FTC’s change to policy could make for healthier mergers

The Federal Trade Commission’s change to a decades-old merger policy could tip the scales toward reducing monopoly power, one expert argued.

Last week, the FTC rescinded a 1995 policy for “prior approval and prior notice” provisions for mergers. The decision means companies that have proposed mergers the FTC found to be problematic will need to give the FTC prior notice and receive prior approval before they proceed with any future transactions of like companies.

The FTC has been facing mounting pressure to increase scrutiny of mergers that give more power to already large, powerful companies. This decision removes some of the burden from the FTC to prove that a merger is problematic, placing it instead on the companies seeking the merger to prove why it’s not.

Robert Hockett, a law professor at Cornell Law School, said although the move isn’t “massively game changing” for any merger currently, it’s a change that could be significant over time.

“After 20 to 30 years of what amounts to a kind of presumption in favor of what private sector firms want to do with a kind of burden on anybody who is suspicious to show why we ought to be suspicious, there’s a change in the nuance of that presumption,” he said. “It’s not like it’s going to switch to a presumption of suspiciousness or nefarious purpose or market-harming behavior, but it is going to be something closer to sort of neutral.”  

Hockett said it’s a “sober realization” that a significant amount of merger and consolidation activity over the last 30 years has concentrated markets to the point where efficiency gains that come through those companies coming together might be outweighed Hockett argued that over the last 30 years, the balance between the two has been off, leading to a concentration of market power seen in a handful of large, powerful companies today. The FTC’s move to require prior notice and seek prior approval will help reestablish that balance, Hockett said.

The FTC’s decision doesn’t prevent mergers from happening, Hockett said. Rather, providing prior notice and seeking prior approval may help stop bad mergers and acquisitions and prevent anticompetitive markets in the future, he said. 

“Going forward on a case-Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.