It's critical that we fight this fight, even if we end up losing. It's the right side of history to be on, and corps are already profiting off of the crisis small businesses are going through. We can't let that truth get washed away by the firehose.
This will never ever pass (because both the GOP and half the Dems will listen to the Chamber of Commerce) so the best hope is jamming through a rent freeze somehow and then trying to persuade Biden to break up big everything next year. Because there is going to be major consolidation. Mitch’s donors are salivating at the thought.
As a messaging bill to signal to Biden that she’s the populist flag bearer of the party and the best bridge to the AOC generation despite being 70 however...excellent work
I’m still not sure why it’s a bad thing. Obviously, businesses folding due to the virus isn’t ideal...but access to capital through a merger is a potential life ring in a tempest. It’s not like mergers are an involuntary activity.
What is the alternative. Close shop?
I think curbing back LBOs when capital is rolling around seeking high returns and plenty of companies are vulnerable is probably a good idea because of the reliable shitty outcomes that LBOs wind up producing.
But M&As in general are kind of a part of how companies in trouble deleverage and survive. Just be a little more holistic than "does it benefit consumar/???????? THEN OK" when evaluating them, because everyone knows how to game that.
Elizabeth Warren famously made breaking up several big tech companies part of her platform, something that, not surprisingly, turned off a lot of people on this subreddit. I often see people finding her view on things incomprehensible here, but there's a lot more substance -- and pro-capitalist instinct -- behind her anti-trust policy than we often give her credit for.
I'm plagiarizing myself from a few months ago here, so I apologize if this comment seems familiar:
By all appearances, Warren seems to take a more classical "does this harm the marketplace" approach to anti-trust, rather than the more limited "are we sure this harms consumers" approach, such that a business practice that is anti-competitive but can't be shown to be directly hurting consumers may still draw her ire. This isn't to say that she isn't concerned for consumer welfare as the end goal, just that she seems to regard market health as a really strong heuristic for estimating whether consumers are harmed in the long run, and as a result is very skeptical of vertical and horizontal integration in general, and doesn't give a lot of credit to the argument that "the efficiency benefits of removing redundancies will be passed on to consumers".
One of her two underlying arguments behind "break them up" was to reverse mergers that she believes should never have been approved. Her belief was, and presumably still is, that the DOJ and FTC have repeatedly green lit mergers that they knew to be anti-competitive, sometimes with conditions (spin off this part of the business and you can merge), and that this has often been shown to result in disproportionate price increases that ultimately harm consumers over the long run. She might even be ultimately right about that; though it must be said, her proposal during the campaign of reversing mergers that have already happened seems like an extreme step compared to just being more strict going forward.
Her second argument supporting breaking up big tech companies was about defining and strictly regulating "platform utilities", with examples like Amazon promoting its own brands in its marketplace or Google promoting their own brands in search results. This is a case where even people who don't like Warren should be able to acknowledge that she "has a point" at the very least. A single company both owning the dominant marketplace for something and making sure their own stuff is promoted more heavily than third party participants is a kind of market failure; on a small scale it's probably not terribly harmful, but on a large enough scale it starts to stifle competition and hurt smaller businesses trying to break into the marketplace. That's mostly a regulatory proposal, though it falls under "break them up" because it could force companies like Amazon, which participates heavily in its own marketplace, to spin off or shut down parts of their business.
None of this is to say you have to agree with her; her campaign trail proposal to reverse past mergers and fundamentally disrupt the business model of several major companies is not a gentle or modest solution to the problem, even if you do agree with her argument. You might agree with her argument but not her conclusion. But this is not merely anti-corporate jeering; she has a coherent argument that a number of widely accepted industry practices and past mergers have been significantly anti-competitive and are likely to be harmful to consumers in the long run.
Ok, but her proposal here is preventing companies with $100M in market cap or revenue from acquiring others. That's not even close to Amazon, Facebook, Apple level 'monopolies'.
And if anything an argument can be made that it's *more* harmful to employees of the acquired companies. If their company is struggling, their choices would be a) go under b) get acquired.
What about the founders of those companies, which might be doing okay but not big enough to IPO? Do they just not get an exit now after the tremendous risk they took to start their businesses and the value theyve created?
> Her second argument supporting breaking up big tech companies was about defining and strictly regulating "platform utilities", with examples like Amazon promoting its own brands in its marketplace
Retailers like Walmart or Giant also sell their own brands in their 'marketplaces', and what she is proposing here is not really related to this or her 'break them up' approach to companies she thinks are too big.
And if anything, consumers would be harmed more than helped from breaking up a company like Amazon. My experience ordering something from Amazon has been 10x better than most other online alternatives. You can depend on Amazon to just get shit done whereas with others you get more mistakes, they take longer, they often take longer than their expected arrival date, its more expensive, etc.
I don't know enough to have an informed opinion on the policy in the article above, which is why I didn't comment on it directly, but rather her larger governing philosophy when it comes to anti-trust.
> And if anything, consumers would be harmed more than helped from breaking up a company like Amazon. My experience ordering something from Amazon has been 10x better than most other online alternatives. You can depend on Amazon to just get shit done whereas with others you get more mistakes, they take longer, they often take longer than their expected arrival date, its more expensive, etc.
With the possible exception of price, these advantages wouldn't be implicated by her proposal. Her take was never "Amazon shouldn't exist"; rather, she's saying Amazon can't be both an online retail giant *and* a major brand competing on its own platform.
She is right that there is a problem here. Any company that isn't Amazon is currently at a severe disadvantage when trying to sell e-readers, because Amazon dominates online retail and uses that power to suppress competitive products and promote their own Kindle line. Kindle products are on the front page of Amazon. They're at the top of search results and index pages for e-readers. If the customer searches for one of your products directly, take the Kobo Clara for example, Amazon may throw the Clara up as the top search result, but they'll slip a Kindle in as the second product down, above even other Kobo e-readers. That's not good for competition. It's not good for consumers. High quality information makes markets sing; Amazon filters the distribution of that information to give themselves a competitive advantage.
Warren's take on Amazon isn't that Amazon's triumphant logistics prowess is problematic, or that Amazon is simply too big; her take is specifically that Amazon can't be trusted to referee the game they're playing in. And she's obviously right. Amazon is permitted to organize the information on their site to favor their own products, and they unabashedly exercise that right, regardless of whether that's what's in the consumer interest. Even if Kindle is the best e-reader today, suppressing competition slows innovation and puts an upward pressure on prices.
Warren's take is that Kindle can continue to exist, but it can't be part of Amazon. Warren's take is that "Amazon Basics" needs to either split off or shut down. Right now Amazon is deliberately flooding the top results with their own brand whenever you look for batteries and that's not fair play for other brands, not only harming prominent brands like Energizer and Duracell that are reduced to second class, but also smaller competitors that get pushed all the way off the first page of results to make room for more Amazon branded products. That's what Warren means about breaking up Amazon. Not "stop doing what you're good at" -- just "don't referee and play in the same game."
You might have a different take on how to solve these problems, but it would be weirdly zealous to not recognize that these practices are anti-competitive and undermine the health of the market. Amazon does a great job, and I prefer to order from them over nearly anyone else. But that is exactly why it's so dangerous for them to have a stake in their own game. Like I said, you may disagree about methods. She reaches for a machete where I think many here would prefer a scalpel. But her anti-trust philosophy is well-reasoned, and the practices that she is taking aim at genuinely problematic.
I get wanting to stop mega corps from buying up all the competition during a crisis, but $100M revenue is too low a cap. Add that to the fact that some companies are going to faced with the decision to close down or sell and regulation like this is gonna put more people out of work.
Do you not have a problem with politically opportunistic government overreach against corporate action that has no actual relevance to (and actually in many cases would aid to) the economic recovery from coronavirus? We already have anti-monopolistic laws and regulatory bodies, so a “Pandemic Anti-Monopoly Act” that imposes a blanket ban on M&A until some undetermined date to be determined by the FTC down the line serves no actual purpose besides virtue signaling to voters who don't know any better. Luckily this is just a PR bill and has zero chance of becoming law. In reality, there will be necessary M&A happening in the coming months to restructure companies that are suddenly distressed due to covid which supports job growth and has no risk of "Pandemic Monopoly" or whatever Warren and AOC want to ramble on about.
Because what this country needs most right now is more ideological attacks against corporations. Let's restrict corporate capital at a time when everything is already shut down and liquidity is at a premium. Just brilliant. Fortunately this has no chance to pass.
God help me, is there a single financial professional out there who doesn't think he can read the secret magic that animates the world just because he can recite the AUM of every Manhattan-based PE firm worth over $20 billion while gargling a glass of water?
Would you like to explain how it is to the benefit of Americans to prohibit PE firms from deploying capital to prospective portfolio companies while portfolio companies are in desperate need of capital? What do you think would happen to those portfolio companies if this passed (it has a 0% chance, this is entirely a PR stunt)? Because that's scoped into this proposal.
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I'm halfway through an advanced copy of the Dayen book and I HIGHLY rec it to any Warren Dem. Warren is actually mentioned in the book fairly early on.
The Curse of Bigness is also a great quick read, and I'm excited to receive my order of Teachout's new book