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> I believe businesses would just lie and say they are going to be part of the business but then just bury them anyway. That's where my pet antitrust solution

• enriquec 3y ago
  Nothing about this would succeed. Do only monopolies perform mergers?
  • fsckboy 3y ago
    > Do only monopolies perform mergers? companies merge to concentrate market share, i.e. eliminate competition, i.e. increase prices, i.e. monopolize. Let's not ban just monopolies, let's also ban monopolize.
    • ethbr0 3y ago
      Companies also acquire and merge to vertically integrate.
      • gAI 3y ago
        Lazy, entitled companies should pull themselves up by their bootstraps and build their own supply chains from scratch. Maybe if they had some work ethic, they wouldn't need all that hard-earned tax money - corporate welfare queens. All joking aside, supply chain shenanigans are a nightmare.
      • fsckboy 3y ago
        So, for example Coca Cola has saturated the drinks market, and they vertically integrate by buying bottling companies... which means their competitor Pepsi can no longer buy from that bottling company because Coke has decreased competition in that market? Here's what they teach in business school: if you have a cloud computing business, and you have an advertising business, and your cloud business wants to advertise its services, should the cloud business get a discount on the ads, maybe the ad business has some surplus capacity you could soak up for free? Nope. The cloud business taking advantage of "free" ads from your ad business will make the health of the cloud business look better than it is. It will cover up overcapacity in the ad business, hiding the poor way it is being run. To properly assess your two businesses so you can make internal investing decisions, you need a clear picture of how those two businesses are operating in their respective markets. If a competitor is selling ads cheaper than you are, your cloud business should buy them. So, if this is how managers and cost accountants are trained to think rationally, well guess what, that's what markets are good at. Vertical integration is part of the monopolization problem.
        • ethbr0 3y ago
          That's an overly simplistic situation. Maybe the bottler bottles for multiple companies. Maybe Coca Cola could redesign their own bottles to target specialized bottle-filling machines, and Coca Cola would have enough volume to use all of that bottler's capacity. But the bottler won't invest in the machines, because they don't want to only bottle Coca Cola products. And absent that, the bottles never get redesigned and the efficient machines never get bought. And absent that, Coca Cola is more expensive than it could be. Or maybe absent an integration, the product offering isn't what the market really wants, because it doesn't want to have to combine two things. Vertical integration can breed efficiency. It can also breed monopoly, but you need to address the iron man if you're making an argument.
        • vGPU 3y ago
          Except in reality, the cloud business would “buy” ads from the ad business, and now you have an “expense” despite the fact that the money never went anywhere. Shuffle here, shuffle there, viola! Tax evasion.
    • unreal37 3y ago
      Unprofitable companies get bought out to simply continue existing. Like Twitch and YouTube.
  • ardacinar 3y ago
    By the way, acquisitions are easier to defend IMO. There are definitely cases of "Business X acquires business Y" that have no anti-competitive intent or anti-competitive consequences. But at least anecdotally, I can say mergers that do not lead to anti-competitive behavior are quite rare.
• londons_explore 3y ago
  You could have other restrictions on mergers... For example, "All IP (trademarks, copyright, patents) from one of the two merged companies gets released to the public" Or perhaps "Anyone with contractual obligations to one of the merged companies is released from those obligations". Both of those would be half way to just dissolving one of the companies and re-hiring the staff by the other company to release a similar product.
  • GTP 3y ago
    > "All IP (trademarks, copyright, patents) from one of the two merged companies gets released to the public" This sounds very extreme to me, sometimes acquisitions are done exactly because the buyer is interested in the other company's IP. This would be a showstopper even in the cases where the buyer really wants to use the IP it is going to aquire.
    • int_19h 3y ago
      > sometimes acquisitions are done exactly because the buyer is interested in the other company's IP How many of those cases produce an outcome that is beneficial to the public?
• somenits 3y ago
  There is an optimal number of firms in competition with each other. It could be that for a particular industry, 10 firms means everyone is losing money and unable to make new investments, while 8 firms means that there's a healthy amount of profit that can sustain R&D and growth. Sure, eventually it might all work out as firms go bankrupt or go into a new business, but you can lose decades in waiting that out. Also, this is easily circumvented by just buying the crucial assets of a competitor, like trade secrets, factories, offices, patents, etc.
  • fsckboy 3y ago
    > 10 firms means everyone is losing money and unable to make new investments, while 8 firms means that there's a healthy amount of profit that can sustain R&D and growth. don't confuse economic profit with accounting profit: the promise/goal/benefit of competitive markets is that economic profit goes to zero. (quickest way to describe the difference is, there are dry cleaners dotting the landscape in competition with each other, they make income which pays the owner's living including saving for retirement, kids college fund, etc. That's accounting profit. That's not economic profit, which is why you don't see VCs and investment banks investing in dry cleaning startups.) Another important aspect of competitive markets is that weak companies die, and new companies enter, what Schumpeter called creative destruction. The 10 firms "losing money" is 10 firms competing, some of whom will fail. The 8 firms making healthy profits with fat (and lazy) R&D departments is attractive for disruption.
    • somenits 3y ago
      I'm not confused. But you are introducing unnecessary concepts here. A firm needs to make some profit in the long run, whatever you want to call it, to be able to sustain investment. If there's too many firms in the market, that can be undermined. That's why you don't see five dry cleaners right next to each other in the same strip mall. And your second paragraph fails to address my point too. I acknowledged that in the long run, the health of the industry could be restored by some of the firms failing. But that can take way too long, and in the meantime, all of them are capital-starved and unable to invest in improving their businesses.
    • 3y ago
• unreal37 3y ago
  Company A is 6 days away from going out of business. They will shut their doors. All employees will lose their jobs. All customers will lose access to whatever Company A does that they find helpful. But then Company B agrees to buy them for $1 so that they continue running. Pays the employees, and continues running the service for customers. Ban it?
  • itsrobforreal 3y ago
    Yes, absolutely. Company B would have to compromise the service and change the rules. Company B can instead spin up its own business and ask Company A to advertise for them, but anything else is just selling out users.
  • hcal 3y ago
    I'm not advocating for banning M&As, but I think that could be addressed by only allowing acquisitions under specific bankruptcy conditions. Again, though, I'm not advocating for that position. I'd hate to spend part of my life building a business and not be able to cash out when the time comes for me to retire.
    • Curvature5868 3y ago
      Is it possible for private companies to pay dividends? Let's say you retire and you own a portion of a small but thriving company. Could that company potentially provide you with dividends as a form of income?
      • bstpierre 3y ago
        Yes, a private company can pay dividends. Or you could loan it the money to buy out your shares and collect interest as it pays back the loan. Or a mixture of the two, with a thousand little variations on terms. I believe I ran into an employee-owned company once that had gone through some version of the loan scenario.
        • traviscj 3y ago
• zeroonetwothree 3y ago
  This would reduce consumer value quite a bit in some cases. Let’s not throw the baby out with the bath water.
• tooltower 3y ago
  I've actually thought about this. But there are cases when mergers can help customers. E.g. when a vertical merger happens, that can absorb some of the profit margins between a supplier and manufacturer. Ideally, regulators should analyze the market for problematic dynamics. But I agree that the vast majority of mergers that make the news are not good for consumers.
• kortilla 3y ago
  M&A should be allowed for vertical integration and efficiency improvements there. Fewer intermediaries is better for everyone (except the intermediaries). Agree on scrutinizing M&A of competitors.
• idopmstuff 3y ago
  So what happens to the mom and pop hardware store that's been running for 30 years when mom and pop want to retire? They just have to shut their doors? Banning all M&A would run into a brick wall of unintended consequences. If no one can sell their business, then a significant percent of potential small business owners just wouldn't start businesses. Then what would happen? Those people would go get jobs. Instead of them owning the things they create, those things would be owned by their employers. Instead of having the issue where someone goes and creates Goodreads but it gets bought by Amazon, nobody would ever create Goodreads. All you've done is save Amazon the acquisition cost.
  • thomasahle 3y ago
    > So what happens to the mom and pop hardware store that's been running for 30 years when mom and pop want to retire? They just have to shut their doors? They could sell it to another mom and pop? It's only an M&A if the shop is bought by / becomes part of another business. If nobody wants to continue running the independent shop, it doesn't make much difference to consumers if a chain buys it, or if it closes down and the chain just opens a new shop there.
    • idopmstuff 3y ago
      If the only people who can buy businesses are individuals, you've cut the potential acquirer pool, and thus the value, by an enormous amount. > If nobody wants to continue running the independent shop, it doesn't make much difference to consumers if a chain buys it, or if it closes down and the chain just opens a new shop there. You're pointing out exactly why banning M&A would be good for big businesses. Now instead of having to buy out the little guy, they just wait for it close and then buy all the assets (can assets be sold under this regime? do you just have to throw everything away?) and reopen under their own name. Now the mom and pop lost a bunch of money and the big company got a new location at a big savings.
      • Apocryphon 3y ago
        Why is a buyout even the only option? Just find new management. Keep it in the family. Turn it into a co-op. There’s also such as a thing as community businesses, apparently.
• golergka 3y ago
  I don't even need to know what unintentional consequences of this will be, but I know that they will be catastrophic.
• crazygringo 3y ago
  No, that's throwing the baby out with the bathwater. There's no problem if a company with 2% of the market merges with another company with 2% -- it tends to lower prices by removing inefficiencies. It's only a problem when prices rise or innovation stops when there are only ~2 competitors left, or when the a single player has 40%+ market share. Also a large proportion of mergers have nothing to do with market share -- they're acquiring a supplier for vertical consolidation, they're buying a product because it's faster than building it in-house, etc. These are generally entirely legitimate as they enable companies to compete more, not less -- which is good for consumers.
  • fsckboy 3y ago
    Vertical consolidation is also monopolistic, it reduces competition by removing a buyer and a seller from a healthy marketplace. what is actually good for consumers is fierce competition spoiling the sleep of capitalists.
    • crazygringo 3y ago
      It's still the same rules though. If you're buying a supplier for 5% of the marketplace it's perfectly fine. If you're buying a supplier for 65% of the market then that's a problem.
      • fsckboy 3y ago
        a supplier for 65% of the market is already a problem. Were the any acquisitions on the way to that market position? even if there weren't, it's still too big, break it in half. Shareholders will still own what they owned before, 65% of the market, and all the IP that is contained therein, but the companies will have to compete.
• paulddraper 3y ago
  > ban all M&A That makes about as much sense as banning marriage. M&A is fundamental and important.
  • Joker_vD 3y ago
    > That makes about as much sense as banning marriage. Banning marriage actually makes a lot of sense, according to some. Why is the state even involved in such private matters in the first place anyhow?
    • paulddraper 3y ago
      Same reasons it's involved in medicine, housing, education, etc etc.
      • ClumsyPilot 3y ago
        Medicine kills people. I never saw someone die from marriage
        • Joker_vD 3y ago
          "Marital discord was significantly and positively associated with suicidal ideation and suicide attempt, and these associations remained significant when controlling for demographics and 12-month prevalence of mood, anxiety, and substance use disorders" [0]. [0] https://onlinelibrary.wiley.com/doi/abs/10.1111/sltb.12157 https://onlinelibrary.wiley.com/doi/abs/10.1111/sltb.12157
        • midoridensha 3y ago
          I'm sure lots of people have committed suicide because they were stuck in bad marriages (esp. before divorce was legalized). Lots of women get murdered by their husbands (and sometimes the reverse).
  • ClumsyPilot 3y ago
    M&S is not fundamental, I didn't ecen exist as a concept untill fairly recently in the history of Capitalism.
• libraryatnight 3y ago
  I agree generally, I'm sure an actual solution is more nuanced but coming from the angle of no M&A seems like a good ideal. My personal issues with business after having worked in it for awhile as an employee and not a capitalist: 1) building a business with a goal of being acquired often builds lazy unsustainable businesses built only to be cashed out, often at the expense of employees. 2) buying good businesses seems frequently to do what you said: they get absorbed and lost and the social cost is a lost source of jobs, innovation, and competition. I know the companies I worked for acquired wonderful smaller companies doing decent things, made happy speeches about their future, then they were gradually pushed out and shut down. Would they have failed anyway? Maybe, but I'd like to see more businesses rise and fall rather than cannibalize each other. I'm not a smart man, so I don't know what to do specifically, but I definitely see the problem this solution is getting at - I hope some day society has figured out a good answer.
• cwp 3y ago
  It doesn't come at the expense of the employees of the acquired business. They often get rich, or at least land a well-paying and career-enhancing gig at the acquiring company. This is important, because it means that new companies that compete with the monopolies have many paths to success. If the only possible outcomes are "beat Amazon" and "fail hard", you won't get many attempts; it's better to get an entry-level job at Amazon and climb the ladder. So yeah, monopolies are bad, but banning M&A only helps them.
  • ClumsyPilot 3y ago
    > If the only possible outcomes are "beat Amazon" and "fail hard", If you start a car company, are your only two options 'beat Wolkwagen" and fail hard? How many car companies do we have?
    • cwp 3y ago
      No, because M&A isn't banned. I don't know how many car companies we have, but I do notice that there are a bunch of new ones recently. Just off the top of my head: Tesla, Lucid, Rivian, Cruise.
• spoonjim 3y ago
  A lot of technologies are brought to a much bigger audience through an acquisition. PASemi for example wouldn’t have had nearly the impact they did if Apple had not acquired them and made them the foundation of Apple Silicon.
• dustingetz 3y ago
  that would essentially ban the stock market, i think. Shares have value because if you accumulate enough of them you control the company, or can sell them to someone else who wants to control the company. If you prevent the buyer from using the company to benefit their interests then there won’t be any buyers. and poof, the entire startup finance appratus evaporates.
• brianwawok 3y ago
  Every member of this forum that has sold a company has had a life changing benefit from selling. It’s not just billionaires.
• kibwen 3y ago
  FWIW, this is also the conclusion that I've come to. Mergers only make markets less competitive, and the mere existence of acquisitions creates perverse incentives that distort the startup market into utter uselessness. The experiment has failed, ban it all, and ignore the protestations of the get-rich-quick crowd. Of course, to fix the overall market you'll also need to break up all the existing megacorps in the process, and I wish you luck with that.
  • nl 3y ago
    But... mergers really do not only make markets less competitive at all! May mergers of huge companies often have negative impact. Firstly most mergers do not involve multi-billion dollar companies at all, secondly many mergers occur when one company is is trouble, and thirdly good takeovers increase distribution of the smaller companies brand. Good examples of successful mergers/takeovers like this include: Halotop bought by Wells Enterprises Geely buying Volvo SAIC buying MG Most acquisitions by Proctor & Gamble Most acquisitions and mergers in the markup and beauty space.
    • throwaway2037 3y ago
      Most acquisitions by Proctor & Gamble That is quite a broad statement. Can you explain more?
      • nl 3y ago
        In the FMCG space that P&G is in most of their takeovers improve distribution for the company that is being acquired, and P&G generally seems to prefer to leave the brand and management of the company alone. I'm sure there have been some that haven't been successful, but most that I'm aware of have gone very well.
    • autoexec 3y ago
      > Good examples of successful mergers/takeovers like this include: How are you defining "good" or "successful" here?
• parineum 3y ago
  > Nobody wins except the monopolist, and monopolies are already bad, so why help them? You are obviously entitled to the opinion that monopolies are bad but, fwiw, the ftc is a lot more concerned with anti-competitive behavior than it is with monopolies. Those get conflated because they frequently occur together but a lot of companies have monopolies that most people don't really have an issue with because they aren't anti-competitive. Sometimes a monopoly is a monopoly because they are better than everyone else.
  • pyeri 3y ago
    >> Sometimes a monopoly is a monopoly because they are better than everyone else. There is also the case of "natural monopolies" in economics, these are railways, postal services, etc. where it wouldn't make sense for multiple players to waste resources and the one player can benefit from economies of scale. It'd be hilarious if 2-3 rail companies tried setting up their own tracks, stations, signals, etc. in a small town for example. So much redundancy all going waste. Another example is multiple telecom companies trying to erect their own towers in vicinity of a little town where only one is enough to provide coverage. It's a collosal waste for the whole society, not just those companies.
    • morepork 3y ago
      More than railways, imagine if roads were privatised and you had 2-3 roading networks trying to get to as many homes/business/etc. as possible
      • autoexec 3y ago
        > imagine if roads were privatised and you had 2-3 roading networks trying to get to as many homes/business/etc. as possible This would never happen. If roads were privatized they wouldn't care about connecting as many homes/business as possible, they'd only care about building roads where it was the most profitable for them and even then any roads that made less money would be left in increasingly poor condition. It wouldn't leave taxpayers off the hook either. Governments would have to spend taxpayer money to incentivize private companies to build out in "unprofitable" areas, but those roads would be kept in the worst conditions of all (assuming that companies didn't just repeatedly promise to build them, only to pocket the taxpayer's money while providing nothing) Some services are worth enough to the public good that profit shouldn't be the only consideration, and some are worth so much that profit shouldn't be the goal at all and instead those services should simply strive to do the job required for every citizen with as little genuine waste as possible.
• perryizgr8 3y ago
  > ban all M&A Let's think through this. Company A wants to buy Company B. M&A is banned. 1. A pays B's owners $X for all IP and other properties of B. 2. B fires everyone. 3. A hires whoever they want out of B's former employees. A "ban" will simply not work as long as your country has a concept of property rights and ownership.
  • datavirtue 3y ago
    So require an employee vote?
• ymolodtsov 3y ago
  > That's where my pet antitrust solution succeeds where others fail: ban all M&A. Such a weird take. Most of the acquisition the big tech does is acquihires. Basically, a way to keep a team employed and return some of the money to the investors and make the team's stock worth something at least.
• PaulRobinson 3y ago
  I agree with much of your premise, but there is an unintended consequence: blocking a significant exit opportunity for investors. This would potentially kill the VC industry. You might not care, but it’s enough of a problem that a lot of entrepreneurs would side with the monopolists and stop this dead in its tracks.