Comment by xahrepap
7 hours ago
Slightly tangential thought:
My belief is: legislation needs to either make it just as hard to merge two companies as it is to unmerge them, or make it just as easy to unmerge two companies as it is to merge them.
It's insane to me that for how often companies merge and cause competition issues, we effectively never see the opposite happen. I know there's a ceremonial approval for merging two companies (at least in the US), but it's just impossible to undo or prevent the damage.
This point of view has more to do with your information diet than it does with reality. Companies un-merge and spin out all the time, for many reasons. Mergers and acquisitions are more interesting because they are often associated with a growth story. We like success.
Aswath Damodaran, who teaches corporate finance at NYU Stern, has a bunch of great talks and content about this where he discusses how companies should act their age. When older companies that are no longer paying dividends are moving into a divestiture phase, they restructure and split up. What we are seeing with some of these big tech companies is that they are transitioning from an exciting growth story into an extractive dividend story in a way that's becoming harmful to consumers. That's why we're talking about breaking them up, and thats the line their management will have to walk if they want to maximize the value of the firm to shareholders through the decline.
This is true, I'd go much further than the OP here and say the barrier for merger should be MUCH higher than the barrier for spin-out or split.
There's no shortage of obvious problems that can arise from concentration of influence and control over a market. So just try to prevent it. Trade some max efficiency for redundancy + anti-corruption/pro-competition/pro-consumer market forces.
I would say google is still in its growth phase, albeit a slower one. Especially with capex spending etc.
> This point of view has more to do with your information diet than it does with reality. Companies un-merge and spin out all the time, for many reasons.
That’s condescending and wrong. Mergers and acquisitions are hundreds of times more common than spinoffs.
>What we are seeing with some of these big tech companies is that they are transitioning from an exciting growth story into an extractive dividend story in a way that's becoming harmful to consumers.
Alphabet is rolling out autonomous driving vehicles in many cities around the USA, potentially getting rid of the need to drive a car in 90% of today's use cases.
How is this not still an exciting growth story? My kids might never need to drive a vehicle, even though we live in a car dependent suburb.
Some cute tech projects do not justify a massive monopoly. Google is financing Waymo using the ~300 billion dollar it extracts annually from consumers via ad spending. I would rather pay substantially less on anything I buy, and have the free market sort out self-driving cars.
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You're basically advocating for unscrambling the omelet to be easier. Should be obvious why it's harder to unmix than it is to mix.
Splitting a large company is already done to shed and transfer liabilities. Divisional Merger Tactic / Texas Two Step. [0] [1] Keep the yoke and drop the albumen with time and patience.
[0] https://batesonlaw.com/divisional-merger-tactic-how-liabilit...
[1] https://www.creditandcollectionnews.com/u-s-supreme-court-de...
You can bet that if the board of directors could show that unscrambling the omelet would result in greater shareholder value produced, it would suddenly be really easy to do...
Happened with Dow-Dupont! A three-way split, even (from a two-way merger). Took roughly two years and was the shareholders' plan from the start. By most accounts it went very smoothly.
[1] https://www.investors.dupont.com/news-and-media/press-releas...
[2] http://www.dow-dupont.com/
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On a technical level it would still be a nightmare. But yes it would actually get done.
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I’m advocating for controlling the damage. The way I said it is cutesy, not literal.
I intended it to point out that it’s too easy to merge companies together but it’s effectively impossible to stop someone from becoming anticompetitive without a real consequence.
If we can’t make it easier to rip them apart then we shouldn’t be so slap-happy about approving them in the first place.
Why skip this part ?
> legislation needs to either make it just as hard to merge two companies as it is to unmerge them
Nothing was skipped - the point is that this is directly analagous to unscrambling an omelet. Separating mixed things is significantly more difficult than mixing them.
"The laws says X" doesn't change whether X is possible or not.
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Yes, this is obviously the ask: why doesn't government unmix the omelet. Your very body unscrambles the omelet and makes you. It's what intelligent things do when they are moving agency into the proper places.
what is the purpose of regulation except to resist entropy in such strategic places?
Progressive corporate taxation would give the market an incentive to do spinoffs and undo the merger wave.
Or we could just roll antitrust policy back to what it was before Ronald Reagan and Robert Bork installed the Consumer Welfare Standard, the idea that companies must be allowed to merge if they can scribble a tall tale with crayons on butcher paper about how the merger will benefit consumers, for sure, pinky promise. This is obviously mega-rigged, it comes from the Robber Baron era, it was defeated before (look up Louis Brandeis) and it can be defeated again (look up Lina Khan). They didn't even change the talking points (dontcha know, the Standard Oil monopoly reduced the price of Kerosene by 70%?!) -- time is a flat circle when it comes to anti-trust policy. Let's spin it back to the part of the circle where we win.
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That’s one half. The other, more interesting half, recognizes that unscrambling the egg is difficult, so we must take more precautions before scrambling it in the first place.
I’ve been saying that an easy solution is just don’t allow companies with even modestly large overall sizes to merge or acquire other companies. At all. For any reason.
I think that despite this reform being a blunt instrument it would work surprisingly well.
It would allow companies that should have declined to decline and it would give massive incumbents a major incentive to innovate in-house.
No, they're advocating for more scrutiny of whether the omelet is going to be very bad for everyone who isn't part of the omelet (yes, this metaphor is weird, but I didn't introduce it)
I don't think it's particularly unusual for a company to spin off another company?
Undoing mistakes is usually difficult and costly, but still worth doing on the road to not making the mistake again. Grandfathering in the subversion of the economy and our democracy is worth fighting.
large corporations spin off divisions into separate companies all the time
Eh, thats a bit of a False analogy. spinning off a division of a company is easier than fully integrating another.
PE companies do it all the time.
PE companies do it with very little regard for if any of the pieces are viable and survive after the fact, so their model isn't one I'd suggest following.
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> or make it just as easy to unmerge two companies as it is to merge them.
[Disclaimer: I work at Google, all words my own and not representative of anyone, etc.]
There's no such thing. Let's stick to software since it's what HN knows best, but it's a universal truth.
Merging two companies: you take the two sides and they keep running. You probably need some extra accounting work to make sure the mandatory reports from each side get combined, but that's all you have to do.
Splitting two companies: oof. If you split ChildCo out of ParentCo:
* You need to hire all the roles that weren't part of that organization before (HR, legal, compliance, etc.)
* You need to register this new entity in all the countries it operates and/or has employees in
* Technologically it's somewhere between messy and impossible. Now you no longer have Google's build stack or monorepo. You have to rewrite everything. You can't just move some VMs to a cloud provider of choice
I suspect a large majority of the issues you brought up with splitting can be addressed by legislation.
Off the top of my head, something along the lines of having a mandatory period of time where the company being acquired must be kept separate enough that the merger can be dissolved in a timely manner should it be deemed necessary. How long that window should be would be up for debate but personally I'd argue the window should scale somehow based on things like the valuations of each company involved, headcounts, and maybe even competitive landscape.
An example would be requiring both companies to perform a pre-merger assessment to determine positions/roles, technology use and regulatory requirements that must be maintained for a clean separation and creating a plan that gets filed with the relevant agencies to be used if/when the merger needs dissolving. If the time comes that they need to dissolve the merger but they don't maintain that separation, they still have to do it and you slap a fine on them equal to some percentage of that mergers cost to be paid by the parent company.
Hell, that idea alone would accomplish both making it harder to merge and easier to dissolve the merger.
What can’t be solved with legislation?
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I think a better framing we should ask ourselves is why is the onus on the government to make sure a breakup is clean? Nothing in the constitution guarantees the rights of corporation.
I disagree with your premise that I shouldn’t express concern/opinions or point out problems with things that affect me simply because I’m not a trained expert in that thing.
"I think that the law should make this happen" without any thought for whether what you're proposing is possible or consistent with the laws of the universe is lazy.
This is similar to people who think we should just legislate secure encryption that has law enforcement backdoors. It's not possible, and people demanding it without an understanding of the area they're trying to regulate is lazy and insulting.
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But what are you trying to say about the greater argument? The parent had two parts to it - make merging as difficult as unmerging, or make unmerging as easy as merging. While you're right that the wiggle room for making unmerging a lot easier is very constrained, this doesn't say anything about the feasibility of the other part of the 'or' and the actual argument they're putting forward. Unless you're trying to extrapolate this to saying that both these changes are impossible, it just comes off as being pedantic.
> Technologically it's somewhere between messy and impossible. Now you no longer have Google's build stack or monorepo. You have to rewrite everything. You can't just move some VMs to a cloud provider of choice
You could give a copy to both successors. Probably would want to excise some of the repo on both sides, but build tools for sure would be fine to have a second copy. There's no need to rewrite everything, especially if Parent and Child are barred by court decree from entering overlapping businesses.
For things that really need a single corporate owner, you could potentially spin that off as well and have both successors contract from that one or depending on the terms of separation have a joint partnership.
Hosting would be messy, yes. But somehow the tech world outside google manages to run systems without Google tools. It would be an adjustment, potentially a large adjustment and take a lot of hours.
> You need to hire all the roles that weren't part of that organization before (HR, legal, compliance, etc.)
> You need to register this new entity in all the countries it operates and/or has employees in
This costs money, people, and time, but it's straight forward. HR and legal would likely need some additional people, but likely you assign the people who work with the spinoff business to the spin off corporation and then back fill as needed.
> There's no such thing.
Spinning off companies happens all the time.
I worked at HP in 2015 during it's split into Inc and HPE.
I then worked at FireEye during it's split.
Fun times.
I have less sympathy for Facebook/Meta. Zuckerberg is on record as saying IG can hurt us. The Whatsapp co-founder Acton saying "it's time. delete Facebook". The fact Zuckerberg's engineers were apparently specifically asked to merge the backends to make them harder to break up. I have very little sympathy for that specifically. I'm not thrilled with a lot of the things Google has done with (say) Youtube - people LOST THEIR ACCOUNTS because of forcing the link to Google+ - but I don't think it's in the same league
Chrome is one of those nebulous areas. If they're dictating web standards they deserve at least an antitrust glance
This is far from impossible, and happens all the time when, for example, a company spins off a subsidiary, or any number of other situations.
It's hard isn't really a blocker, it's just saying 'this isn't convenient for us', which is why it would have to be forced by legislation.
In none of those two cases is what's being proposed "as easy as a merger" - especially since those companies get to take as much time as they want without any court or law-enforced timeline.
And yet, Bell was split.
I don't necessarily disagree, but in practice it's never as easy. Combing ingredients for a cake is always easier than separating them back out. Getting married is easier than getting divorced. It almost feels like some kind of fundamental law.
My experience is that "split" companies are often split only at the superficial financial level and the behind-the-scenes engineering systems are never actually decoupled, you just have a services agreement where the new company pays the old company to continue providing software. Or vice versa. It's usually pretty ugly and expensive and not the clean win for competition you are thinking about.
We stopped this in the 1950s with a 90% federal income tax bracket. CEOs could not make more thab the equivalent of 5mil a year in 2026 dollars.
No CEO wanted to merge when it would turn two 5mil a year jobs into one 5mil a year job. Cutting taxes on the rich enabled profiteering by CEOs.