By Bryan Koenig

Law360 (May 6, 2020, 6:43 PM EDT) -- As some Congressional Democrats pile on arguments that most mergers should be blocked during the COVID-19 pandemic, Republicans on the Federal Trade Commission are arguing that fears of predatory transactions are at best misplaced and overblown.

FTC Commissioner Noah Phillips argued in a blog post Tuesday, expanding on an essay he published in The New York Times late last month, that economic crises like the one caused by the current pandemic actually slow down mergers and acquisitions activity. He said companies have less cash, less financial certainty and less flexibility to negotiate and pursue mergers, belying fears from Congressional Democrats that companies are poised to "exploit" the crisis.

"Experience bears out those expectations. Consider our last bear market, the financial crisis that took place over a decade ago. Publicly available FTC data show the number of [Hart-Scott-Rodino Antitrust Act] reported transactions dropped off a cliff," Phillips said. "During fiscal year 2009, the height of the crisis, HSR reported transactions were down nearly 70% compared to just two years earlier, in fiscal year 2007. Not surprising."

In his post for the Truth on the Market blog, Phillips insinuated that Democrats calling for a merger stoppage are simply trying to push a larger anti-merger agenda.

"In the past two weeks, some of the same people who sought to stop mergers and acquisitions during the bull market took the opportunity of the COVID-19 pandemic and the new bear market to call to ban M&A," he said.

Those calls came as recently as Tuesday, when House antitrust subcommittee chair David N. Cicilline, D-R.I., and other lawmakers said in a letter to House Speaker Nancy Pelosi, D-Calif., and House Minority Leader Kevin McCarthy, R-Calif., that the next COVID-19 relief package should include a prohibition on any transactions that don't involve companies in dire financial straits.

Lawmakers like Rep. Alexandria Ocasio-Cortez, D-N.Y., warned that the economic repercussions from the novel coronavirus are likely to yield "a deep, and potentially lengthy, recession."

"In light of this reality, we write to respectfully urge you to include a merger moratorium in the next stimulus bill in order to halt the wave of predatory mergers and takeovers that risk further concentrating wealth and power and decimating independent business," the lawmakers said.

The lawmakers argued further that "dominant corporations" and private equity firms see the crisis as "an opportunity ripe for exploitation," in which they can "swoop in for a buying spree, rolling up industries and saddling independent businesses with debt."

"Although mergers and acquisitions have temporarily slowed, analysts predict that deal-making will soon 'bounce back and accelerate,' hastening concentration across the board," the lawmakers said.

They repeated a frequent criticism by liberals of FTC and U.S. Department of Justice antitrust enforcement: that it has been too lax, especially against corporate consolidation following the 2008 financial crisis, and has allowed mergers that have yielded massive industry concentration.

However, Phillips and fellow Republican FTC Commissioner Christine S. Wilson argue that antitrust enforcers have shown themselves to be up to the task of reviewing mergers and contesting anti-competitive ones, especially thanks to a reduced burden because of dramatic reductions in merger filings during the pandemic.

"Despite changes in where agency employees do their work, the FTC is conducting the business of the commission without interruption. Our work is as important now as ever, and we remain committed to protecting consumers and competition," Wilson said in a tweet on Friday.

In other tweets that same day, Wilson argued that procompetitive mergers in economic downturns can actually save companies from bankruptcy and help prevent job losses.

Wilson too noted the nearly 60% reduction in transactions reported to the FTC and DOJ in the past month.

She argued that the "gap between rhetoric and reality" on warnings of a flood of mergers and their actual reduction suggests that proposals to ban mergers aren't really aimed at saving small businesses. Instead, she said the disconnect suggests such proposals are really "an attempt to use #COVID19  tragedy to push a pre-existing agenda of halting mergers of a certain size, or in particular industries, or by private investors, without regard to whether those mergers harm consumers."

Wilson's tweets came a few days after Ocasio-Cortez and Sen. Elizabeth Warren, D-Mass., followed up on Cicilline's calls for a merger moratorium with plans to ban most mergers and acquisitions while the country recuperates from a pandemic that as of Tuesday had sickened more than 1.17 million Americans and killed more than 68,000, according to Centers for Disease Control and Prevention data.

Ocasio-Cortez and Warren's Pandemic Anti-Monopoly Act would impose a moratorium on mergers and acquisitions that currently need to be reported to the federal agencies for antitrust review, and ban all transactions involving companies with more than $100 million in revenue or financial institutions with a market capitalization over $100 million, according to the statement.

Transactions involving private equity and hedge funds would also be barred under the proposal, as would deals by companies with patents covering products affected by the current crisis, such as personal protective equipment.

--Additional reporting by Matthew Perlman and Anne Cullen. Editing by Nicole Bleier.

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