Massachusetts Senator Elizabeth Warren and New York Representative Alexandria Ocasio-Cortez have proposed an M&A ban on corporate mergers during the coronavirus crisis.
The two staunch Democratic critics of Wall Street, Warren and Ocasio-Cortez said this week that smaller companies are quickly falling victim to the financial upset. Without an M&A ban, large corporations with cash reserves are supported with up to $4 trillion in Federal Reserve lending may use their power over the U.S. economy.
“As we fight to save livelihoods and lives during the coronavirus pandemic, giant corporations and private equity vultures are just waiting for a chance to gobble up struggling small businesses and increase their power through predatory mergers,” Warren said in a statement.
The proposal for an M&A ban would face an uphill battle with the Republican-controlled Senate and with President Trump.
The proposed Pandemic Anti-Monopoly Act would impose a moratorium on deals by companies with more than $100M in revenues or financial institutions with a market capitalization above $100M. The legislation would also stop deals by companies backed by private equity and hedge funds and would protect groups that hold patents that could be significant during the coronavirus pandemic, such as for personal protective equipment.
The legislation seeks an M&A ban of mergers and acquisitions involving large companies until the Federal Trade Commission “determines that small businesses, workers and consumers are no longer under severe financial distress.”
In addition, the legislation would include and M&A ban mergers including a company with over $40 billion in annual revenue or two companies each with at least $15 billion in annual revenue. It also seeks to expand antitrust law beyond the 40-year-old consumer welfare standard, which has guided the country’s antitrust policy. Under existing regulation, the federal government’s antitrust policies assess mergers based on their potential to injury to consumers, examining monopolistic prices and diminished quality.
The M&A ban has the support of House Judiciary antitrust subcommittee Chairman David Cicilline (D-RI) who told that media that was attempting to get the M&A stoppage into the next stimulus bill.
Representative Alexandria Ocasio-Cortez tweeted:
Congress gave a $4 TRILLION check to Wall Street while sending mom+pops on a wild goose chase for PPP. That is major, oligarchic, economy-shaping power Congress just gave the wealthy. The LEAST we should do is halt big mergers during COVID to slow the consolidation of sectors. — Alexandria Ocasio-Cortez (@AOC) April 28, 2020
Senator Warren has a summary of the M&A ban on her website that includes private equity and technology companies, as well as drugstore chain Rite Aid Corp., as entities that may be looking to make acquisitions.
The bill instructs the FTC to “establish a legal presumption against mergers and acquisitions that pose a risk to the government’s ability to respond to a national emergency.”
The proposed M&A ban also would give gig workers the power to unionize, which would be a potential sea change for ride-hailing companies like Uber Technologies and Lyft who have resisted attempts to classify their workers as anything but independent contractors.
House Majority Leader Steny Hoyer said House Democrats have not reviewed the proposed M&A ban idea or drafted a position on the idea.