Open Markets Calls for Ban on Takeovers by Large Corporation and Funds for Duration of Crisis

The Open Markets Institute calls on Congress, the Trump administration, and federal and state law enforcement agencies to use their various powers to impose an immediate ban on all mergers and acquisitions by any corporation with more than $100 million in annual revenue, and by any financial institution or equity fund with more than $100 million in capitalization. The ban should remain in place for the duration of the present crisis.

The immediate reason for this ban is the present inability of the Antitrust Division of the Department of Justice (DOJ), the Federal Trade Commission (FTC), and other competition law enforcement agencies to effectively evaluate mergers, given the semi-closure of government due to the present crisis. According to Politico, the DOJ has already asked for more time to review existing proposals for mergers, even in advance of any potential surge in deals.

More fundamentally, the ban is needed to prevent a wholesale concentration of additional power by corporations that already dominate or largely dominate their industries, especially in ways that may significantly worsen the crisis that now threatens America’s health, social, and economic systems. The history of the Panic of 2008 and the subsequent Great Recession instructs us that such a massive, uncontrolled consolidation will result in the unnecessary firing of millions of employees, the unnecessary bankrupting of innumerable independent businesses, a dramatic slowing of innovation in vital industries such as pharmaceuticals, and a further concentration of power and control dangerous both to our democracy and our open commercial systems.[1]

Absent an effective ban on takeovers by super-large corporations and investment funds, Americans should expect massive, uncontrolled consolidation throughout our political economy. As has been widely reported, private equity firms and corporations such as Apple sit today atop vast piles of cash, much of which they are ready to deploy immediately on deals.

We understand that the proposed size limit is arbitrary in nature. But such simple limits on size and structure have abundant precedents. The $100 million limit we propose is higher than the present $90 million pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The $100 million limit is also double one of the key thresholds proposed by Sen. Amy Klobuchar in the Consolidation Prevention and Competition Promotion Act of 2017.

This size limit will still allow struggling independent businesses to combine when they feel that is their best option. At the same time, it will help protect viable but struggling medium-sized and smaller businesses from coming under overwhelming pressure to sell out to highly capitalized private equity firms and super-large corporations. Indeed, the ban will immediately buttress incentives for banks and new investors to provide funds to viable but temporarily struggling businesses.

Federal regulators can take up review of larger mergers once the health crisis has passed, but they should presume that deals pursued by corporations with more than $100 million in annual revenue, and by financial institutions or equity funds with more than $100 million in capitalization, are anti-competitive unless proven otherwise. Meanwhile, Congress should make any corporate bailouts conditional on not buying competitors.

We believe these measures are also merited because of the role concentration has played in undermining our public health, industrial, and financial systems in ways that have dramatically contributed to the COVID-19 crisis. In recent years, for instance, monopolists have used their power in ways that resulted in sharp cuts in the number of hospital beds and ICU facilities, and in the offshoring and degradation of many of the systems we rely on for the production of face masks, testing materials, pharmaceuticals, and other prophylactic devices.

To make sure such a ban does not result in unnecessary disruption for workers, consumers, or others who depend on companies in immediate threat of closure, Congress and the Trump administration must provide viable but ailing firms with practical alternatives to selling out, both through direct government funding and the careful restructuring of private credit markets. Encouragingly, a number of proposed provisions within the bailout bill now under debate would offer various forms of permanent or temporary relief to firms in distress.

We believe such a temporary ban on takeovers by larger corporations and investment funds will immediately help to:

  • Protect American health care workers and other frontline employees. As noted, much of the danger these workers face today is due to the actions of the monopolists who have dramatically reduced the capacity, resiliency, and often the quality of our hospital, pharmaceutical, health, and medical device systems.
  • Protect American jobs. After almost every merger by large corporations, the first act of executives is to fire a large percentage of the total number of employees of the combined enterprise.
  • Protect independent businesses and farmers. The main reason for the sharp decline in independent business and farming in the United States in recent decades is the actions of monopolists, who have been left free to expropriate the livelihoods of millions of American citizens.
  • Protect our innovation systems. Executives at merged corporations routinely slash investments in research and development. They also routinely wield the combination of corporate power and patent monopoly to keep better ideas from the market.
  • Promote industrial resiliency. Fear of catastrophic disruption to supply chains characterized by hyper-concentration of capacity has helped to panic investors already reeling from dramatic declines in demand. New mergers will only increase the power that leading firms – and the financiers who control them – can exercise on vulnerable suppliers.
  • Protect democratic institutions. Monopolists in industries including communications, energy, agriculture, banking and finance, and manufacturing already wield too much power over our government, our commerce, and individual companies and people.
  • Protect our communities and families. Monopolists strip communities of vital businesses, and they strip families of vital resources. In the present crisis, we must aim to promote the ability of our families and communities to adapt to the specific dangers at hand, in their homes, and on their main streets.
  • Protect consumers. Any large-scale program of consolidation will result in higher prices, fewer choices, and less innovation, among other harms.


[1] One apt case to study is the $68 billion merger of Pfizer and Wyeth in early 2009, which was floated with some $22 billion in taxpayer dollars funneled through Citibank, Goldman Sachs, and Bank of America. The effects of this deal included: the immediate firing of 19,000 employees, a figure that by 2013 had risen to 37,000; the gutting of investment in research and development, with Pfizer cutting R&D spending from $11.3 billion to $6.5 billion and slashing the number of staff chemists from 1,250 to some 850; and higher prices for drugs, at a time when drug prices were already outrageously high.