The Wrath of Khan

The Federal Trade Commission (FTC), run by antitrust activist Chair Lina Khan, has announced a set of harmful new rules that will stack the deck against corporate mergers.

Acquisitions and mergers are not inherently bad. On the contrary, there are many reasons why they are good for the economy and consumers – mergers help to increase market share, reduce the cost of operations, avoid replication, leverage innovation, and allow for expansion.   

The Khan led FTC has taken myriad actions to attack free markets. The announcement on new guidelines on assessing acquisitions and mergers is yet another example of the FTC treating corporations as if they are criminal enterprises trying to shortchange the American public.

The fact is that government does not create wealth. Government is good at taxing, regulating individuals and corporations. Government is bad at running the private sector. Look at the balance sheet: the U.S. government has run up a $33 trillion national debt and annual deficits as far as the eye can see. There is a lot about economic growth bureaucrats don’t know.

With its proposed guidelines, the FTC is attempting to implement antitrust regulation through government pressure. The Commission’s merger guidelines are a brazen move by the Biden administration to bypass Congress – similar to its attempts to act outside the law on the student debt crisis. These revisions will force companies not to act on potential mergers – resulting in a chilling, negative impact on the economy.  

Lina Khan, who in 2021 was appointed the new Chairwoman of the FTC by President Joe Biden, embraces a radical strategy for leveraging government power against American innovation and industry. She believes that successful companies cannot go on “unmolested by government obstruction.” Her own testimony before Congress confirms her political bias – she conflates the FTC’s authority with her personal ideology.  

Mergers are good for the economy. Mergers can create economies of scale that allow the combined enterprises to be more efficient. Think Amazon and the fact that they have grown bigger and better  providing service consumers want.

Mergers can allow a company to break into a new market with an innovative product or service. Microsoft is a great example of a business that started as a software company yet ended up branching out to the gaming market with the now widely used Xbox. This led to Microsoft acquiring Activision Blizzard to expand its gaming coverage. In 2012, Facebook paid $1 billion to integrate Instagram into their bank of consumer social media services. Mergers help provide the investment and ingenuity to bring better ideas, services, and products to market in real time. Mergers solve the ‘failure to launch’ problem for smaller businesses wanting to break into a market. Mergers are good for consumers.

Regardless, for Lina Khan, the FTC is a useful cudgel to bash corporate mergers and attack America’s most successful companies.

The FTC leadership knows they can’t explicitly outlaw mergers, so they are rolling out thirteen rules that will effectively prohibit mergers from going forward in the first place. CNBC reported, “the Federal Trade Commission and Department of Justice issued new guidelines for approving mergers … and said that their new focus when evaluating mergers will include the impact a deal will have on competition for workers, along with how a series of acquisitions, rather than one-offs, could result in harmful effects on the market.”

It’s as if the FTC is a ‘pre-crime’ tribunal looking for pre-text to block mergers and acquisitions. The new guidelines treat companies as if they are guilty and must prove their innocence. The rules include,

• Mergers should not significantly increase concentration in highly concentrated markets.
• Mergers should not eliminate substantial competition between firms.
• Mergers should not increase the risk of coordination.
• Mergers should not eliminate a potential entrant in a concentrated market.
• Mergers should not facilitate anticompetitive unilateral effects.

The rules are vague and purposely subjective so to allow the FTC unlimited powers to stop all mergers. It’s fair to say that the FTC under Khan’s leadership is waging an economic war against the market economy. It’s an overreach that threatens the economy.

The FTC is writing outcome determinative guidelines that will empower Lina Khan to disallow, on a blanket basis, mergers and acquisitions of virtually any size, and in any sector of our economy. Khan is an ideologue – she is an unelected, bureaucrat looking to sabotage corporate success. Congress needs to step in and stop the wrath of Khan.