Broadcom’s potential bid to buy VMware, which would be one of the largest deals of 2022, could raise a number of questions. The biggest one: Will the Biden administration, which has vowed to fight corporate concentration, allow such a deal to go forward?
The country’s top deal cops, the Federal Trade Commission head Lina Khan and the Justice Department’s Jonathan Kanter, have been pushing for the government to have more authority to block corporate deals. But criticism is mounting that antitrust efforts have gone too far, the DealBook newsletter reports. Earlier this week, Lawrence H. Summers, a Harvard University professor and former top adviser in the Obama administration, tweeted that a new era of “populist antitrust policy” could lead to an economy that is “more inflationary and less resilient.”
In the past, a deal like Broadcom’s potential acquisition of VMware would not have been an issue. The two companies are not direct competitors. Instead, the acquisition in deal terms is closer to what is often called a vertical integration — when one company buys another in a related industry. Horizontal deals, where the two companies are direct rivals, have traditionally been the ones that the government has policed, fearing that fewer competitors in one market would lead to higher prices.
Government officials are signaling that vertical and other deals are problematic as well. “By myopically treating transactions as vertical or horizontal, we may miss important details that a broader perspective can provide,” the F.T.C. commissioner Rebecca Slaughter said last year. In addition, the Senate majority leader Chuck Schumer is reportedly pushing for a vote by early summer on legislation that he and others argue will address the way Big Tech has exploited gaps in antitrust regulations to eliminate competition.
Mr. Summers argued the Biden administration is dangerously headed back to failed policies of the past. He tweeted that the administration’s policy statements “better reflect legal doctrines of the 1960s than economic understandings of the last two decades.” Mr. Summers said attacking deals just because they are big ignores the benefits that can come from larger, more efficient companies. What’s more, Summers said using antitrust regulation to limit layoffs ends up embedding higher costs into the system. “There are real risks,” Mr. Summers tweeted. “Policies that attack bigness can easily be inflationary if they prevent the exploitation of economies of scale or limit superstar firms.”