New State Merger Review Laws Could Harm U.S. Economy
U.S. states are ramping up their review of proposed mergers and acquisitions (M&A). Both Washington and Colorado have enacted new pre-merger notification statutes that will take effect this summer, and other states have introduced or are considering similar legislation. These changes could impose major new costs on potential merging parties and harm the U.S. economy. In addition, the Trump Administration may wish to consider revisiting costly changes imposed in a revised 2024 federal pre-merger rule.
M&A Benefits
As I previously discussed in Forbes, M&A activity generates major economic benefits by reallocating capital to higher-valued uses and thus yielding more efficient production and innovation. Specifically:
M&A Costs and Federal Enforcement Oversight Trends
As I previously explained, M&A activity may also, however, impose costs when it reduces competition in the marketplace. The Clayton Antitrust Act bars M&A transactions that may substantially lessen competition.
A longstanding bipartisan federal enforcement consensus that targeted only those mergers that threaten to harm consumer welfare (by raising prices and reducing output, quality, or innovation) was overturned by the Biden Administration, which introduced a populist 'big is bad' skepticism of merger activity.
These are 'early days' in the second Trump Administration. Nevertheless, new Department of Justice and Federal Trade Commission antitrust enforcers appear to be signaling that they will focus on improvements in merger review process, rather than a return to the far less interventionist pre-Biden approach to merger analysis.
Indeed, the Trump DOJ and FTC have kept in place 2023 Biden merger analysis guidelines that greatly relaxed prior guidelines' standard for deeming a merger problematic. The new guidelines disincentivized mergers by featuring novel and unproven theories of competitive harm.
The new Trump enforcers also have retained an October 2024 revised pre-merger rule. Compliance with the revised rule 'require[s]
New State Merger Legislative Requirements Will Likely Prove Harmful
At its best, alignment of state and federal antitrust enforcement efforts is an example of beneficial 'cooperative federalism.'
States can enforce federal merger law on behalf of their residents. They also may challenge mergers under state antitrust laws. State statutes may allow a local focus on small state-specific mergers not investigated by federal enforcers.
State and federal merger enforcement may also, however, work at cross-purposes.
State merger cases may generate highly costly, wasteful duplication of federal efforts, and may occasionally be in tension with federal antitrust policy.
The 2024 Model Antitrust Pre-Merger Notification Act served as the basis for an April 2025 pre-merger notification law in Washington, with many other states expected to follow suit. The Model Act gives states access to federal pre-merger filings, subject to the same confidentiality requirements that apply under federal law.
Widespread adoption of the Model Act will increase filing cost burdens on merging parties and will subject them to a greater risk of having sensitive non-public business information leak out from a variety of new sources.
Even greater concerns stem from the fact that California and New York are considering pre-merger legislation that sweeps more broadly than the Model Act. The new pre-merger burdens would impose major new costs on merging parties.
What's more, the California proposal would also establish a far lower substantive standard for striking down a merger ('an appreciable risk of materially lessening competition') than that found in federal law ('may be substantially to lessen competition'). This change raises the legal risk associated with merger proposals. It could seriously disincentivize many beneficial mergers for no good reason.
Policy Implications and Next Steps
Taken as a whole, recent state merger-related initiatives threaten significant U.S. economic harm.
The U.S. has the strongest most innovative capital markets, which are key to driving economic growth. M&A plays a central role in the success of those markets. It keeps rivals on their toes and yields more vibrant competition.
The weakening of M&A based on new state-created burdens and legal risks would tend to diminish economic growth and lower American competitive vitality, at least to a degree.
This is that last thing we should want to do in a highly competitive global economy.
The Trump Administration hopefully will take note.
The President might, for example, direct the DOJ and the FTC to make 'competition advocacy' filings with the states highlighting the economic harm that specific merger-related legislative proposals would likely impose. The two agencies have specialized economists and lawyers with a long and respected history of making advocacy filings, directed at both state and federal government entities.
The two agencies also use the 'bully pulpit' to emphasize the importance of continued close cooperation between federal and state antitrust enforcers.
Federal and state enforcers already cooperate and make joint filings in a variety of cases.
New state merger requirements could reduce the effectiveness of such cooperation.
Finally, the FTC and the DOJ may wish to take a second look at the revised 2024 federal pre-merger rule to determine whether some of the costly new requirements it placed on filers could be eliminated. Issuing a new less costly rule could be good for American M&A. It would also be fully in tune with President Trump's April 2025 Executive Order on Reducing Anticompetitive Regulatory Barriers.
Hopefully state and federal officials will take note and act to enhance the economic benefits of merger review.
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