The number of corporate mergers has jumped in recent years, but funding has stagnated for the federal agencies that are supposed to make sure the deals won’t harm consumers.
Why it matters: A wave of mega-mergers touching many facets of daily life, from T-Mobile’s merger with Sprint to CVS’s purchase of Aetna, will test the Justice Department's and Federal Trade Commission’s ability to examine smaller or more novel cases, antitrust experts say.
What they’re saying: “You have finite resources in terms of people power, so if you are spending all of your time litigating big mergers … there might be some investigations where decisions might have to be made about which investigations you can pursue,” said Caroline Holland, who was a senior staffer in DOJ’s Antitrust Division under President Obama and is now a Mozilla fellow.
What's happening:
- More mergers are underway now than at any point since the recession. The total number of transactions reported to the federal government in fiscal year 2017, and not including cases given expedited approval or where the agencies couldn't legally pursue an investigation, is 82% higher than the number reported in 2010 and 55% higher than the number reported in 2012.
- Funding for antitrust officials who weigh the deals hasn’t kept pace. The funding for the Department of Justice’s antitrust division has fallen 10% since 2010, when adjusted for inflation. That's in line with the broader picture: not adjusting for inflation, the Department's overall budget increased just slightly in 2016 and 2017.
- Funding for the FTC has fallen 5% since 2010 (adjusted for inflation).
- An FTC spokesperson declined to comment on funding levels and Antitrust Division officials didn't provide a comment.
Driving the news: Merger and acquisition activity is up 36% in the United States compared to the same time last year, according to Thomson Reuters data from April.
- Several deals under government review have gotten national attention, including Sinclair’s purchase of Tribune's TV stations or T-Mobile’s deal with Sprint, which stands to reduce the number of national wireless providers from four to three.
- Meanwhile, the Justice Department is awaiting the ruling on its lengthy legal effort to block AT&T’s proposed $85 billion purchase of Time Warner.
Yes, but: It’s not the attention-grabbing mega-mergers that advocates worry will get less of a close look thanks to a shortage of funds. Instead, some say budget limitations are likely to matter when officials are deciding which smaller or "borderline" deals to investigate further.
- “Sometimes there’s nothing there,” said Holland of the agency's early investigations. “Other times, it might be, ‘This is kind of a close call, and we’ve got three or four close calls and we need to pick one of them.’"
- "It could mean settlements get accepted that otherwise wouldn’t, or deals that should be challenged aren’t," said Michael Kades of the Washington Center for Equitable Growth, an antitrust-enforcement-friendly think tank that has done extensive research on the topic, in an email.
- Even with mega-deals in the news, they have only accounted for 55% of total global M&A activity this year, per Thomson Reuters.
Democratic lawmakers, whose 2018 platform takes aim at corporate consolidation, worry about the agencies' flat funding. In a statement, Sen. Amy Klobuchar said that enforcing "our antitrust laws is a big job and it’s gotten bigger" and noted she's introduced legislation "to update merger filing fees and increase agencies’ resources, while ensuring that taxpayers foot less of the bill for merger review."
- Earlier this year, the Congressional Antitrust Caucus urged appropriators to give the antitrust division more resources to handle higher case-loads.
Former government staffers caution, however, that regulators are used to making do with limited resources.
“I think the commission does make cuts like that but they’re very much focused on whether they’re good uses in pursuit of the commission’s mission, much more so than if there’s some resource constraint,” said a former FTC staffer. “I think if there’s a good case, the commission will find a way to bring it.”
Editor's note: This piece has been clarified to show it‘s the Washington Center for Equitable Growth.