House bill tracks foreign investment in U.S. mergers
The Foreign Merger Subsidy Disclosure Act would allow federal antitrust enforcement agencies to track foreign government investment behind U.S. business mergers.
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 gaining control of U.S. businesses and assets through mergers.
The Foreign Merger Subsidy Disclosure Act asks for transparency from merging companies in the U.S. It would require merging companies to report any financial support or subsidies received from a foreign government to the Federal Trade Commission and the Department of Justice Antitrust Division.
The bill, introduced by Rep. Scott Fitzgerald (R-Wis.) and Rep. Greg Stanton (D-Ariz.), has been included in the U.S. House of Representatives' comprehensive China competition package, the America Competes Act of 2022. The America Competes Act will head to a conference committee where U.S. House and Senate leaders will work to reconcile differences between the House and Senate versions of the bill before it's 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 about the Chinese government using state-owned enterprises -- a business enterprise created by a government to engage in commercial activities -- to acquire U.S. intellectual property and assets like emerging technologies as well as engage in predatory pricing tactics. Although the bill is aimed at China, it would apply to other countries as well.
This type of activity poses both national security and competitive risks, Fitzgerald said during a webinar hosted by conservative think tank Hudson Institute.
"About 3% of China's GDP was specifically being set aside to subsidize many of these companies that quite honestly are doing business, not only up against American private enterprises, but a mix of international and global companies," Fitzgerald said.
Empowering antitrust enforcement agencies
As merger activity reaches new heights in the U.S., Stanton said it's important for antitrust enforcement agencies to know what companies are subsidized and to what level.
Stanton pointed to the semiconductor industry as one that has been "massively subsidized" by the Chinese government.
The COVID-19 pandemic has led to global supply chain shortages, especially in semiconductors that are predominately made in Asia. It's led to a surge in government interest in reorienting semiconductor manufacturing back to the U.S.
Rep. Greg Stanton, D-Ariz.
"The supply chain is a national security issue," Stanton said. "The United States losing our global position on semiconductors is also a national security issue. Regulators should have this information and should be able to consider national security implications as they make important decisions about merging companies in the U.S."
Fitzgerald said the Foreign Merger Subsidy Disclosure Act requires a modest disclosure that could have significant impact on not only tracking funding but also providing transparency.
Stanton echoed his point and said the goal of the bill is to increase transparency that will ensure that economic competition is done as "fairly as possible."
The intent is to prevent "the inappropriate use of the American enterprise system to try to distort it for other purposes, to undermine the American company or to engage in [intellectual property] theft by 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 general reporter at the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.