The Coming Explosion of State Anti-Merger Litigation
States are finally recognizing the harms caused by mergers, and I predict many more will take action.
Hi everyone. This year, I am going to start writing more original articles and providing my thoughts on current events. Today, I am starting that process with a post on my prediction that states are preparing to ramp up litigation to block mergers under their own laws. Enjoy. Be sure to follow me on X, Bluesky, and Mastodon.
Primarily operating as a means to transfer wealth from communities and workers to executives and financiers, mergers have been a scourge on our social fabric since they became the essential means by which large corporations obtained and entrenched their power in the 19th century. In an attempt to suppress this method of competition, Congress has enacted numerous laws, beginning with the Sherman Act in 1890, followed by the Clayton and Federal Trade Commission Acts in 1914, the Celler–Kefauver Act in 1950 (which strengthened the Clayton Act), and finally, the Hart-Scott-Rodino (HSR) Act of 1976. Since the development of the modern administrative state in the 20th century, Congress has also endowed other federal agencies, like the Federal Communications Commission or the Surface Transportation Board, with additional sector-specific merger authority. Unfortunately, except for a brief period between 1962 and 1974—and mostly in cases involving large mergers between direct competitors—the United States has maintained an ineffective anti-merger regime, whether due to a hostile federal judiciary kneecapping various aspects of the law, disinterested enforcers, or government actors willing to blatantly disregard the rule of law.
But now, as the American economy reaches a crisis point, the consequences of this insufficient enforcement regime have become impossible to ignore. Between 2020 and 2024, nearly 95,000 mergers occurred in the United States, totaling over $10 trillion and leading to significant increases in market concentration. One of the biggest drivers of this wave of consolidation is the private equity sector—an industry notorious for its aggressive use of mergers. The private equity sector readily deploys its endless troves of capital to seize control of every industry it can. From fire truck manufacturers and daycare centers to hospice care facilities, accounting firms, orthopedic medical practices, and plumbing, electrical, and HVAC companies, the strategy is the same—private equity acquires as many businesses as possible in an industry and then imposes extractive pricing to gouge the American public. A recent report on the daycare industry co-authored by Audrey Stienon, my colleague at the Open Markets Institute, puts it bluntly:
[The private equity sector is] more interested in extracting wealth from taxpayer dollars than in building an industry that provides quality services, creates well-paying jobs, and supports the wellbeing of families and communities across the country.
Enforcers in the Biden administration advanced multiple initiatives to combat mergers and initiated federal efforts to rein in the rapacious private equity industry. The Biden administration demonstrated its willingness to fully enforce the law by aggressively pursuing merger lawsuits to completion and rewriting the guidelines enforcement agencies use to initiate merger lawsuits, expressly noting that mergers that involve “multiple acquisitions in the same or related business lines” may violate the antitrust laws. Various enforcement actions—including lawsuits and settlements—expressly targeted the private equity industry.
The Biden administration also enacted a first-of-its-kind administrative rule under the HSR Act. The rule requires firms to submit more comprehensive information to the Department of Justice (DOJ) and Federal Trade Commission (FTC) before finalizing the transaction, strengthening the agencies' ability to challenge mergers. While some early enforcement actions under the second Trump administration indicate this level of scrutiny could continue, the overall approach remains uncertain.1 Regardless of what enforcers in the Trump administration decide to do, states also have an essential role in stopping mergers.
States have always been a critical part of America’s antitrust enforcement apparatus, enacting their own laws in the late 1880s before the federal government followed suit. As explained later, states primarily rely on invoking federal law to block mergers. Unfortunately, hostility from the federal judiciary has stifled many recent efforts.
The most notable setback was the merger between cellular communications giants T-Mobile and Sprint, announced in 2018. The merger between the third- and fourth-largest national wireless carriers was clearly illegal under the antitrust and telecommunications laws. The Federal Communications Commission and the DOJ refused to block the merger.2 A coalition of states stepped in with their own lawsuit. Then, in 2020, the federal judiciary struck down the state’s efforts to block the merger under the federal antitrust laws.
A more recent defeat for state merger litigation concerned the efforts to require Meta (formerly known as Facebook) to divest Instagram and WhatsApp because those acquisitions led to the company monopolizing the personal social networking market. In its complaint, the states deployed their traditional playbook by only invoking the federal antitrust laws to bring their case. The judges on the D.C. Circuit Court of Appeals eventually threw out the lawsuit on procedural grounds based on a concept known as laches, where a plaintiff loses their lawsuit because they waited too long to initiate it.3 Such defeats can discourage states from bringing lawsuits. However, deploying federal law is not the only option available—states have their own laws they can use.
In certain instances, state laws closely mirror the federal antitrust laws. In other cases, states have separate laws that, while they use different language, are functionally equivalent to the federal antitrust laws. While these laws operate similarly to their federal counterparts, there is a critical difference. Instead of being litigated in a federal courthouse, these laws are enforced in a state courthouse. In addition to not being tied down to the federal jurisprudence, a lawsuit litigated in a court in the state where the chief law enforcement officer is located provides a much more favorable venue than one potentially located in Washington, D.C.
Oddly, states have mostly shied away from using their own laws. It could be because the HSR Act lets State AGs sue as “parens patriae,” enabling them to challenge a merger on behalf of their constituents and obtain monetary damages if they win. It could also be because they believe the federal laws give them enough legal power, since favorable case law from the 1960s and 1970s is still controlling. Indeed, at least until recently, it is unclear whether law firms even consider state anti-merger provisions to threaten the desires of financiers and executives. For example, a law firm’s 2003 report detailing the “legal aspects” of mergers and acquisitions in the United States does not mention state antitrust laws as a potential barrier to a transaction.4 However, state attorneys general looking to show their constituents that the law can actually do something to protect their communities from wealth extraction by the hands of financiers have started leveraging their state laws to block mergers.
When grocery giants Kroger and Albertsons announced their nearly $25 billion mega-merger in 2022, Colorado and Washington State took the initiative to block the merger, with the FTC and other states initiating a separate lawsuit later. Rather than invoking federal law, both Colorado and Washington State decided to leverage their own laws. For Colorado, which recently overhauled its state antitrust law, the decision to use it was easy. Washington State’s law mimics Section 7 of the Clayton Act, the primary anti-merger law at the federal level. The Washington State lawsuit prevailed, and the Colorado lawsuit was close to victory—initially securing a temporary halt to the merger—but was dropped after Kroger and Albertsons abandoned their merger due to the Washington State lawsuit and the FTC’s separate lawsuit succeeding.
This past February, a state judge in New York held that a ski resort that acquired a competitor and subsequently shut down those facilities violated the state’s antitrust law (known as the Donnelly Act).5 Unlike the Colorado and Washington State lawsuits targeting Kroger and Albertsons, New York does not have an explicit anti-merger provision mirroring Section 7 of the Clayton Act. Instead, the Donnelly Act resembles the federal Sherman Antitrust Act (which, in general, imposes a higher burden on litigants to show a violation concerning a merger).
Beyond enforcement, states are also looking to amend their laws, adding more substantive strength and procedural roadblocks to mergers. As stated earlier, Colorado recently amended their state law. Among other changes, the new law extends the period during which a merger can be challenged. This change makes it easier to challenge roll-up mergers, the type private equity firms frequently pursue. In New York, state senator Michael Gianaris has repeatedly proposed his “Twenty-First Century Anti-Trust Act,” which would overhaul and strengthen the state’s antitrust laws.
Some states are also looking to enact Little-HSR Acts. These laws are based on the Uniform Antitrust Pre-Merger Notification Act, which, like its federal counterpart, requires merging parties to submit materials detailing key aspects of the transaction to the state. Little-HSR Acts provide state attorneys general with upfront material they can use to challenge a merger—without needing to conduct the investigation themselves. As of March 2025, 7 states and the District of Columbia have introduced some form of the Uniform Antitrust Pre-Merger Notification Act.6 Other state lawmakers, including those in California and Washington State, have proposed laws that seek to increase state oversight of healthcare mergers and investments, particularly those involving private equity companies.
Of course, the current sample size is too small to make accurate predictions. Three courtroom wins and a handful of proposed laws are not much to celebrate—yet. However, it is evident that state lawmakers and state attorneys general are increasingly interested in erecting more roadblocks against this infamous method of competition. All the pieces appear to be coming together for a massive influx of state-led merger litigation. State AGs seeking to bolster their litigation record, push back against extractive financiers, and demonstrate the value of their enforcement efforts to the public should take full advantage of their state’s anti-merger provisions. With momentum building, now is the time to act.
Thanks for reading.
Image credit: yyamatoyamato via Pixabay.
Initial enforcement actions include: Complaint, U.S. vs. Hewlett Packard Enterprise Co. and Juniper Networks, Inc., No. 5:25-cv-00951 (N.D. Cal, Jan. 30, 2025); GTCR BC Holdings, LLC, No. 9440 (Mar. 6, 2025). The FTC also recently decided to retain the 2023 Merger Guidelines enacted under the Biden Administration, which, while open-ended and do not push the law as far as it can go, could also indicate a willingness to enforce the merger laws. FTC Chairman Andrew N. Ferguson Announces that the FTC and DOJ’s Joint 2023 Merger Guidelines Are in Effect, FTC.gov (Feb. 18, 2025). But also consider that in his cover letter pitching himself as the worthy chair of the FTC to President Trump, Andrew Ferguson stated that he wanted to end the “war on mergers” and claimed—despite substantial evidence to the contrary—that “Most mergers benefit Americans and promote the movement of the capital that fuels innovation.”
Technically, the DOJ settled with T-Mobile and Sprint, but the settlement was highly flawed and turned out to be a complete failure. Economist Hal Singer described the aftermath of the settlement as, “If this [settlement] were engineered by a general manager of a basketball team, they would be fired.” Hal Singer, The Terrible T-Mobile/Sprint Merger Must Be Undone, Wired (Feb. 25, 2021).
As of March 2025, the FTC’s lawsuit against Facebook, initiated in 2020, is still ongoing.
The report does emphasize states’ anti-takeover legislation, which empowers corporate boards and shareholders to reject mergers.
The decision was on a motion for summary judgment. The complaint for the lawsuit can be found here.
New York state senator Michael Gianaris’ Twenty-First Century Anti-Trust Act also incorporates a Little-HSR Act provision, but as of March 2025, it has not been reintroduced in the New York state legislature.