[wskinner]

> Part of her agenda is strengthening the merger review process. Merger review is intrinsically hard, because authorities essentially have to try and figure out what the effect will be if the merger is allowed or denied. There is no crystal ball for this, and there are rarely 'right' answers. Yet the merger regime has been very favourable to large firms over the past few decades, and there's a reasonable consensus in the antitrust community that it should be strengthened. A tighter merger process might make startup exits through acquisition less common, but it should also make it easier for startups to grow organically into large companies. In terms of creating a bottom-up and more pluralistic Silicon Valley, that seems like a win to me.

Serious question: what is the "antitrust community"?

Can you shed some light on the theory that making mergers more difficult would either a) make it easier for startups to grow organically or b) benefit society in general?

If the upside from working at or creating a startup is due to some combination of IPO or acquisition (this is of course a simplified model), and acquisitions are made more difficult, why do you assume that IPOs would become more likely or more lucrative? Once upside is removed from the startup ecosystem, how will potential employees and founders respond at the margin? I'm struggling to see an equilibrium here that involves more rather than less money and work poured into startups.

[huitzitziltzin]

>> Serious question: what is the "antitrust community"?

Members:

- lawyers who work in the agencies on antitrust

- lawyers who work in competition practices of major law firms

- lawyers who work as competition counsel in-house at large firms

- legal scholars (in law schools) who write on these issues

- economists who work in the same agencies (FTC and DoJ)

- economists who work in the litigation consulting industry

- economists who work in academia on antitrust and competition issues (anyone in an economics department who lists “industrial organization” as a research field).

Plus our various groupies and hangers-on, who are numerous, because our parties are amazing…

[tgma]

Whatever "antitrust community" might be, if exists, almost by definition will be filled with people who are on balance biased towards more extreme enforcement of antitrust. Otherwise they would have no reason for being.

So not surprising at all that the "antitrust community" on average would be pro an FTC witchhunt whatever the basis may be on paper.

[huitzitziltzin]

>> almost by definition will be filled with people who are on balance biased towards more extreme enforcement of antitrust.

Absolutely not.

I want to get antitrust enforcement right not to just “do more of it”

[tgma]

Do you consider yourself part of the "antitrust community?" Ok, if so, please let me know then, "doing it right," in your own opinion, entails doing more or less than is done now, in aggregate?

[todd-davies]

There are a sizeable bunch of antitrust scholars/economists/lawyers who are very much against stronger enforcement. For instance, see [1].

[1] https://laweconcenter.org/

[catlover76]

> Serious question: what is the "antitrust community"?

Not the poster, but I would assume it refers to the people who follow developments in antitrust law and the enforcement thereof (so antitrust lawyers, basically).

[dmoy]

> so antitrust lawyers, basically).

Well, and lawyers-turned-professor and/or treatise authors (who are typically professors). Often the experts turn towards academia if they're truly in it just to know everything about the field. So, Hovencamp, etc.

"Legal scholar" if you will

[todd-davies]

The "antitrust community" is people working in antitrust law/policy/academia who write, tweet, speak at conferences, etc. Two caveats are that a) this is my view based on personal observations, and b) that a consensus doesn't mean that everybody agrees. Undisputedly however, there is a lot of academic work these days which comes to the conclusion that merger review should be strengthened. For instance, see [1].

Khan's aim isn't necessarily to make mergers more difficult, or to prevent them per se. Rather, it's to make a more concerted effort to prevent mergers which on balance, appear not to be in the public interest. There are several reasons why a merger might be harmful.

First, some mergers are "killer acquisitions" whereby a large firm will acquire a "nascent" competitor and then discontinue its product (e.g. [2]). One danger here is that killer acquisitions nip start-up competition in the bud, such that new firms don't have a chance to grow and compete against incumbent firms. That's a problem because competition means that consumers, rather than incumbent firms, ultimately get to choose market outcomes. If there is no choice, then consumers can't choose. The ultimate failure mode here is some kind of command economy where monopoly firms get to make most of the decisions about how markets work and consumers get little say at all.

Second, mergers lead to market concentration because you're taking a market with n firms and moving to a market with n-1 firms. Market concentration isn't inherently bad, indeed, some markets are 'naturally' concentrated. That said unconcentrated markets are generally preferred to concentrated ones because concentrated markets can lead to things like tacit collusion (which has similar outcomes to a cartel) [3].

Third, if there is a real possibility for startups to grow organically and challenge large incumbent firms for the market, then theory goes that VC funding could be stimulated on the promise of a potentially huge return. For instance, a VC might be willing to fund a firm if there's a 5% chance that it will be the next Google, but not if there's a 10% chance that it gets acquired in a year or two.

You make a good point regarding acquisitions, IPOs and the personal incentives to work at a startup. I'm not assuming that IPO's would become more likely or lucrative; I don't have a view on that (except perhaps what I said in the previous paragraph). I guess if a firm was going to be successful, and a merger wasn't an option then it would eventually IPO instead, no? That might lead to delayed compensation, but it shouldn't affect the viability of a solid business. Fewer acquisitions might end up with some firms failing before IPO which would have otherwise been acquired. That's bad from the perspective of those at the firm, but isn't inherently bad from a social perspective. After all competition necessarily entails winners and losers. If all else fails, there is a 'failing firm defence' which would allow an acquisition if the only other option is the firm going out of business [4].

Finally, the lack of enforcement over the past few decades hasn't given regulators much opportunity to "learn" what is a good/bad merger. A more active merger review policy would entail regulators building up expertise and fine-tuning their approach. It's important to remember that merger control isn't necessarily adversarial. At its best, it's a positive-sum dialogue between firms who want to do business and regulators who are trying to provide public-minded oversight.

[1] Kwoka, John. "The structural presumption and the safe harbor in merger review: False positives or unwarranted concerns." Antitrust LJ 81 (2016): 837. https://heinonline.org/HOL/Page?handle=hein.journals/antil81... [2] https://news.ycombinator.com/item?id=38145568 [3] https://www.tutor2u.net/economics/reference/oligopoly-tacit-... [4] https://www.concurrences.com/en/dictionary/Failing-firm-defe...

[gms]

> I guess if a firm was going to be successful, and a merger wasn't an option then it would eventually IPO instead, no?

No, most businesses don't grow revenue fast enough to be IPO-worthy (or, as with WhatsApp and Instagram when they were acquired, don't make enough revenue to even be viable standalone businesses).

But even putting all that aside, what about the personal freedom argument?

If a founder wants to sell their company because they're tired of running it (this is a job that comes with immense personal sacrifice), or wants cash to take care of family, or sick parents, etc, should the government have the right to force them to keep it running?

The societal implications of the above feel absurd.

[todd-davies]

I think it's a false dichotomy to say that businesses either succeed by IPO/acquisition or fail. Can't a startup "just" be profitable within its niche, serve its customers well and make money while being privately held? It's not clear to me that we should live in a world where every middling startup is eventually acquired or has an IPO. Sure, some startups are destined for exponential growth and huge success, but not all. Likewise, if a business isn't profitable (and can't get funding to tide it over until it is profitable) then maybe it's not a good business. That's catastrophic for the firm, but on a social level, it essentially survival of the fittest.

With regards to personal freedom, we need to think more broadly than just founders. There's also the personal freedom of citizens to consider too; when powerful firms control large parts of the economy they essentially operate as private governments which can also impinge on people's personal freedom (see the below quote). Should a startup founder be allowed to sell a startup to monopolist/oligopolist if that contributes to more economic concentration? Maybe each individual merger isn't that harmful, but taken together their cumulative effect is. Besides, Khan isn't trying to block all mergers. She is focusing on mergers with already dominant firms; perhaps it's possible for the founder to sell a firm which isn't in a dominant position.

> ...power that controls the economy should be in the hands of elected representatives of the people, not in the hands of an industrial oligarchy. Industrial power should be decentralised. It should be scattered into many hands so that the fortunates of the people will not be dependent on the whim or caprice, the political prejudices, the emotional stability of a few self-appointed men. The fact that they are not vicious men but respectable and social minded is irrelevant. That is the philosophy and the command of the Sherman Act. It is founded on a theory of hostility to the concentration in private hands of power so great that only a government of the people should have it. [1]

[1] https://supreme.justia.com/cases/federal/us/334/495/

[gms]

How do you define ‘power’? Absent government regulation that can result in pathologies, a corporation only exists if customers are happy with its services. If Amazon makes me unhappy I’ll just take my money to alternatives.

No corporation forces me to do anything. They offer services and I’m free to buy or not from whomever.

[todd-davies]

Power is notoriously hard to define. In antitrust "market power" is usually defined as either the ability to set prices above marginal cost, or an ability to act free from competitive constraint (i.e. if the firm takes some action, it doesn't worry about other firms responding and taking away some of its business).

On the point of consumers switching away from bad firms, you say that

> a corporation only exists if customers are happy with its services

I'm not so sure. There are many firms that exist despite consumers being unhappy with the products/services provided. The notion that consumers can take their business elsewhere is shouldn't be taken for granted. There are many times where that's not possible; maybe alternative firms don't exist, or they're not convenient, or they have products you like (even) less. Maybe you're "locked in" to the existing firm even though it's starting to provide a worse service, through a contract or because of some path dependency. Thus, we can't take it for granted that firms and consumers have equal bargaining power and that consumers can simply stop purchasing at any time.

[gms]

I’ve never seen alternative firms not exist unless, like I said earlier, government regulations exist to make it harder for new market entrants to pop up (see eg investment banking firms or local cable companies in some regions). In a free society there are always a set of people eager to take advantage of existing vendor weakness.

I commend your exceeding politeness but it seems like this position is based on feelings of consumer harm and missionary zeal rather than rigour (including a lack of true acknowledgement of second order effects of this regulation - all regulation has costs). Yet here I am as a consumer speaking for myself otherwise.

Maybe this why Lina keeps losing her cases.

WhatsApp can’t figure how to make money -> Facebook buys them and can afford to keep them free -> consumers continue using them instead of losing access to a wealth-generating service (the third world is full of small businesses that run on WhatsApp and Instagram).

Still not clear to me why preventing this from happening is good.