Why We Need a Merger Cap: An Antitrust Lesson from General Electric

Authors

Carl T. Bogus

Document Type

Article

Abstract

This Article makes a modest proposal from a radical perspective. The proposal is this: Once a firm reaches a certain size, it should be prohibited from growing larger through mergers or acquisitions. The radical perspective is that antitrust law should be concerned with corporate size. It was a century ago that Louis D. Brandeis coined the term “curse of bigness,” and his concern about the social and political consequences of corporate size has long since fallen out of favor. Today, the consensus view is that antitrust should be concerned exclusively with economics. Current doctrine allows corporations to merge, provided only that by doing so, they do not acquire sufficient market power to raise prices.

Despite its radical perspective, the proposal is nonetheless modest in several ways. First, it would apply only to the very largest companies. Second, it would only prohibit those companies from growing through mergers and acquisitions; firms could still grow by outperforming rivals through fair competition. Third, a company subject to the cap could make an acquisition by first bringing itself below the cap through divestitures. And, although the proposal is designed to address the social and political ramifications of corporate giantism—concerns many antitrust scholars consider too subjective and value-laden for policy prescriptions, the cap is easily administrable and applied neutrally and objectively.

This Article shows why we need a merger cap by focusing on the history of the General Electric Company from 1981 to 2017, when it was headed by Jack Welch and his successor, Jeff Immelt. During those years, GE acquired 1,380 other companies. Many of those acquisitions were valued in the hundreds of millions and billions of dollars. GE was, then, considered the best managed company in America. Fortune dubbed Jack Welch the “Manager of the Century,” and some people believed GE had transformed management into “something resembling a hard science.” If there was a company capable of making smart acquisitions, it was GE. Yet nearly all of its acquisitions failed. Rather than making GE more efficient or more profitable, GE’s acquisitions all but destroyed what had been one of the nation’s largest and most revered companies. Even more importantly, they did enormous damage to the social fabric of the nation.

The GE story serves as a mega case study that confirms what research studies have previously shown: namely, that most corporate mergers fail. By examining in detail three of GE’s most important acquisitions, this Article illuminates why mergers fail. Finally, the GE story shows how corporate size and mergers combine to produce social harms.

Recommended Citation

Carl T. Bogus, Why We Need a Merger Cap: An Antitrust Lesson from General Electric, 51 J. Legis. 1 (2025).
Available at: https://scholarship.law.nd.edu/jleg/vol51/iss1/3