4 ms·

US antitrust law has a failing company doctrine. If you can show that absent the merger, the company would almost certainly fail, and no other likely purchaser

US antitrust law has a failing company doctrine. If you can show that absent the merger, the company would almost certainly fail, and no other likely purchaser exists, then you have the right to buy it regardless of any competitive concerns.

i_am_jl 3y ago
I was really hoping this was a novelty account that just went around HN threads, calling out misinformation.
- Nullabillity 3y ago
  Did we read the same post? "The US implements X" doesn't counter "X is a terrible idea" at all.
  - maleldil 3y ago
    I think they were talking about parent's name, thatsjustwrong, and how perfect it would be for a fact checking novelty account.
edgyquant 3y ago
That sounds terrible and should change ASAP
- bobthepanda 3y ago
  Is it? T-Mobile was cleared to buy Sprint because Sprint was not able to be a going concern. The end result is the same, with 3 national cell carriers.
- cortesoft 3y ago
  Why? How is market competition or the public served by forcing a company to go out of business instead of being acquired? The end result is the same (no competitor), but overall productivity is hurt. Why is that better for the public?
  - ironmagma 3y ago
    Going bankrupt doesn't necessarily mean going out of business. Also, as another commenter said, "letting a company fail really just means letting it sink far enough that some other acquirer will pick it up."
    - throwaway2037 3y ago
      Great point: In US bankruptcy law, "Chapter 7" is liquidation, and "Chapter 11" is re-org. Often, a well-managed Chapter 11 bankruptcy can allow a company to reduce debt burden and emerge as a stronger company, saving many jobs in the process. Chapter 11 bankruptcy is common in the US airline industry.
      - bombcar 3y ago
        Chapter 11 is basically finding a lower bidder - the lenders are willing to take ownership of the failing company.
  - troupo 3y ago
    > How is market competition or the public served by forcing a company to go out of business instead of being acquired How is market competition or the public served by companies whose only strategy is to fail and be bought by the ever shrinking number of ultra rich mega corporations?
gms 3y ago
Do you know why this didn't apply regarding JetBlue trying to acquire Spirit?
- bobthepanda 3y ago
  Spirit being about to "certainly fail" is debatable, and JetBlue is not the only willing purchaser of Spirit. One outcome is Spirit goes into bankruptcy reorganization and still operates, which is hardly unprecedented for an American airline. Nearly every major airline has filed for Chapter 11 since 2002, the lone exception being Southwest.
  - throwaway2037 3y ago
    Small note: JetBlue was started in 1999/2000, so it would be included on the "exception" list. But overall, your point stands. Chapter 11 re-org is bizarrely common in US airlines. Warren Buffett has many funny quotes about the terrible return on investment for US airlines -- both debt and equity.
    - basch 3y ago
      >Delta entered Chapter 11 on Sept. 14, 2005, amid high fuel prices and the burdens of high labor and pension expenses. Delta significantly reduced its labor and pension costs while under court protection. It’s always interesting that Chapter 11 is a way out of pension promises. That someone can take employment at a certain wage, and then the company can renege on the back half of the compensation once the person retires.
      - lotsofpulp 3y ago
        Hence one should be wary of accepting the promise to be paid decades in the future by anyone other than the US federal government, or much more regulated entities like insurance companies. If the payer is not US federal government, stick to broad market index funds in 401k/IRA.
    - philwelch 3y ago
notatoad 3y ago
>and no other likely purchaser exists this seems like the important part of that doctrine, and a perfect justification for why an amazon acquisition shouldn't be allowed. letting a company fail really just means letting it sink far enough that some other acquirer will pick it up.
- dangerlibrary 3y ago
  Or it'll just fade into oblivion, like Convoy.
  - throwaway2037 3y ago
    This Convoy? https://en.wikipedia.org/wiki/Convoy_(company) https://en.wikipedia.org/wiki/Convoy_(company) If yes, it sounds rough! > On 19th October 2023, Convoy ceased operations and laid off remaining staff. Remaining staff were given no severance and were told their stock options were worthless.[9] In a memo sent that day to employees, Lewis points to "a massive freight recession and a contraction in the capital markets" as major factors resulting in the company's failure.[10]
  - techie128 3y ago
    Nothing fades into oblivion. The company is obligated to liquidate its assets which includes IP. This gives a big opportunity to build new products that may be more economically viable. This would not be possible if the company would be acquired by the incumbent who will just acquire the company’s IP and sit on it.
    - ben_w 3y ago
      > The company is obligated to liquidate its assets which includes IP "We have no idea who owns this IP in order to ask for permission, because the company went bankrupt" comes up fairly often in discussions about copyright duration and video games.
    - vidarh 3y ago
      How often does acquired IP rights just end up in a lawyers filing cabinet somewhere, with nobody in the acquiring company sufficiently incentivized to do something with most of it? A lot of the time - especially with failing companies where the sale might happen at rock bottom prices, but otherwise too - the acquirer and seller may have very different ideas about which part of the transaction matters. E.g. one company I co-founded sold off a business unit after we pivoted, and where to me at least the technology was the most worthwhile part - far better than the platform the buyer had. But to them the 6% of the userbase they were able to convert to paying users of their own service was what justified the sale price. And as much as I think the tech we sold them with the userbase was better, I get that to them - even if they agreed with my assessment, and maybe they didn't - it wasn't sufficiently better to them to justify replacing what they had and knew how to develop and knew how to operate (we sold the system, not the company, so none of our staff went with them). Acquired IP gets used when it is the focus of the purchase, and the acquirer knows exactly what they want or need that IP for, but even then more so if it's e.g. patents rather than software. A lot of software acquirers thought they needed still end up languishing and eventually dying. But I've seen so much IP "fade into oblivion" over the years. I'd say, I don't even know who currently owns the rights to the majority of the software I've personally developed in my career. Some would be easy to track down. Others near impossible.
troupo 3y ago
So that's why most "innovative" startups in the US (apart from those bleeding billions dollars a year) never seek profit and hope to be purchased
philwelch 3y ago
What if it’s only likely to fail as a consequence of your own anticompetitive actions?

i_am_jl 3y ago

I was really hoping this was a novelty account that just went around HN threads, calling out misinformation.

Nullabillity 3y ago
Did we read the same post? "The US implements X" doesn't counter "X is a terrible idea" at all.
- maleldil 3y ago
  I think they were talking about parent's name, thatsjustwrong, and how perfect it would be for a fact checking novelty account.

edgyquant 3y ago

That sounds terrible and should change ASAP

bobthepanda 3y ago
Is it? T-Mobile was cleared to buy Sprint because Sprint was not able to be a going concern. The end result is the same, with 3 national cell carriers.
cortesoft 3y ago
Why? How is market competition or the public served by forcing a company to go out of business instead of being acquired? The end result is the same (no competitor), but overall productivity is hurt. Why is that better for the public?
- ironmagma 3y ago
  Going bankrupt doesn't necessarily mean going out of business. Also, as another commenter said, "letting a company fail really just means letting it sink far enough that some other acquirer will pick it up."
  - throwaway2037 3y ago
    Great point: In US bankruptcy law, "Chapter 7" is liquidation, and "Chapter 11" is re-org. Often, a well-managed Chapter 11 bankruptcy can allow a company to reduce debt burden and emerge as a stronger company, saving many jobs in the process. Chapter 11 bankruptcy is common in the US airline industry.
    - bombcar 3y ago
      Chapter 11 is basically finding a lower bidder - the lenders are willing to take ownership of the failing company.
- troupo 3y ago
  > How is market competition or the public served by forcing a company to go out of business instead of being acquired How is market competition or the public served by companies whose only strategy is to fail and be bought by the ever shrinking number of ultra rich mega corporations?

gms 3y ago

Do you know why this didn't apply regarding JetBlue trying to acquire Spirit?

bobthepanda 3y ago
Spirit being about to "certainly fail" is debatable, and JetBlue is not the only willing purchaser of Spirit. One outcome is Spirit goes into bankruptcy reorganization and still operates, which is hardly unprecedented for an American airline. Nearly every major airline has filed for Chapter 11 since 2002, the lone exception being Southwest.
- throwaway2037 3y ago
  Small note: JetBlue was started in 1999/2000, so it would be included on the "exception" list. But overall, your point stands. Chapter 11 re-org is bizarrely common in US airlines. Warren Buffett has many funny quotes about the terrible return on investment for US airlines -- both debt and equity.
  - basch 3y ago
    >Delta entered Chapter 11 on Sept. 14, 2005, amid high fuel prices and the burdens of high labor and pension expenses. Delta significantly reduced its labor and pension costs while under court protection. It’s always interesting that Chapter 11 is a way out of pension promises. That someone can take employment at a certain wage, and then the company can renege on the back half of the compensation once the person retires.
    - lotsofpulp 3y ago
      Hence one should be wary of accepting the promise to be paid decades in the future by anyone other than the US federal government, or much more regulated entities like insurance companies. If the payer is not US federal government, stick to broad market index funds in 401k/IRA.
  - philwelch 3y ago

notatoad 3y ago

>and no other likely purchaser exists this seems like the important part of that doctrine, and a perfect justification for why an amazon acquisition shouldn't be allowed. letting a company fail really just means letting it sink far enough that some other acquirer will pick it up.

dangerlibrary 3y ago
Or it'll just fade into oblivion, like Convoy.
- throwaway2037 3y ago
  This Convoy? https://en.wikipedia.org/wiki/Convoy_(company) https://en.wikipedia.org/wiki/Convoy_(company) If yes, it sounds rough! > On 19th October 2023, Convoy ceased operations and laid off remaining staff. Remaining staff were given no severance and were told their stock options were worthless.[9] In a memo sent that day to employees, Lewis points to "a massive freight recession and a contraction in the capital markets" as major factors resulting in the company's failure.[10]
- techie128 3y ago
  Nothing fades into oblivion. The company is obligated to liquidate its assets which includes IP. This gives a big opportunity to build new products that may be more economically viable. This would not be possible if the company would be acquired by the incumbent who will just acquire the company’s IP and sit on it.
  - ben_w 3y ago
    > The company is obligated to liquidate its assets which includes IP "We have no idea who owns this IP in order to ask for permission, because the company went bankrupt" comes up fairly often in discussions about copyright duration and video games.
  - vidarh 3y ago
    How often does acquired IP rights just end up in a lawyers filing cabinet somewhere, with nobody in the acquiring company sufficiently incentivized to do something with most of it? A lot of the time - especially with failing companies where the sale might happen at rock bottom prices, but otherwise too - the acquirer and seller may have very different ideas about which part of the transaction matters. E.g. one company I co-founded sold off a business unit after we pivoted, and where to me at least the technology was the most worthwhile part - far better than the platform the buyer had. But to them the 6% of the userbase they were able to convert to paying users of their own service was what justified the sale price. And as much as I think the tech we sold them with the userbase was better, I get that to them - even if they agreed with my assessment, and maybe they didn't - it wasn't sufficiently better to them to justify replacing what they had and knew how to develop and knew how to operate (we sold the system, not the company, so none of our staff went with them). Acquired IP gets used when it is the focus of the purchase, and the acquirer knows exactly what they want or need that IP for, but even then more so if it's e.g. patents rather than software. A lot of software acquirers thought they needed still end up languishing and eventually dying. But I've seen so much IP "fade into oblivion" over the years. I'd say, I don't even know who currently owns the rights to the majority of the software I've personally developed in my career. Some would be easy to track down. Others near impossible.

troupo 3y ago

So that's why most "innovative" startups in the US (apart from those bleeding billions dollars a year) never seek profit and hope to be purchased

philwelch 3y ago

What if it’s only likely to fail as a consequence of your own anticompetitive actions?