Approximately $1.7 trillion worth of deals have been announced globally so far this year — one of the strongest starts to the year since before the 2008 financial crisis. However, while experts have noted consumers are often negatively affected by increased M&A activity, New York Times opinion columnist Bryce Covert notes another group of individuals is equally as affected: employees.
The same day T-Mobile and Sprint announced their intent to merge in April, roughly a dozen other corporation mergers were announced around the world, totaling a combined $120 billion, Ms. Covert notes. Some of the largest deals announced so far this year in terms of deal value include AT&T's pending $85 billion play for Time Warner; Marathon Petroleum's $23 billion proposal to purchase rival Andeavor; and Woonsocket, R.I.-based CVS Health's $69 billion offer to buy Aetna, among a plethora of other announced transactions.
The increase in M&A activity across industries means fewer companies and therefore less competition in their respective markets, Ms. Covert writes. However, a more dangerous side effect involves the employees of those companies. Ms. Covert cites various studies suggesting that mergers leave workers with fewer options in the job market, thereby reducing their bargaining power in the workforce and leading to stagnating wages.
"It used to be that when productivity grew, workers reaped some of the harvest. But since the mid-1970s, productivity has continued ever upward, while pay has only muddled along," Ms. Covert writes. "One explanation is monopsony power, or the power of a few consolidated employers to hold down pay. When workers have few options for where they can seek employment, they can get backed into a corner, forced to accept lower wages just so they can get or hold on to a job."
While the Federal Trade Commission and other regulatory agencies have the power to block a company's proposed merger, Ms. Covert cites a review of recent antitrust cases that found "no court has ever stopped a merger on the grounds that eliminating an employer hurts a workforce." Instead, antitrust regulators have limited their rationale to whether customers would have to pay more for the product or service as a result of the merger.
"American merger activity shows few signs of slowing down. … It's time for regulators to step in before this massive concentration erodes workers' bargaining power any further," Ms. Covert writes.
To access Ms. Covert's full op-ed, click here.