In a bid to bolster competition with China, U.S. lawmakers have introduced a bipartisan antitrust bill requiring disclosure of foreign investment in mergers. Its goal is to prevent China and other governments from taking control of American companies and assets through mergers.
the Foreign Merger Subsidies Disclosure Act calls for transparency of companies merging in the United States. It would require merging companies to report any financial support or subsidy received from a foreign government to the Federal Trade Commission and the Justice Department’s Antitrust Division.
The bill, introduced by Rep. Scott Fitzgerald (R-Wis.) and Rep. Greg Stanton (D-Arizona), was included in the U.S. House of Representatives’ comprehensive China competition agenda, l ‘America Competes Act of 2022. The America Competes Act will head to a conference committee where US House and Senate leaders will work to reconcile the differences between the House and Senate versions of the bill before it is is signed into law by President Joe Biden. The Senate passed its version of the bill, the U.S. Innovation and Competition Act of 2021, Last year.
The Foreign Merger Subsidy Act aims to address heightened concerns that the Chinese government is using state-owned enterprises — a commercial enterprise created by a government to engage in commercial activities — to acquire U.S. intellectual property and assets such as emerging technologies as well as to engage in predatory pricing tactics. Although the bill targets China, it would also apply to other countries.
This type of activity poses both national security and competitive risks, Fitzgerald said in a online seminar hosted by the conservative think tank Hudson Institute.
“About 3% of China’s GDP was specifically earmarked to subsidize many of these companies doing honest business, not just against private US companies, but a mix of international and global companies,” Fitzgerald said.
Empowerment of antitrust law enforcement agencies
As merger activity reaches new heights in the United States, Stanton said it’s important for antitrust authorities to know which companies are being subsidized and at what level.
Stanton called the semiconductor industry “heavily subsidized” by the Chinese government.
The COVID-19 pandemic has led to shortages in the global supply chain, particularly in semiconductors which are primarily manufactured in Asia. This has led to renewed government interest in reorienting semiconductor manufacturing toward the United States.
Rep. Greg Stanton, D-Arizona.
“The supply chain is a national security issue,” Stanton said. “The United States’ loss of our global position in semiconductors is also a national security issue. Regulators should have this information and should be able to consider the national security implications when making decisions. important regarding corporate mergers in the United States”.
Fitzgerald said the Foreign Merger Subsidy Disclosure Act requires modest disclosure that could have a significant impact not only on tracking funding, but also on providing transparency.
Stanton echoed his view and said the purpose of the bill is to increase transparency which will ensure that economic competition is conducted in the “most fair way possible”.
The intent is to prevent “misuse of the American business system to attempt to misrepresent it for other purposes, to undermine the American business, or to engage in [intellectual property] theft through the acquisition of American companies,” he said.
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a generalist journalist at Wilmington StarNews and crime and education reporter Wabash Plain Dealer.