over whether to halt consolidation in Silicon Valley, some major firms are moving ahead with or exploring significant acquisitions that could reshape the industry on the other side of the pandemic.

The congressional debate escalated this past week when every Republican member of the House Judiciary subcommittee on antitrust slammed a Democratic proposal to pause such mergers, arguing it would stunt the economic recovery from the pandemic.

“A moratorium would reduce the flexibility that American businesses have in deciding how to best access capital,” they wrote in a letter to top officials at the Justice Department and Federal Trade — the two federal agencies tasked with reviewing mergers. “Such flexibility is vital, especially during and in the wake of economic crises. With companies struggling to survive, it makes no sense to deny them a primary way to access cash — especially when there may be limited alternatives available.”

The letter was the first time that Jordan, the Judiciary Committee’s new ranking member, had taken a public position on the matter since becoming the panel’s top Republican in February.

“It was telling that ranking member Jordan was joined by all of the Republicans on the antitrust subcommittee in signing that letter,” said Jesse Blumenthal, a tech policy analyst at the Charles Koch–funded group Stand Together.

A Republican congressional aide familiar with the Judiciary Committee’s thinking told The Hill that sending the letter was an important public statement.

“Staying silent on this issue was not an option,” the aide said, adding that a moratorium would be “dangerous and crazy.”

Temporarily suspending mergers and acquisitions was first floated last month by Rep. David Cicilline (D-R.I.), chairman of the House Judiciary antitrust subcommittee. The proposal was then pitched to leadership earlier this month in hopes that it would be included in the next coronavirus relief package.

Supporters include Energy and Commerce consumer protection subcommittee Chairwoman Jan Schakowsky (D-Ill.), leadership member Rep. Jamie Raskin (D-Md.) and progressive lawmakers like Reps. Pramila Jayapal (D-Wash.) and Mark Pocan (D-Wis.), the two co-chairpeople of the Congressional Progressive Caucus.

Ocasio-Cortez also teamed up with Sen. Elizabeth Warren (D-Mass.) to propose the Pandemic Anti-Monopoly Act, which would freeze mergers for companies that have more than $100 million in revenue, are run by hedge funds or private equity firms or that have exclusive patents impacted by the crisis, like key medical equipment.

“If we don’t stop predatory M&As now, the actions of big corporations will have decades-long economic consequences — for all of us. With less competition, the whole country will see job loss and higher costs for consumers,” Ocasio-Cortez said unveiling the proposal in late April.

More recently, group of 23 economists and legal scholars sent a letter to the House Judiciary Committee on Friday saying a moratorium would be unnecessary because the economy is competitive and existing antitrust law can curb excessive corporate consolidation.

On Monday, a coalition of taxpayer and free market organizations, including ALEC Action and Americans for Tax Reform, sent a letter critical of pausing mergers, saying it would stifle innovation.

“If the deal is big enough, then it’s going to go through the process and it will be scrutinized,” Jonathan Bender, a mergers and acquisitions lawyer at Wilk Auslander, separately told The Hill.

Opponents of a moratorium have also pointed to the failure to get the freeze into the HEROES Act approved by the House last week, especially since the proposal has been described by Democratic leadership as an opening offer.

“If you can’t find space for an idea in a $3 trillion bill you have got to wonder just how far out on the ledge you are,” Blumenthal said.

The disagreements over a merger moratorium come in the midst of a yearlong antitrust investigation by the House Judiciary Committee into Facebook, Google, Amazon and Apple.

The moratorium debate is the latest example of how even though both sides have serious qualms with big tech companies, they are divided over how to resolve them.

Facebook last Friday announced it would be acquiring Giphy, a search engine for animated images known as GIFs.

The deal has come under fire from both sides of the aisle.

Sen. Josh Hawley (R-Mo.), an outspoken critic of big tech, said in a statement on Friday that “Facebook wants Giphy so it can collect even more data on us.”

“Facebook shouldn’t be acquiring any companies while it is under antitrust investigation for its past purchases,” he said.

Sen. Amy Klobuchar (D-Minn.) called on the Justice Department and Federal Trade Commission to investigate the deal. Additionally, Uber is reportedly in discussions to acquire Grubhub, a deal that would consolidate two of the biggest players in the meal delivery business.

Combining the two would comfortably make Uber the largest food delivery company, giving it a huge advantage over its competitors.

“Uber’s potential acquisition of Grubhub raises serious concerns,” Klobuchar said in a statement at the time of the reports. “Consumers and restaurants are using these services more than ever, and the last thing they need is an increase in the extremely high fees already paid to these companies. Protecting competition remains especially important as we continue to confront the financial impacts of the coronavirus pandemic.”

In a statement to The Hill on Tuesday, Warren said that the two potential acquisitions underscore the need for a moratorium.

“It seems like every day there is news of giant companies considering gobbling up a bigger share of our economy,” she said.

“More market consolidation means job losses, price increases and less innovation. We need a moratorium on harmful mergers during this public health and economic crisis.”