By Dean DeChiaro CQ-Roll Call
WWR Article Summary (tl;dr) New legislation announced by Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez would direct the Federal Trade Commission to place "a near-universal moratorium on mergers and acquisitions, including those in the tech industry, until the agency decides small businesses and their employees are no longer suffering financially."
Long before COVID-19 changed everything, progressives in Washington had begun pushing for a new era of antitrust enforcement in which the government would take on the power amassed by the captains of today's technology industry, companies like Facebook, Google and Amazon.
Now, Democratic lawmakers like Sen. Elizabeth Warren of Massachusetts, Rep. Alexandria Ocasio-Cortez of New York, and Rep. David Cicilline of Rhode Island are placing that crusade in the context of the ongoing pandemic.
New legislation announced by Warren and Ocasio-Cortez last week would direct the Federal Trade Commission to place a near-universal moratorium on mergers and acquisitions, including those in the tech industry, until the agency decides small businesses and their employees are no longer suffering financially.
In addition, another group of lawmakers, upset at an April 23 report in The Wall Street Journal that found that Amazon used data collected on its third-party sellers to manufacture competing products bearing the Amazon brand, has asked Jeff Bezos, the online retailer's CEO, to come testify to Congress.
Cicilline, Rep. Jerrold Nadler, D-N.Y., the chairman of the House Judiciary Committee, and Rep. Jim Sensenbrenner, R-Wis., who are investigating Amazon's market power, told Bezos in a letter asking for his appearance that the newspaper report contradicted what Amazon officials had previously told the committee.
Together these efforts will put big technology firms on the hot seat as they continue to prosper while many companies decline in the coronavirus shutdown economy.
Warren, in a statement about her legislation, said the merger moratorium would help save small companies that could be swallowed up by the Big Tech giants.
"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," Warren said, adding that her legislation would "protect workers, entrepreneurs, small businesses, and families from being squeezed even more by harmful mergers during this crisis and any future national emergency."
The moratorium proposed by Warren and Ocasio-Cortez would cover mergers and acquisitions involving companies with over $100 million in revenue, companies controlled by private equity companies and hedge funds, and companies that control a patent on sought-after personal protective equipment.
Cicilline, who chairs the House Judiciary antitrust subcommittee and has been investigating Big Tech's market power since last year, endorsed a similar plan in public remarks last week.
The lawmakers' argument comes down to the idea that mergers and acquisitions during an economic downturn give an unfair advantage to cash-rich companies such as Facebook and Google over nascent startups with no such war chest and little choice but to sell if a buyer comes calling.
"During national crises, the federal government should support small businesses so that they can bounce back after the emergency ends," said a one-pager on the bill released by Warren's office.
"That means ensuring that small businesses have viable alternatives other than accepting acquisition offers that may lead to job losses, price increases, and further entrenchment of giant corporate power."
But the proposal – the text of which has not yet been released – is already meeting resistance from a diverse group of stakeholders who say hitting the pause button on mergers and acquisitions could ultimately hurt already struggling small businesses.
"Their views here are misguided. I don't think this is necessary at all," said Aaron Cutler, a partner at the D.C. lobbying firm Hogan Lovells, which represents a wide range of technology companies. "I think it's a terrible idea."
Cutler said placing a moratorium on mergers and acquisitions could endanger small businesses whose only way to survive the pandemic may be a purchase by a larger firm.
"The free market needs to work," Cutler said. "Companies that are having some financial difficulties that may be pursuing mergers and acquisitions as a future strategy don't need to be told that they can't do so."
Charlotte Slaiman, the director of competition policy at Public Knowledge, a nonpartisan consumer rights organization, said she supports greater scrutiny of mergers and acquisitions during the pandemic but also raised concerns about the proposed moratorium.
"It's a serious concern that there may be a lot of merger activity going on during the downturn, so we want to make sure federal agencies are paying close attention," Slaiman said. But, she said, "you have to be very careful with a moratorium."
Slaiman suggested an exemption for small businesses that might otherwise shut down completely if they are not acquired. "We would want to do everything we can to make sure those workers are still employed," she said. Perhaps no technology company's market power has attracted greater negative attention from lawmakers during the ongoing pandemic than Amazon, especially in light of the April 23 Wall Street Journal report.
Following the report, Sen. Josh Hawley, R-Mo., who has built a reputation as Silicon Valley's chief antagonist among Republicans, wrote to Attorney General William Barr asking the Justice Department to open a criminal antitrust investigation of the company. Hawley said the company's practices demanded attention in any situation, but called them "especially concerning now."
"Thousands of small businesses have been forced to suspend in-store retail and instead rely on Amazon because of shutdowns related to the coronavirus pandemic," Hawley wrote to Barr. "Amazon's reported data practices are an existential threat that may prevent these businesses from ever recovering."
Cicilline, Nadler and Sensenbrenner were particularly incensed that an associate general counsel of Amazon, Nate Sutton, said at a hearing last July that the company does not "use any seller data to compete" with third-party sellers and that the company does not use those sellers' "individual data when we're making decisions to launch private brands." The lawmakers said Amazon had repeated those claims in written testimony.
"If the reporting in the Wall Street Journal article is accurate," the lawmakers wrote, "then statements Amazon made to the Committee about the company's business practices appear to be misleading, and possibly criminally false or perjurious."
In a statement to CNBC, Amazon disputed the Wall Street Journal report but said it would open an internal investigation because "we take these allegations very seriously."
"We strictly prohibit our employees from using non-public, seller-specific data to determine which private label products to launch," the company said. ___ Distributed by Tribune Content Agency, LLC.