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Over the last year, our cherished democratic institutions have been stressed to the breaking point. Every day we hear about new threats to what we consider sacrosanct — and many of those threats are coming from the White House. President Donald Trump has shown us again and again that he is happy to use the various departments of government to benefit himself and his friends and to attack his enemies, whether that means dismantling the EPA from within or encouraging the intelligence community to investigate conspiracy theories around Hillary Clinton.
So far, the business world has been inoculated from this madness. Until recently, the stock market climbed steadily while unemployment shrank. Anticipating tax reform and increased deregulations, businesses have merged at a faster pace than in the first year of any other modern presidency. U.S. mergers and acquisitions have totaled $1.2 trillion since Trump was elected.
But Trump’s latest move could finally slow that prosperity. The Justice Department is suing to stop the merger between AT&T and Time Warner. There are even reports that the DOJ has approached state attorneys general to encourage them to block the $85.4 billion merger.
But media observers question the reasoning behind the suit. On the face of it, the merger shouldn’t inspire the kind of pushback we’re seeing from the DOJ. This is what’s known as a vertical merger which means it’s between companies that don’t currently compete, so it doesn’t reduce competition. The DOJ almost never blocks these kinds of mergers.
Instead, it seems to have everything to do with Time Warner’s ownership of CNN.
Trump has tweeted his displeasure with the news network, which he finds overly critical of his administration, again and again and again. There are reports that the government is willing to settle with AT&T over the case — if the company sells CNN.
This news should send a shiver through the spine of every American. It means that the president is willing to interfere in a business deal just to punish his perceived enemies. Putting aside for a moment the potentially chilling effect this could have on free speech, as media companies looking to merge may think twice about giving their reporters free rein to report on the Trump administration, it could also have a chilling effect on economic growth.
Entrepreneurs (especially tech entrepreneurs) at every level rely on exits. Entrepreneurs need to know that eventually they will be able to sell their businesses or go public. And entrepreneurs need to know that they can buy smaller businesses to expand their current offerings or grow in new directions.
These kinds of strong-arm tactics from the White House — coming after the merger has been under review for more than a year — will make many business leaders think twice about doing any kind of M&A activity that might attract attention from the government. Trump is unpredictable. No one knows which company he might turn his angry glare on next. And the M&A process is expensive and complicated. There’s little doubt that many executives will chose to postpone, or even end, M&A plans because of the growing level of uncertainty.
The situation could even cause problems for companies that are clearly friends of Trump. Rupert Murdoch, who has been a staunch Trump ally, would like to sell his 21st Century Fox studio. If he sells to a company like Disney, there will definitely be anti-monopoly concerns. How will the administration be able to approve this kind of merger if they’re trying to put the brakes on a less-concerning vertical merger like the AT&T Time Warner deal?
This kind of fear will eventually pump the brakes on America’s current economic growth. Entrepreneurs do their best work when they know exactly what the playing field looks like. They know the rules and know how to work within the system to grow their businesses. The administration’s current approach is akin to throwing the rule book in the trash and replacing it with a despot who needs to be appeased and coddled at every step. That doesn’t create an environment that encourages entrepreneurialism.
The president loves to brag about the economic growth that has already taken place on his watch. If he wants it to continue, he needs to rethink his approach to this merger. Sending a strong message to business that the only deals that can go through are the ones Trump likes is a losing idea. As Trump himself might say: Sad!
Mike Montgomery is the executive director of CALinnovates, a technology advocacy organization. Disclosure: AT&T is a member of CALinnovates. Reach him @CALinnovates.
This article originally appeared on Recode.net.
