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Indeed, you have to wonder if the world might be a better place if mergers were just not allowed. There's a famous Adam Smith quote about people in the same bus

Indeed, you have to wonder if the world might be a better place if mergers were just not allowed. There's a famous Adam Smith quote about people in the same business coming together to screw the consumer. Mergers are perhaps the ultimate collusion. For instance, what if the default position was that mergers were banned, except where you could convincingly show that everyone is better off? For instance in dying industries where scale is necessary.

lotsofpulp 5y ago
A lot of money (including taxpayer money) would be spent on lawyers and courts figuring out how to "convincingly show that everyone is better off".
- abduhl 5y ago
  Probably less in aggregate than is currently spent on lawyers figuring out how to structure these deals.
- hallway_monitor 5y ago
  A lot of money is spent on useless things. This would be completely worth doing and may be the change in corporate law that we need.
ethbr0 5y ago
It's an interesting point, and ultimately kind of boils down to "Is a more profitable company good for consumers?" To which the answer seems inarguably "Sometimes." Scale that reduces production costs (and therefore prices), yes. Or prices could be maintained and the increased profits given to shareholders, in which case no. I think the broader question is "What systemic features exist that make giant companies more efficient than a network of smaller, independent companies?" And to that, I'd argue that in the 21st century, not many. The market and communication B2B inefficiencies that drove conglomeration in the 20th century have most been reduced to zero. The only reason to have a hyperscale company these days is to deploy capital at scale in loss-making enterprises in hopes of capturing market share... and I'm not sure that's something that's been healthy in aggregate?
- rlpb 5y ago
  > And to that, I'd argue that in the 21st century, not many. The market and communication B2B inefficiencies that drove conglomeration in the 20th century have most been reduced to zero. There's still the efficiencies of mass production for physical goods. For digital services that include any element of social network, there's the network effect. I think these are still a significant factor in most markets today. For match-making services in particular, brand recognition is important; otherwise users have difficulty in _finding_ quality from a directory of smaller, independent companies. And arranging effective federation, while possible, is expensive and development of such systems is slow.
  - ethbr0 5y ago
    True. But I imagine what would evolve would be a few B2C "face" brands, backed by a web of unmentioned B2B companies that customers never directly interact with. Which is essentially the dynamic now, except the B2C last mile companies can parlay their relationship and just buy everything high value upstream of them. Which... I'm not sure is great for competition. Anything that moved the market away from one in which all customers are "an Apple customer" or "a Google customer" or "a Facebook customer", with those companies unconstrained in their ability to leverage that, seems better.
- BurningFrog 5y ago
  A major reason to group companies together in a "hyperscale" company is to influence government regulation, which is where you can access real money and power.
- deleted 5y ago
  [deleted]
politician 5y ago
Cartels would still exist.
woah 5y ago
What does this even mean? No business is allowed to buy another business? This would force economic activity to be centered around wealthy individuals (even more than it already is). People feel that wealthy individuals having majority control over big businesses is a bad thing (Bezos, Zuckerberg, etc), but your proposal would enshrine this in law. For example think about the case of Steel, inc. vs John Smith. Steel, inc. is a corporation with a broad set of owners (hell, let's make it employee owned). It makes steel. John Smith is a rich guy who has bought controlling interests in a number of privately held businesses which are all in the steel industry. John Smith will easily be able to outcompete Steel, inc. Steel, inc. is encumbered by your law, while John Smith is not. If John Smith's empire needs an ore mine, he can just buy it. If Steel, inc. needs an ore mine, the only thing they can do is find a new ore deposit, and buy all the machinery needed on the open market. Your law mandates that all business be controlled by rich individuals instead of groups of shareholders.
- kedean 5y ago
  It doesn't seem like much of a stretch to also stop allowing an individual to buy up multiple businesses like that. Starting lots of businesses is one thing, buying them up like Pokemon provides very little value to the world. John Smith could still buy up controlling shares in various companies, but it's also not a big stretch to regulate that sort of thing too. I don't really buy the idea that we need huge corporations to protect us from the rich.
jeroenhd 5y ago
I think a world without mergers would cause a lot of trouble for companies nearing bankruptcy and especially their workforce. When a company is about to fall over because if cashflow issues, another can come in with its reserves and save hundreds or thousands of jobs. That's good for everyone. I'd argue for a world with only limited possibilities for mergers, where mergers are a last resort rather than the goal of a startup. So many companies these days produce absolutely nothing of value in the hopes of being bought out by a big conglomerate.
thehappypm 5y ago
This is kind of a dumb take.. mergers are often done to enable efficiency. A jet engine company might suck at marketing.
- Apocryphon 5y ago
  That's why ad agencies exist.
  - thehappypm 5y ago
    OK, so you hire an ad agency, which then needs its own IT department, it’s own HR and finance.. why not merge them in? If you ban mergers you’ll just have the people individually get poached
    - Apocryphon 5y ago
      That doesn't really make things efficient because the different nature of the two industries will require some of the departments to stay different. Not to mention it removes a business that was previously providing marketing services from the market, and attaches it to a jet engine company. I doubt that Giphy the Meta subsidiary uses the same IT department as Facebook.
Animats 5y ago
The EU had a study that indicated that you need at least four competitors before price competition appears. Two or three act like a monopoly, almost automatically. The free market thing requires multiple players to work. So mergers that bring the number of competitors below four should be prohibited. The US is down to three big banks, three mobile phone companies, and three drugstore chains, and they don't compete on price much. If an industry gets below four, maybe the companies should be given the choice of breaking up or converting to a common carrier or regulated public utility.
theskypirate 5y ago
"Why don't we just ban all <insert business thing>!" People always want a simple answer. Intervening in markets can be done successfully in some cases, but as a random member of the public you're never going to come up with a silver bullet.

lotsofpulp 5y ago

A lot of money (including taxpayer money) would be spent on lawyers and courts figuring out how to "convincingly show that everyone is better off".

abduhl 5y ago
Probably less in aggregate than is currently spent on lawyers figuring out how to structure these deals.
hallway_monitor 5y ago
A lot of money is spent on useless things. This would be completely worth doing and may be the change in corporate law that we need.

ethbr0 5y ago

It's an interesting point, and ultimately kind of boils down to "Is a more profitable company good for consumers?" To which the answer seems inarguably "Sometimes." Scale that reduces production costs (and therefore prices), yes. Or prices could be maintained and the increased profits given to shareholders, in which case no. I think the broader question is "What systemic features exist that make giant companies more efficient than a network of smaller, independent companies?" And to that, I'd argue that in the 21st century, not many. The market and communication B2B inefficiencies that drove conglomeration in the 20th century have most been reduced to zero. The only reason to have a hyperscale company these days is to deploy capital at scale in loss-making enterprises in hopes of capturing market share... and I'm not sure that's something that's been healthy in aggregate?

rlpb 5y ago
> And to that, I'd argue that in the 21st century, not many. The market and communication B2B inefficiencies that drove conglomeration in the 20th century have most been reduced to zero. There's still the efficiencies of mass production for physical goods. For digital services that include any element of social network, there's the network effect. I think these are still a significant factor in most markets today. For match-making services in particular, brand recognition is important; otherwise users have difficulty in _finding_ quality from a directory of smaller, independent companies. And arranging effective federation, while possible, is expensive and development of such systems is slow.
- ethbr0 5y ago
  True. But I imagine what would evolve would be a few B2C "face" brands, backed by a web of unmentioned B2B companies that customers never directly interact with. Which is essentially the dynamic now, except the B2C last mile companies can parlay their relationship and just buy everything high value upstream of them. Which... I'm not sure is great for competition. Anything that moved the market away from one in which all customers are "an Apple customer" or "a Google customer" or "a Facebook customer", with those companies unconstrained in their ability to leverage that, seems better.
BurningFrog 5y ago
A major reason to group companies together in a "hyperscale" company is to influence government regulation, which is where you can access real money and power.
deleted 5y ago
[deleted]

politician 5y ago

Cartels would still exist.

woah 5y ago

What does this even mean? No business is allowed to buy another business? This would force economic activity to be centered around wealthy individuals (even more than it already is). People feel that wealthy individuals having majority control over big businesses is a bad thing (Bezos, Zuckerberg, etc), but your proposal would enshrine this in law. For example think about the case of Steel, inc. vs John Smith. Steel, inc. is a corporation with a broad set of owners (hell, let's make it employee owned). It makes steel. John Smith is a rich guy who has bought controlling interests in a number of privately held businesses which are all in the steel industry. John Smith will easily be able to outcompete Steel, inc. Steel, inc. is encumbered by your law, while John Smith is not. If John Smith's empire needs an ore mine, he can just buy it. If Steel, inc. needs an ore mine, the only thing they can do is find a new ore deposit, and buy all the machinery needed on the open market. Your law mandates that all business be controlled by rich individuals instead of groups of shareholders.

kedean 5y ago
It doesn't seem like much of a stretch to also stop allowing an individual to buy up multiple businesses like that. Starting lots of businesses is one thing, buying them up like Pokemon provides very little value to the world. John Smith could still buy up controlling shares in various companies, but it's also not a big stretch to regulate that sort of thing too. I don't really buy the idea that we need huge corporations to protect us from the rich.

jeroenhd 5y ago

I think a world without mergers would cause a lot of trouble for companies nearing bankruptcy and especially their workforce. When a company is about to fall over because if cashflow issues, another can come in with its reserves and save hundreds or thousands of jobs. That's good for everyone. I'd argue for a world with only limited possibilities for mergers, where mergers are a last resort rather than the goal of a startup. So many companies these days produce absolutely nothing of value in the hopes of being bought out by a big conglomerate.

thehappypm 5y ago

This is kind of a dumb take.. mergers are often done to enable efficiency. A jet engine company might suck at marketing.

Apocryphon 5y ago
That's why ad agencies exist.
- thehappypm 5y ago
  OK, so you hire an ad agency, which then needs its own IT department, it’s own HR and finance.. why not merge them in? If you ban mergers you’ll just have the people individually get poached
  - Apocryphon 5y ago
    That doesn't really make things efficient because the different nature of the two industries will require some of the departments to stay different. Not to mention it removes a business that was previously providing marketing services from the market, and attaches it to a jet engine company. I doubt that Giphy the Meta subsidiary uses the same IT department as Facebook.

Animats 5y ago

The EU had a study that indicated that you need at least four competitors before price competition appears. Two or three act like a monopoly, almost automatically. The free market thing requires multiple players to work. So mergers that bring the number of competitors below four should be prohibited. The US is down to three big banks, three mobile phone companies, and three drugstore chains, and they don't compete on price much. If an industry gets below four, maybe the companies should be given the choice of breaking up or converting to a common carrier or regulated public utility.

theskypirate 5y ago

"Why don't we just ban all <insert business thing>!" People always want a simple answer. Intervening in markets can be done successfully in some cases, but as a random member of the public you're never going to come up with a silver bullet.