(WASHINGTON, D.C.) - Today, Congressman Jamie Raskin (D-MD) led a letter with Seth Moulton (D-MA), Founding Member of the Congressional Antitrust Caucus, and the co-chairs and founding members of the Caucus to the Federal Trade Commission requesting a review of how corporate consolidation affects American workers, consumers, and small businesses.

In the letter, they stated, “Open and competitive markets are critical to the interests of consumers, workers, and businesses large and small. But there is mounting evidence of increasing concentration and market power throughout the U.S. economy, and the impact is being felt by consumers, workers, and entrepreneurs. Some of the symptoms include sharp increases in return on investments for a small group of large firms, persistently high corporate profits, and a rise in monopsony power for the largest firms over their workers and suppliers and overall concentration in labor markets. In competitive markets, firms are incentivized to spend profits on capital equipment, research and development, or on wages to attract and retain the best labor force. But in the place of healthy economic activity, we are currently witnessing record-breaking distributions of profits to shareholders, as spending on investment and wages remains flat to down.”

A full text of the letter can be found below.

The Honorable Joseph Simons
Chairman
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580

Dear Chairman Simons,

We write to express support for your proposed merger retrospective program and request more information about the timeline and criteria to be considered for its implementation.

Open and competitive markets are critical to the interests of consumers, workers, and businesses large and small. But there is mounting evidence of increasing concentration and market power throughout the U.S. economy, and the impact is being felt by consumers, workers, and entrepreneurs. Some of the symptoms include sharp increases in return on investments for a small group of large firms, persistently high corporate profits, and a rise in monopsony power for the largest firms over their workers and suppliers and overall concentration in labor markets. In competitive markets, firms are incentivized to spend profits on capital equipment, research and development, or on wages to attract and retain the best labor force. But in the place of healthy economic activity, we are currently witnessing record-breaking distributions of profits to shareholders, as spending on investment and wages remains flat to down.

It also appears to be more challenging than ever for new businesses to form and to remain the engine driving American job growth. New firms as a share of total firms have continued to decline over the last decade, suggesting that the barriers to entry for new businesses may have increased. Young firms now also represent a smaller share of total employment across industries, meaning workers have fewer small business employers to choose from. This naturally contributes to large employers having more power over their suppliers and workers. As the largest employers represent a more significant share of job opportunities, there are more opportunities for abuse. Judicial and legislative actions have already been taken to address monopsony power in cases ranging from collusion in the hiring of registered nurses to predatory no-poach and non-compete agreements in employment contracts.

This alarming trend raises serious concerns about the effectiveness of merger enforcement over the past several decades. Merger activity in North America now exceeds 2007 levels with over 10,000 transactions surpassing $1.8 trillion of value in 2017. The size of these transactions has also continued to grow, with the median value increasing from around $15 million in 2007 to over $45 million in 2018. Despite these trends, the number of transactions deemed to pose competitive concerns warranting an in-depth investigation has been minimal, with just twenty to thirty “second requests” issued by the Commission in every year from fiscal years 2010 to 2016.

As some experts have noted, merger enforcement has declined and potentially narrowed in recent years. For example, a study by Professor John Kwoka notes that the rate of enforcement actions for mergers in markets with more than four significant competitors declined precipitously from between twenty-five and fifty percent in 1996 to zero in 2008. The Commission’s own studies, meanwhile have shown a thirty percent error rate in merger remedies that require a divestiture of assets.  While this rate appears too high as is, it also fails to specifically account for additional anticompetitive impacts on labor markets.

Moreover, despite historic levels of merger activity, the Commission’s funding levels have remained flat. As a result, enforcement action appears to have not kept pace with transaction filings. According to Michael Kades of the Washington Center for Equitable Growth, “antitrust enforcers lack the resources to protect consumers and promote competition during the current merger wave, which likely has contributed to increases in concentration and monopoly power.” At the same time, the Commission has been forced to expend valuable resources challenging large, anticompetitive transactions and conduct that are resource intensive. For example, in recent years it has expended significant resources blocking anticompetitive hospital mergers that would have resulted in “higher healthcare costs and lower quality service in local communities.”

Within the context of these concerns, we believe that there is room for significant improvement. As you have noted, “Addressing these concerns is critical, as they lie at the heart of the agency’s competition mission. The FTC needs to devote substantial resources to determine whether its merger enforcement has been too lax, and if that’s the case, the agency needs to determine the reason for such failure and fix it.” We strongly agree.

Accordingly, we ask that you provide information regarding the Commission’s merger retrospective program, and respectfully request that you respond to the following questions by June 30, 2018:

1.         Merger Enforcement Evaluation Criteria

a.          In addition to effects on the price and quality of products or services and competition in relevant markets, can you comment on how you will consider the following factors in evaluating past merger enforcement: spending on capital expenditures, investment in research and development, reduction in planned or actual employment and facility capacity, average salary and benefits—of the top 1 percent, the median, and the lowest 10 percent of individuals employed— before and after the merger?

b.         Do you plan to consider the impact on an employer’s monopsony power or the bargaining position of workers before and after the merger as part of your evaluation? If so, how do you plan to measure and evaluate it? If not, can you explain what limitations prevent you from accounting for this?

c.          In the Senate confirmation hearing, Mr. Chopra indicated that it may be valuable to review barriers to entry in highly concentrated markets.[16] Do you plan to account for changes in barriers to entry for new firms in markets before and after a merger?

d.         Will the retrospective address the process for determining the appropriate markets through which to assess concentration? In the case of a merger between firms not currently competing in the same product markets, should the FTC consider factors such as access to and share of suppliers and distribution channels in the evaluation of concentration?

2.         Retrospective Focus and Prioritization

a.          How will you prioritize evaluation of markets in the merger retrospective? Will the study include all mergers over a selected time period or prioritize a subset of industries? If a subset is prioritized, how will this be determined?

b.         Given the rapid pace of transactions and recent concerns about increasing market concentration in the technology sector, will you specifically analyze acquisitions by large technology and e-commerce platform companies, or concerns related to the potential loss of competition in this market?

c.          In your Senate questionnaire, you mentioned that the FTC should also extend the retrospective process to non-merger matters. How will you implement this plan? How will it account for non-enforcement in areas involving single firm conduct?

d.         How do you plan to address concerns raised by Commissioner Rohit Chopra related to addressing corporate recidivism through the robust enforcement of consent decrees?[17]

3.         Resources and Timeline

a.          In your Senate questionnaire, you noted that “the FTC needs to devote substantial resources to determine whether its merger enforcement has been too lax, and if that’s the case, the agency needs to determine the reason for such a failure and fix it.”[18] Does the FTC have sufficient financial and human resources to complete a thorough cross-sector merger retrospective within a reasonable timeline? If not, what resources would be required?

b.         What do you propose as a timeline for completion of this merger retrospective? Can you commit to share a public update on a defined timeline so appropriate policy actions can be taken to address any failures in a reasonable timeframe?

Thank you for your attention to this important matter. We look forward to working with you and your fellow commissioners to ensure that our markets remain competitive for the benefit of all Americans.

Sincerely,

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