By: Avery Kurzontkowski
Edited By: Cynthia Huang, Sanaa Karkera, Alexandra Li
Advocacy for strong antitrust policy is one of the most pressing matters in preserving the integrity of American economics. Senator Elizabeth Warren of Massachusetts and Representative Alexandria Ocasio Cortez of NY-14 demonstrated its importance throughout the COVID-19 pandemic, introducing the Pandemic Anti-Monopoly Act (PAMA) to prevent harmful mergers of corporations.
One week prior to the introduction of the act, Representative David Cicilline, the chair of the House Judiciary Committee’s antitrust panel, had called for a ban on mergers during the COVID-19 pandemic. These mergers often result in reduced competition and a larger market share, allowing the new company to gain a monopoly and increase the prices of its products or services in an uncontrolled environment. The timing of this act was critical. With the slowing of consumer spending and limited economic resources during the pandemic, anticompetitive mergers would have further constrained the already stifled growth of small businesses.
In a pre-pandemic setting, not all mergers and acquisitions would be considered harmful. However, reduced access to consumer resources, including a 8.9 percent fall in national GDP, during the pandemic made M&As inappropriate. The imposition of a moratorium on acquisitions and mergers during the pandemic (until the Federal Trade Commission determines small businesses to be no longer under financial distress) was a pivotal step in alleviating financial distress caused by the pandemic. The corporate use of pandemic benefits in order to strengthen financials of larger companies poses an unethical threat as it harms smaller entities with limited resources, and less relief at a time of slowed business. The Pandemic Anti-Monopoly Act would work towards strengthening the financial aspect of the United States’ crises response.
As the Act formally states,
“The Pandemic Anti-Monopoly Act would: Impose a moratorium on risky mergers and acquisitions until the Federal Trade Commission (FTC) unanimously determines that small businesses, workers, and consumers are no longer under severe financial distress. The moratorium includes all mergers and acquisitions that involve: Companies with over $100 million in revenue or financial institutions with over $100 million in market capitalization Private equity companies, hedge funds, or companies that are majority-owned by a private equity company or hedge fund Companies with an exclusive patent that impacts the crisis, like personal protective equipment Transactions that must otherwise be reported to the FTC under current law. Pause all waiting periods and deadlines imposed on antitrust agencies during the moratorium Direct the FTC to engage in rulemaking to establish a legal presumption against mergers and acquisitions that pose a risk to the government's ability to respond to a national emergency” (“Warren, Ocasio-Cortez to Introduce Pandemic Anti-Monopoly Act”, 2020)
Although this plan would have been effective during the pandemic, the changing economic landscape demands for new policies, making sustainability a key factor in the prevention of harmful mergers. These practices have occurred with many other companies, concentrating market shares into the hands of a few select corporations and thereby limiting consumer choice and economic opportunity.
Ocasio-Cortez and Warren have made clear their intention to advocate for the passing of the act, through multiple public statements: “As we fight to save livelihoods and lives during the coronavirus pandemic, giant corporations and private equity vultures are just waiting for a chance to gobble up struggling small businesses and increase their power through predatory mergers. We're introducing legislation to protect workers, entrepreneurs, small businesses, and families from being squeezed even more by harmful mergers during this crisis and any future national emergency” (Warren, 2022). Ocasio adds:
"This legislation is desperately needed. 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” (Ocasio-Cortez, 2020).
Although bipartisan support for the Act was far from expected, Senator Warren and Representative Ocasio-Cortez used their joint political influence to maintain focus on the economic implications of the virus as the U.S. transitioned into the political year. With both parties being democrats, it was important for their statements to appeal to not only ethics, but economic viability, to attract Republican support. Critics of the act highlight the fact that the pandemic not only distresses small businesses, but all businesses. As said by Carl Szabo, Vice President of Netchoice, “In hard economic times, often the only way to save a business and the jobs it provides is to seek investment from larger market players, the bill’s effect would be to force businesses to go bankrupt rather than merge with a successful market player” (Szabo 2020).
COVID-19 has highlighted the importance of antitrust regulation, as ensuring fair competition and protecting consumers has come to a focal view. The past three years have enunciated abuses of market power in its harm for both businesses and consumers. Big Tech companies profited from the crisis of the pandemic; meanwhile, smaller businesses struggled, consumers were exploited, and lower sector jobs were lost.
As antitrust acts continue to be increasingly important in today’s economy, maintaining proper intervention and enforcing acts such as the PAMA is critical in preventing unethical practices and protecting the integrity of business competition in the U.S.. Companies must begin adhering to such antitrust laws for the sake of fair play and morality.
Bibliography:
“Warren, Ocasio-Cortez to Introduce Pandemic Anti-Monopoly Act: U.S. Senator Elizabeth Warren of Massachusetts.” Warren, Ocasio-Cortez to Introduce Pandemic Anti-Monopoly Act | U.S. Senator Elizabeth Warren of Massachusetts, April 28, 2020. https://www.warren.senate.gov/newsroom/press-releases/warren-ocasio-cortez-to-introduce-pandemic-anti-monopoly-actread-one-pager-here
“H.R.1 - 116th Congress (2019-2020): For The People Act of 2019.” Accessed December 31, 2022. https://www.congress.gov/bill/116th-congress/house-bill/1.
Hatmaker, Taylor. “AOC and Elizabeth Warren Call for a Freeze on Big Mergers as the Coronavirus Crisis Unfolds.” TechCrunch, April 28, 2020. https://techcrunch.com/2020/04/28/warren-ocasio-cortez-pandemic-anti-monopoly-act/.
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