Pentagon Stupidity Is a Design Choice

These new legal requirements will force private equity firms to tell the Pentagon whether they are mucking around with weapons makers.

Using metaphor of blindness to sight is common throughout human history, because everyone understands what it means to open your eyes.

In August, I wrote up an important shift among antitrust enforcers, in a piece titled “Government Stupidity Is a Design Choice.” In it, I described how the Federal Trade Commission and Antitrust Division, prompted by Congress, tweaked a form, called the Hart Scott Rodino form, that companies must fill out when they want to engage in any corporate acquisition worth over $100 million.

Dealmakers will now have to answer basic questions, such as “Why are you merging?” “Who is on your board of directors?” “How does your industry work?” “Who is lending money for the buy-out?” They will have to give information upfront about subsidiaries, their product lines, defense contracts, their power in labor markets, and previous acquisitions, which is particularly important when a firm is rolling up a lot of smaller entities.

The government got virtually no useful information from it, meaning that every day a government lawyer would receive a bunch of notifications that two random companies are merging, and he’d have to start with virtually no information, and then with a few hours of research decide which were worth investigating.

But while corporate lawyers might be mad about this change among antitrust enforcers, now they’ll have to deal with another part of the government getting that same X-Ray machine.

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