House Judiciary antitrust chair calls for temporary merger ban
Merger activity has slowed to a trickle, but it's a raging river compared to what could be coming if some in Congress get their way.
Driving the news: Rep. David Cicilline (D-R.I.), who chairs House Judiciary's antitrust subcommittee, yesterday proposed a moratorium on all M&A activity outside of situations in which companies are bankrupt or on the brink of insolvency.
What Cicilline said, during an event hosted by liberal think tank Open Markets Institute:
"Private equity firms have been sitting on $2.5 trillion of investor cash, while dominant technology firms have over $570 billion in cash and investments ... Industry analysts are already beginning to forecast an acceleration of deal-making that may hasten economic concentration ...
"Mega-mergers and corporate takeovers that were permitted during the last economic crisis led to the firing of millions of workers, the slowing of investment and innovation, and huge increases in executive compensation. As we respond to the current crisis — with millions of Americans facing unemployment and millions of businesses in severe economic distress — we cannot afford to repeat this mistake."
Cicilline also called for antitrust officials to expand their focus to include such things as price-gouging and non-compete clauses.
The bottom line: It's very hard to see Cicilline getting this included in a Phase 4 stimulus bill, despite claiming to have the support of unidentified colleagues, or that he could write such rules tight enough that M&A lawyers wouldn't manage to wiggle around them. Particularly given counter-arguments that such constriction would be counterproductive for companies seeking maximum flexibility.
- But it does suggest that deal-makers should prepare for added scrutiny on transactions they do move forward with.