(WASHINGTON, D.C.) – Antitrust Subcommittee Member Jamie Raskin (MD-08) joined Chairman David N. Cicilline (RI-01) in urging that the next COVID-19 relief package include language prohibiting corporate mergers that do not involve the purchase of a severely distressed company.
“Powerful corporations and private equity firms are standing ready to exploit this crisis for unfair financial gain. We know that market consolidation produces higher prices and few choices for consumers, lower wages for workers, and contributes to grotesque levels of economic inequality,” said Rep. Cicilline. “To protect American consumers and workers, the next COVID-19 relief package should include a merger moratorium for transactions that do not involve firms that are truly failing and have exhausted all other options or are in bankruptcy proceedings.”
In the wake of the 2008 financial crisis, antitrust enforcers allowed waves of corporate mergers that resulted in millions of job losses and less innovation while executives continued to receive massive bonuses. For example, prior to the 2008 recession, there were seven nationwide airline carriers. Due to lax merger enforcement, airlines consolidated down to just four carriers, beginning with Delta’s acquisition of Northwest Airlines in 2008. None of these mergers was blocked by the Justice Department. America also saw significant consolidation in the banking industry, including acquisitions of community banks, immediately following the financial crisis. The net result is a banking system that doesn’t serve working people and small businesses.
Congresswoman Alexandria Ocasio-Cortez said, “Antitrust agencies have already admitted their capacity to review mergers is reduced by the crisis. Meanwhile, reports say that Rite Aid, private equity and other big businesses are actively looking to scoop up smaller businesses and consolidate industry for their gains. These companies should be using their cash reserves to help their employees not to acquire more power. If we don’t stop predatory M&As now, the actions of big corporations will have decades-long economic consequences - for all of us. With less competition, the whole country will see job loss and higher costs for consumers.”
“We need to guard against the type of market consolidation that leads to higher prices for consumers and lower pay for workers, especially during an economic crisis. Congress must take decisive action to prevent corporate interests from eroding consumer and worker power. If we don’t stop large corporations and private equity firms from taking advantage of economic instability, the negative impacts on consumers and workers will be felt for decades to come,” said Rep. Pramila Jayapal.
“A national public health crisis should not be the opportunity for large corporations to conduct a bum’s rush of anticompetitive mergers and acquisitions that centralize power, increase prices and decrease competition,” said Rep. Jamie Raskin. “After the 2008 subprime mortgage meltdown crisis, America woke up to find far greater economic concentration because Washington was asleep at the wheel. Let’s not repeat that history.”
“We’re facing a crisis—this is not the time to let corporations and private equity firms run unchecked and profit off of a pandemic,” said Congressman Mark Pocan. “We’ve seen the cost of unregulated private equity and large corporations long before this crisis—they gobble up vulnerable businesses, while workers and consumers pay the price with widespread layoffs, fewer choices, and higher prices. This crisis has continued to expose the rampant inequality prevalent across our nation, and we shouldn’t allow it to deepen any further.”
“It is vital that we ensure consumers are protected as we address the challenges posed by the COVID-19 pandemic,” said Congressman Joe Neguse. “We are already hearing reports of private equity firms poised to exploit this crisis through consolidations and the wiping out of competition from smaller businesses, just like we saw throughout and following the 2008 financial crisis. It is essential that we include a moratorium on unnecessary corporate mergers in the next relief package to safeguard both our small businesses and a competitive marketplace in order to keep job losses and costs down for everyone.”
Congresswoman Jan Schakowsky said, “While many Americans are suffering, vulture capitalists are licking their chops, looking for ways to rig the system and squeeze more profit out of hardworking Americans by creating unseen vertical and horizonal monopolies. It’s critical to hit pause on these anti-competitive practices, and ensure maximal consumer choice. Despite promising to advocate for this country’s forgotten men and women, President Trump has governed for corporations and billionaires, to the detriment of struggling families. Therefore, it’s critical for Congress to prohibit these mergers and acquisitions and prevent the Administration from further exacerbating inequality.”
The full text of the letter sent to Speaker Nancy Pelosi and Republican Leader Kevin McCarthy is embedded below.
Dear Madam Speaker and Minority Leader McCarthy:
As you know, the COVID-19 pandemic has plunged our country into sharp crisis, and all signs point to a deep, and potentially lengthy, recession. In light of this reality, we write to respectfully urge you to include a merger moratorium in the next stimulus bill in order to halt the wave of predatory mergers and takeovers that risk further concentrating wealth and power and decimating independent business.
Although this is a time of anxiety and despair for the vast majority of Americans, some see the present crisis as an opportunity ripe for exploitation. As millions of businesses struggle to stay afloat, private equity firms and dominant corporations are positioned to swoop in for a buying spree, rolling up industries and saddling independent businesses with debt. Private equity firms have been sitting on $2.5 trillion of investor cash, while dominant technology firms have over $570 billion in cash and investments. Top industry consultants are already advising their corporate clients that the current landscape of distressed assets presents “unique opportunities to invest.” Although mergers and acquisitions have temporarily slowed, analysts predict that deal-making will soon “bounce back and accelerate,” hastening concentration across the board.
Extensive evidence shows that decades of unfettered consolidation has resulted in higher prices, lower wages, steep declines in new business formation, innovation, and entrepreneurship, reduced rates of productive investment, fragile supply chains, and grotesque levels of economic inequality. Private equity firms, meanwhile, routinely extract profits and strip out productive assets while loading up businesses with unsustainable levels of debt, leading to mass layoffs and eventual bankruptcy.
Mega-mergers and corporate takeovers permitted by enforcers during the last economic crisis led, in several major instances, to the firing of millions of workers, slowing of investment in innovation, and huge increases in executive bonuses. Amid the current crisis—with millions of Americans facing unemployment and millions of businesses facing potential extinction—the antitrust agencies are once again swiftly approving corporate deal-making. If Congress does not act, predatory mergers and takeovers will enable a small number of investors and executives to further concentrate wealth and control at the expense of workers and independent business.
We must take immediate action to halt this trend by including a moratorium in the upcoming stimulus package on all transactions that do not involve firms that are truly failing or bankruptcy transactions.
Rep. David N. Cicilline
Rep. Pramila Jayapal
Rep. Alexandria Ocasio-Cortez
Rep. Joe Neguse
Rep. Mark Pocan
Rep. Jan Schakowsky
Rep. Jamie Raskin
Rep. Henry C. “Hank” Johnson, Jr.
Rep. Jesus G. “Chuy” Garcia
Rep. Bonnie Watson Coleman
Rep. Ilhan Omar
Rep. Stephen Lynch