By Matthew Perlman

Law360 (April 28, 2020, 6:35 PM EDT ) Sen. Elizabeth Warren, D-Mass., and Rep. Alexandria Ocasio-Cortez, D-N.Y., announced plans Tuesday to introduce legislation that would ban most mergers and acquisitions by companies over a certain size while the country recovers from the COVID-19 pandemic.

The lawmakers said in a statement Tuesday that the Pandemic Anti-Monopoly Act is intended to stop large corporations and investment funds from exploiting the outbreak and its economic impact by snapping up struggling businesses through predatory acquisitions.

"As we fight to save livelihoods and lives during the coronavirus pandemic, giant corporations and private equity vultures are just waiting for a chance to gobble up struggling small businesses and increase their power through predatory mergers," Warren said in the statement.

The act would impose a moratorium on mergers and acquisitions that currently need to be reported to the federal agencies for antitrust review, and ban all transactions involving companies with over $100 million in revenue or financial institutions with a market capitalization over $100 million, according to the statement.

Transactions involving private equity and hedge funds would also be barred under the proposal, as would deals by companies with patents covering products affected by the current crisis, such as personal protective equipment.

The moratorium would remain in place until the Federal Trade Commission "unanimously determines that small businesses, workers and consumers are no longer under severe financial distress," the statement said.

Ocasio-Cortez said in Tuesday's statement that the legislation is desperately needed considering the challenges antitrust enforcers are facing amid the pandemic, as well as reports that Rite Aid Corp. and other big businesses are already on the hunt for acquisitions.

"These companies should be using their cash reserves to help their employees not to acquire more power," she said. "If we don't stop predatory M&As now, the actions of big corporations will have decades-long economic consequences — for all of us."

The proposed legislation comes a week after Rep. David Cicilline, D-R.I., head of the house antitrust panel, called for a moratorium on merger activity to be included in the next coronavirus relief bill. He argued that corporate takeovers permitted during the last financial crisis resulted in lost jobs, reduced investment and less innovation. But he also called for a carveout for deals involving firms that are failing or in bankruptcy.

Cicilline voiced his support for the moratorium during an April 23 virtual event hosted by Open Markets Institute, a nonprofit advocate for robust antitrust enforcement that has been calling for a merger ban because of the pandemic since March. On Tuesday the group applauded the proposal from Warren and Ocasio-Cortez in a statement.

"The proposal includes many of the right principles needed, including a merger ban," Open Market's legal director Sandeep Vaheesan said. "It's important that we not only pause mergers for the duration of the crisis, but also extend the ban well into the recovery phase."

The bill would pause all deadlines and waiting periods that normally apply to antitrust deal reviews during the moratorium, which could affect transactions pending at the agencies at the time of its passage. It would also direct the FTC to establish rules that make it harder for companies to cut deals that "pose a risk to the government's ability to respond to a national emergency," the lawmakers' statement said.

FTC Commissioner Noah Joshua Phillips, a Republican, suggested in a tweet Tuesday that while calls for an "unprecedented merger ban" continue, such drastic steps may not be needed. He pointed to a New York Times story in which he pushed back against contentions that antitrust enforcers are being overwhelmed by a rush of merger activity during the pandemic, and told the publication that reported deals and deal volume in general are both down because of the crisis.

In the piece he argued that mergers have an "important role to play during a period of economic adjustment," and said the agencies are capable of continuing to review deals for their competitive impact during the pandemic.

--Additional reporting by Anne Cullen. Editing by Alanna Weissman.

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