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Warren, Ocasio-Cortez Float Long-Shot Bid to Pause M&A in Crisis

April 28, 2020, 4:45 PM

Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez are proposing to ban corporate mergers while the coronavirus crisis persists, as the Democrat Party’s progressive wing seeks to reassert itself after falling short in the presidential primaries.

Warren of Massachusetts and Ocasio-Cortez of New York said Tuesday that with smaller companies falling victim to the economic turmoil at a higher rate, large corporations with cash reserves bolstered by up to $4 trillion in Federal Reserve lending could increase their power over the U.S. economic landscape.

Elizabeth Warren and Alexandria Ocasio-Cortez
Source: Bloomberg

“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 in a statement.

The proposal would face extremely long odds in the Republican-controlled Senate and with President Donald Trump.

It comes as Democrats are seeking to consolidate the party for the November election for president and Congress and come up with a united plan in Congress to tackle the economic fallout from the health crisis. Warren, one of the leading progressive candidates in this year’s Democratic presidential field, endorsed moderate Joe Biden this month after both she and Senator Bernie Sanders, who had been a standard-bearer for the party’s liberal wing, dropping out of the race.

Biden is courting his party’s left wing, and so is House Speaker Nancy Pelosi, who wants their support for the next round of stimulus legislation.

The bill would put a hold on mergers and acquisitions involving large companies until the Federal Trade Commission “determines that small businesses, workers and consumers are no longer under severe financial distress,” according to a summary. The proposal was first reported by NBC News.

The idea has the support of House Judiciary antitrust subcommittee Chairman David Cicilline, a Rhode Island Democrat, who said in a Bloomberg TV interview Tuesday he is trying to get the ban included in the next stimulus bill.

A summary of the bill on Warren’s website cites private equity and technology companies, as well as drugstore chain Rite Aid Corp., as entities that may be looking to make acquisitions.

The moratorium would apply to companies with more than $100 million in revenue, financial institutions with over $100 million in market capitalization, as well as private equity companies, hedge funds, “companies with an exclusive patent that impacts the crisis, like personal protective equipment,” and transactions that must be reported to the Federal Trade Commission.

It would direct the FTC to “establish a legal presumption against mergers and acquisitions that pose a risk to the government’s ability to respond to a national emergency.”

WATCH: Noah Phillips, commissioner of the U.S. Federal Trade Commission, criticizes the proposed ban on mergers and acquisitions during the coronavirus pandemic for coming at a “counter-intuitive” time.
Markets: The Close.” (Source: Bloomberg)

House Majority Leader Steny Hoyer said House Democrats have not yet discussed the merger ban idea or formed a position on it.

The bill was hailed by Sarah Miller, executive director of the American Economic Liberties Project, a nonprofit group that aims to rein in corporate power.

Bills already passed by Congress to bolster the economy amid the crisis “supercharged big corporations’ and Wall Street’s ability to prey on and abuse small businesses and the communities they support,” Miller said in a statement.

Given the long-shot nature of the bill, initial financial sector reaction was muted.

“It doesn’t seem that the market is overall too concerned about this right now,” said Paul Aversano, a managing director at Alvarez & Marsal. “In the last crisis, I did not see private capital driving job loss; if anything it was the opposite.”

(adds Cicilline, consultant comment starting in eighth paragraph)

--With assistance from Crystal Tse.

To contact the reporter on this story:
Erik Wasson in Washington at ewasson@bloomberg.net

To contact the editor responsible for this story:
Joe Sobczyk at jsobczyk@bloomberg.net

© 2020 Bloomberg L.P. All rights reserved. Used with permission.

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