Congress members make noise about mergers; regulators make decisions
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23 June 2017. By Curtis Eichelberger.
Public criticism from members of Congress about the antitrust implications of a blockbuster merger can damage the reputations of the companies involved, but it's hard to find an example where congressional condemnation swayed antitrust regulators.
Former regulators and even some members of Congress say congressional prodding has little impact on the deliberations of regulators, who can't be easily bullied into blocking a deal or forcing deep concessions.
Minnesota Senator Al Franken and several Senate Democrats are concerned that AT&T's $85 billion acquisition of Time Warner will lead to fewer choices and higher prices for consumers. They shared their sentiments this week in a letter to Attorney General Jeff Sessions, hoping to pressure the Department of Justice into blocking the deal.
The letter was widely reported and it adeptly addressed antitrust concerns, but there's no reason to believe that it will lead to rejection of the deal.
After the deal was announced in October 2016, US Senators Mike Lee of Utah and Amy Klobuchar of Minnesota — the chairman and ranking member of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights — announced they would hold a hearing to address the deal, one of the biggest mergers of the year.
Senate Judiciary Committee Chairman Chuck Grassley, an Iowa Republican, issued a statement calling for a "robust review."
Donald Trump had said he would block the deal if elected president, and he met with AT&T CEO Randall Stephenson on Jan. 12 — to no apparent effect.
Stephenson and Time Warner CEO Jeff Bewkes, among others, said in testimony before the subcommittee in December that the merger would benefit consumers by making access to content easier.
In January, 13 Senate Democrats sent a letter asking Stephenson and Bewkes to provide more information, and when the response came, Franken and Senator Edward Markey of Massachusetts issued separate statements saying AT&T's response fell short of the mark and that they would continue their investigation.
Franken's latest missive articulated his misgivings.
"We have strong concerns that the combined company's unmatched control of popular content and the distribution of that content will lead to higher prices, fewer choices, and poorer quality services for Americans — substantial harms that cannot be remedied with unreliable, unenforceable, and time-limited behavioral conditions," he wrote.
Former government officials say such letters and statements, and even packed hearings on the evening news, have little effect on the agencies' economic review of a merger, which must follow antitrust law and potentially be defended in court.
Attorneys in private practice say they are sometimes asked by companies if it would be helpful to seek a hearing. The lawyers see little upside because a hearing is unlikely to sway regulators, but it might result in a gaffe that harms a company's reputation.
As with AT&T-Time Warner, the recent Dow-DuPont and ChemChina-Syngenta deals faced significant opposition in Congress, where legislators said the deals would lessen competition in genetics and seed traits, threaten national security and raise prices for farmers, who would in turn pass those increases on to consumers.
Senators Grassley, Lee and Klobuchar and Vermont Senator Patrick Leahy issued statements calling for the Dow-DuPont deal to receive serious scrutiny. A high-profile hearing on agricultural mergers was held before the Senate Judiciary Committee with the CEOs of Dow, DuPont, Syngenta, Bayer and Monsanto. A long list of third parties, including the American Antitrust Institute and National Farmers Union voiced their concerns.
But in the end, Dow-DuPont and ChemChina-Syngenta got antitrust approval.
Amazon's $13.7 billion acquisition of popular organic grocer Whole Foods was announced June 16, drawing considerable public criticism.
Representative Ro Khanna, a California Democrat, told CNBC on Monday that the "main problem is, it is going to hurt local grocery stores." He said Amazon and Whole Foods can "engage in low-cost pricing and it is also going to put pressure on wages."
He called on the DOJ and Federal Trade Commission to review the impact the deal would have on food prices and wages. Still, absent an recognizable claim based in antitrust law, Khanna and other critics of the deal don't seem to have much leverage.
On the other hand, while regulators strive to avoid political influences, they can be swayed by information from a legislator.
"You want to do the right thing and deal with the politics later," said former FTC Chairman Jon Leibowitz, now a partner at Davis Polk. "But we always paid attention to the letters we received from members of Congress. Sometimes they turn out to be important."
For example, in 2009, Senator Klobuchar sent a letter to Leibowitz informing him about a company that allegedly bought up several drugs used to help premature infants with heart problems and then dramatically increased the price. The FTC filed suit, but eventually lost.
In most cases, though, if Congress wants to see change, its hearings and public protestations must lead to changes in the law.