Khan Rewrites the Merger Rulebook

Say this for Federal Trade Commission Chair Lina Khan, she is keeping antitrust attorneys fully employed. Last week the FTC proposed new merger filing requirements that aim to mire tie-ups in red-tape and give the agency more ammunition to block deals.

Federal law requires companies proposing mergers valued at more than $111.4 million to notify the FTC and Justice Department and wait 30 days before closing deals. Most are waved through because they don’t present significant competition concerns. Only 2% of transactions in 2021 underwent more thorough reviews.

Ms. Khan says 30 days isn’t enough time to screen complex deals. So the FTC wants to require merging companies to submit reams more paperwork before deals can close. Companies would have to provide all drafts of their deal documents and identify potential business overlaps and acquisitions in the past 10 years. They would also have to list their creditors, minority shareholders, non-controlling entities and “certain other interest holders that may exert influence, as well as officers, directors, and board observers.”

Ms. Khan is seeking to shift the focus of merger reviews from the consumer welfare standard that has prevailed for four decades. She also wants to broaden the regulatory analysis beyond market concentration. Her implication is that mergers might be challenged if companies have too many creditors or shareholders in common.

Ditto if they employ similar workers. The FTC wants businesses to identify the occupations and locations of their workers because they “may compete in the same labor market even when they do not compete in the same product or input market.” This is true of most tech companies and drug makers and the start-ups they seek to buy.

Businesses would also have to identify “any penalties or findings” against them by the Labor Department and National Labor Relations Board during the five years before their merger filing. “If a firm has a history of labor law violations, it may be indicative of a concentrated labor market where workers do not have the ability to easily find another job,” the FTC says.

The FTC provides no evidence to support this claim. Unions often file labor complaints to pressure businesses to surrender to organizing campaigns. Under the proposed merger rules, businesses that resist unions may have a harder time getting deals approved, which is no doubt one of Ms. Khan’s motives.

She has others. The FTC says its “changes would improve the efficiency and effectiveness” of initial reviews, but its transparent goal is to slow mergers and expand the scope of deals that will get more scrutiny. The FTC estimates the new requirements in its 133-page rule would quadruple the time it takes companies to prepare merger filings.

Antitrust experts say businesses currently need about 10 days to submit a filing and that the FTC’s new demands could add several months to the process. The agency hilariously claims it has “requested input on ways to lessen the burden of collecting this information” and has “tried to lessen the burden where possible.” If you believe that, you must be an antitrust lawyer savoring all the new billable hours. No one else will benefit from this ideological rewrite of antitrust law by regulatory fiat.