Study Warns That Weakening M&A Policy Threatens America’s Tech Edge and Empowers China
WASHINGTON, D.C. – The American Edge Project (AEP), a coalition of two dozen domestic organizations, today unveiled a new issue brief outlining the critical role mergers and acquisitions (M&A) play in strengthening America’s technological edge, particularly in artificial intelligence (AI), biotechnology, semiconductors, and other advanced technologies.
The report, “From AI to M&A: How Acquisitions Underpin America’s Tech Leadership,” details how China’s aggressive state-backed industrial policy is closing the global innovation gap. It warns that regulatory hostility toward mergers risks ceding ground to the Chinese Communist Party (CCP) and undercutting President Trump’s AI Action Plan.
“M&A provides start-ups and small companies with the critical financing and infrastructure to scale their innovative technologies in a competitive market,” said Doug Kelly, CEO of the American Edge Project.“By prioritizing innovation and measured enforcement, the U.S. can continue to lead in global technological advancements. The U.S. needs a dynamic M&A regulatory environment to beat China in the high-stakes AI race.”
The issue brief in its entirety can be found here. Key findings from the report include:
- China’s State Industrial Policy is Challenging American Technological Supremacy: China uses state investment, coercion, and theft to advance its technological capabilities. To achieve its goal of becoming the world’s dominant AI power, China is investing $2.8 trillion on a slew of technologies, including AI, advanced microchips, and quantum computing. China’s government is subsidizing access to computing power and compiling data to train AI systems, while China’s military is building new laboratories and reorganizing its science and technology branches. China supports its efforts by annually stealing $500 billion in intellectual property from the U.S. alone.
- M&A Fuels Innovation Across the Economy: For startups and small companies, capital enables them to transform ideas into new technologies. By joining forces with larger entities, these firms gain access to financing, infrastructure, and distribution networks, a dynamic that helps to bring innovations to market faster and more broadly. With low exit barriers and a predictable regulatory climate, the U.S. enjoys thriving capital markets. In 2021 alone, the U.S. recorded a peak of nearly 19,000 completed transactions worth close to $350 billion. In 2023, venture capital invested $67.2 billion in AI, much of it from established tech companies that are investing tens of billions of dollars in AI and providing startups with the essential resources and infrastructure. Companies with unique technologies are frequently acquired.
- Robust M&A Requires a Stable Regulatory and Enforcement Climate: For most of the past 40 years, the U.S. has enjoyed a predictable and transparent antitrust framework that allows larger companies to invest in innovative start-ups, compete in new product markets, and grow organically without artificial regulatory restrictions. Unlike other parts of the world, the U.S. does not handcuff or “shoot the winner” of the competitive marketplace. Instead, the U.S. reviews mergers for their possible impact on consumers and the competitive process, rather than for their impact on particular competitors or out of concerns that some successful companies might grow too big or enter too many product lines.
- Europe’s Merger Hostility is a Lesson for American Policymakers: In part due to its merger policies, Europe’s economy has fallen behind the other developed parts of the world, including the United States and China, in terms of growth, investment, and innovation. For example, from 2017 to 2019, there were roughly twice as many venture capitalists in the U.S. as there were in Europe. In Washington and states around the country, policymakers should recognize the dangers of importing European competition policy concepts into the United States. If adopted here at home, the European model would risk stagnation and shatter the very ecosystem that has propelled America’s global tech leadership.
- Instead, U.S. Should Build on the President’s AI Action Plan: In its AI Action Plan, the White House wisely instructed the Federal Trade Commission (FTC) to ensure that its enforcement and regulatory activities “do not advance theories of liability that unduly burden AI innovation.” The White House should extend this directive to the Department of Justice (DOJ) and to all forms of innovation, from biotech to quantum computing. A return to measured antitrust enforcement, grounded in precedent and evidence of consumer harm, would help to cabin the antitrust agencies’ Neo-Brandeisian impulses.
BACKGROUND:
The American Edge Project is a coalition of domestic organizations representing a cross-section of U.S. innovators who are dedicated to telling the story about technology’s positive influence on America’s economy and the vital role innovation plays in our society. Former New Mexico Governor Susana Martinez, former U.S. Representative Chris Carney, and former Federal Election Commission Chairman Bradley A. Smith are directors of the American Edge Project. AEP’s National Security Advisory Board is comprised of Former White House Counterterrorism and Homeland Security Advisor Frances Townsend; retired four-star General Joseph F. Dunford Jr., United States Marine Corps (USMC), who served as former Chairman of the Joint Chiefs of Staff; and former Acting Director of the Central Intelligence Agency (CIA), Michael J. Morell. Former U.S. Senators Saxby Chambliss (R-GA) and Kent Conrad (D-ND) serve as Co-Chairs of the Project’s Economic Advisory Board. Former U.S. Representative Greg Walden (R-OR) and Former U.S. Representative Loretta Sanchez (D-CA) serve as Co-Chairs of the Project’s Open & Accessible Internet Advisory Board.
Visit AmericanEdgeProject.org for more information.
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