Washington Monthly - Can COVID-19 Get Congress to Finally Strengthen U.S. Antitrust Law?

If it wasn’t clear that corporate consolidation was a problem before the COVID-19 pandemic, there should be absolutely no doubt now. Mergers have severely subverted the U.S. economy’s resilience and undercut the national response to the coronavirus outbreak.

Mergers contributed to the loss of 600,000 hospital beds between 1975 and 2017 (from 1.5 million to around 900,000 beds nationwide) and likely deprived the government of an emergency stockpile of ventilators. And now, with millions of businesses on the ropes due to the crisis but with many of the very largest corporations flush with cash, another wave of mergers and acquisitions may be imminent. Facebook has purchased GIF-creating site Giphy. Amazon and Uber are reported to be near acquiring the movie theater chain AMC and food delivery service GrubHub, respectively.

To stem this tide, New York Congresswoman Alexandria Ocasio-Cortez and Massachusetts Senator Elizabeth Warren have proposed the Pandemic Anti-Monopoly Act, which would halt mergers and acquisitions by large corporations and private equity funds for the duration of the COVID-19 crisis and its aftermath. Other Congressional progressives, including Washington Congresswoman Pramila Jayapal and House Antitrust Subcommittee Chairman David Cicilline, have called on House leadership to include a merger moratorium in the next rescue package. The sponsors understand that the principal lifeline for distressed small and medium-sized businesses and workers should be federal aid, not acquisitions by large corporations and powerful financiers.

The merger moratorium represents a major rethinking of federal merger policy. Although Congress enacted a strong anti-merger law. in 1950, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have maintained a lax posture toward consolidation since the early 1980s. They have permitted nearly all mergers to proceed and blocked them under only extremely limited circumstances. For instance, out of the 78 mergers proposed between 2015 and 2019 that involved two firms worth more than $10 billion each, the DOJ and the FTC successfully stopped only three of them. The result of permissive merger policy has been a dramatic increase in concentration across industries and markets. This tolerant attitude toward consolidation is built on a series of myths and has been deeply damaging to the public.

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