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Federal regulators scrutinize large business mergers

On Jan. 18, the U.S. Department of Justice and Federal Trade Commission announced plans to tighten regulations and enforcement over illegal business mergers.

The agencies will also ask for public comment on updating current federal guidelines guarding against unlawful and anticompetitive deals involving massive companies.

Regulators are looking to re-evaluate the competitive playing field

Large-scale mergers and acquisitions have trended toward increased concentration since the early 1980s. Most big mergers have been approved regardless of whether Democratic or Republican administrations have been in power over the past decade and a half. During the upcoming public comment period, the Justice Department hopes to understand:

  • Why so many industries have fewer competitors today
  • Whether current enforcement tools are still relevant
  • If guidelines accurately measure impacts to innovation and quality, not just consumer prices
  • If “anticompetitive conduct” should have a broader meaning

The government also wants to know specific examples of mergers that have harmed competition.

The merger surge continues

The agencies say merger applications more than doubled from 2020 to 2021. The latest megamerger is an all-cash $68.7 billion deal for Microsoft to acquire Activision Blizzard, which owns Candy Crush and Call of Duty online games. Both U.S. and European regulators must approve the deal.

Last November, the Justice Department sued to block the $2.2 billion sale of Simon & Schuster to Bertelsmann’s Penguin Random House, a German media giant, which is already the largest book publisher in the United States.

The Justice Department says it will continue antitrust action against Google, which began during the previous administration, over accusations that the company abused its online search and advertising dominance. Meanwhile, the FTC is going after Meta, formerly Facebook, claiming the tech company has a monopoly in the social networking market.

Structuring a business merger or acquisition

While large-scale public company transactions get most of the headlines, the overwhelming majority of business sales and mergers involve privately-held entities. These transactions can also range from tens of millions to hundreds of millions of dollars.

It is crucial to have experienced legal guidance in your corner to navigate the myriad complex requirements pertaining not only to potential antitrust concerns but laws over licensing, permitting, securities and tax issues.

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