The Problem:

One of the more pronounced indicators of the consolidation crisis in recent years is a wave of mergers that reached an all-time high of $5.8 trillion in 2021, aided by skyrocketing valuations and corporations wanting to sell.[1] Runaway mergers present a crisis for working people, who are hit with sweeping layoffs in their wake.[2] If they are fortunate enough to keep their jobs, they face the depressed wages, job insecurity, worse working conditions, and other compounded harms of eviscerated competition.[3]

Though mergers have gone unchecked across most sectors of the economy, they are perhaps most pronounced in the context of dominant tech platforms, which have collectively engaged in several hundred mergers between 2000 and 2019, thereby eliminating nascent competitors, closing off market entry, and undermining competition.[4] Officials have bemoaned having more mergers to review and fewer resources to review them.

At the state and local level, mergers frequently evade any review at all, mostly for the simple reason that they are valued below the premerger notification thresholds of the federal Hart-Scott-Rodino Act.[5] Other times, state enforcement authorities are simply too under-resourced to effectively investigate merger concerns, while federal enforcement authorities may be less aware of harms experienced at the local and regional level. Regardless, even small transactions can have large impacts on competition, which is particularly true of mergers in highly localized industries.[6]

State merger laws, to the extent they are at all prevalent, have tended to focus on concentration in the private health care industry. It goes without saying that states with rigorous premerger notification policies, investigative mandates, competition-based review criteria, and adequate remedies have opened more investigations and successfully challenged more anti-competitive mergers than states without.[7] 

The Solution:

States have a critical role to play in addressing poorly functioning markets because federal antitrust enforcement is limited by resource constraints, high Hart-Scott-Rodino filing thresholds, less flexible merger review authority, and less knowledge of local market conditions.[8]

Model Legislation:

Model legislation to reinvigorate state investigation, regulation, and enforcement against potentially anti-competitive mergers would:

• Require merging entities to provide concurrent notice of Hart-Scott-Rodino premerger notices to state attorneys general.
• Establish lower monetary value thresholds for triggering premerger notification, to better approximate the propensity for anti-competitive mergers at the state and regional level.
• Allow state attorneys general to initiate a waiting period before consummation of a merger, and to compel document production.
• Restructure and adequately fund state agencies to promote coordinated investigations of proposed mergers among antitrust and industry/subject matter experts.
• Provide specific competition-based review criteria for proposed mergers.
• Grant state enforcement agencies with the authority to approve, conditionally approve, or block proposed mergers.
• In rare cases, rather than block a merger entirely, provide for structural remedies, such as divestiture of facilities, to prevent anti-competitive price increases, anti-competitive contract clauses, or other abuses of market power.

Notes:

[1] Miller, Sarah and Brown, Krista. “To Save Jobs and Slow Inequality, Stop the Merger Frenzy.” American Economic Liberties Project, January 11, 2022.

[2] Id.

[3] Id.

[4] “Investigation of Competition in Digital Markets.” U.S. House Judiciary Committee, Subcommittee on Antitrust, 2020, at p. 387.

[5] On January 24, 2022, the Federal Trade Commission updated thresholds for premerger notifications under Section 7A of the Clayton Act to $101 million.

[6] Wollman, Thomas G. “Stealth Consolidation: Evidence from an Amendment to the Hart-Scott-Rodino Act.” American Economic Review: Insights, Vol. 1., No. 1, July 2019.

[7] Fulton, Brent D., et al. “States’ Merger Review Authority is Associated With States Challenging Hospital Mergers.” Health Affairs, Vol. 40, No. 12: Hospitals, Workforce, Equity & More, December 2021.

[8] Berenson, Robert A., et al. “Addressing Health Care Market Consolidation and High Prices.” Urban Institute, January 2020.