Wall Street Deal Making Faces Greater Scrutiny Under FTC

The Biden administration’s antitrust enforcers are throwing sand in the gears of Wall Street’s deal machine.

Under Chairwoman Lina Khan, the Federal Trade Commission is questioning mergers that likely would have gone unchallenged in years past—a change Ms. Khan says is needed to prevent companies from building up too much power and stifling competition.

“In all too many areas of our economy, including agriculture, airlines, healthcare, we’ve seen significant consolidation and reduction of competition,” Ms. Khan said in an interview. “Mergers have played a role in that.”

The FTC issued 42 letters of investigation over mergers or similar transactions during the 2021 fiscal year, according to the latest available data, almost double the number for 2020 and the highest in more than 10 years. Deal makers, antitrust attorneys and Republicans complain that in some cases the FTC is simply trying to slow down deals where there isn’t a credible threat to competition.

“The emphasis is on using process to make doing deals more expensive and to heighten the risk, delay and uncertainty of doing those deals,” said Christine Wilson, a Republican commissioner who has been critical of Ms. Khan’s management.

Bankers and boards of directors are now more aware of the risk that antitrust enforcers will investigate, which has sometimes led companies to postpone merger plans, said Eric Swedenburg, co-head of the mergers and acquisitions practice at Simpson Thacher LLP.

“Boards are well aware of the aggressive antitrust enforcement regime right now,” Mr. Swedenburg said. “You have to assume you’re not going to get a pass on anything.”