In a recent policy brief, Satya Marar, a fellow at the Mercatus Center at George Mason University, points out the considerable harm that the Federal Trade Commission (FTC) and Department of Justice’s (DOJ) recent approach to antitrust enforcement is having on early-stage companies. By attempting to broadly deter mergers and acquisitions (M&A), the Agencies are obstructing a critical path for companies to combine complementary resources and secure investment.
The risk of the Agencies’ approach is particularly acute in the life sciences, where deterring pro-innovation M&A risks upsetting an already high-pressure ecosystem for companies developing breakthrough medicines for patients. Thus, as Marar rightly concludes, the Agencies must return to a balanced approach to M&A and avoid placing an undue burden on the over 2,300 U.S. biopharmaceutical companies and impeding the innovations they seek to advance.
Key excerpts from Marar’s report include:
- “The allure of venture capital and the possibility of future acquisition are two of the greatest motivators for entrepreneurs to strike out on beneficial new projects…This is especially true for innovative, high-value sectors like tech and pharmaceuticals, where big and small firms offer complementary advantages. Often, smaller ones possess unique talent, ideas, and research capabilities, and larger ones possess the economies of scale, resources, and relationships with private sector partners and government agencies that foster new technologies and expedite regulatory approvals.”
- “Though the prospect of acquisition by a larger firm motivates entrepreneurs to innovate and take risks, this reality is at odds with the FTC and DOJ’s current push to block more mergers. In the name of reducing consolidation across the economy, these agencies have frowned on deals that previous administrations would likely have deemed favorable to competition and to consumers’ best interests.”
- “In 2023 the FTC, in conjunction with the DOJ, followed up these changes by proposing to amend the premerger notification rule. The amendment would further expand the scale and scope of disclosure requirements, adding millions of dollars in merger filing costs.”
- “The FTC and DOJ subsequently released new merger guidelines, which have been widely criticized by multiple experts for failing to provide clarity about the kinds of deals the agencies would permit. The guidelines also fail to adequately recognize the potential of many deals to boost competition by creating entities that better serve consumers and help bring new technologies and products to market quickly.”
- “Though the agencies have often failed to block deals in court when judges adhere to 40 years of legal precedent and economic insight, this hasn’t stopped the FTC from touting abandoned deals and a chilling of merger activity across the economy as evidence of their success…Rather than confirming the agencies’ success, abandoned deals may instead indicate that parties scuttled beneficial, legal transactions due to the potential multiyear, multimillion dollar cost of compliance and the potential of a lawsuit.”
- “The FTC and DOJ’s approach to policing mergers has already caused immense damage, including the loss of billions of dollars in value for smaller firms seeking to grow or survive through mergers.”
To read the full policy brief, click here.