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Corporate Mergers Decrease Business Lobbying, New Report Finds, While Spinoffs Increase Lobbying

Antitrust advocates argue that preventing corporate concentration by blocking mergers and breaking up big companies also will curb corporations’ political influence. But it actually has the opposite effect, according to a new report from the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy.

ITIF analyzed data on lobbying expenditures, firm revenues, and mergers, and found that large firms lobby proportionally less than small firms, that mergers reduce lobbying expenditures, and that corporate spinoffs increase lobbying—effects that undercut a key argument proponents make for aggressive antitrust enforcement.

“The antitrust populists’ say economic power begets political power,” said Hadi Houalla, a research assistant at ITIF’s Schumpeter Project on Competition Policy and author of the report. “But this analysis flips that idea on its head. If bigger firms use lobbying to increase political influence, mergers should increase lobbying. Our analysis suggests otherwise.”

Previous research has incorrectly asserted that big business funnels a disproportionate amount of funding into politics, and therefore antitrust is necessary to disrupt corporate influence and protect democracy. ITIF’s analysis calls that research into question, finding mergers decrease the percentage of revenue companies spend on lobbying by 19.35 percent.

ITIF’s new report also finds it is wrong to assume two smaller companies spun off from a corporate breakup would have less influence than the original combined firm. In fact, there is a negative correlation (-0.17) between firms’ total revenue and the percentage of revenue they devote to lobbying. Contrary to previous claims, larger firms devote proportionally less revenue to lobbying than smaller companies do. Small companies also exert influence in the policy arena through trade associations and geographic advantages.

“If antitrust advocates want to reduce lobbying and corporate power, they should push for more mergers and dramatically fewer antitrust breakups,” said Aurelien Portuese, director of ITIF’s Schumpeter Project on Competition Policy. “Antitrust does notsafeguard democracy, but instead increases corporate lobbying, decreases economic growth, and harms consumers.”

Read the report.

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The Information Technology and Innovation Foundation (ITIF) is an independent, nonprofit, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. Recognized by its peers in the think tank community as the global center of excellence for science and technology policy, ITIF’s mission is to formulate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress.

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