Consumers could be hurt in a hostile takeover of Wyndham by Choice.
Consumers could be hurt in a hostile takeover of Wyndham by Choice.
T he Biden administration is using the nation’s antitrust laws to launch an all-out war on the success of American business.
In the last 16 months, seven stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — have seen their S&P 500 stock price rise 117 percent, far outpacing the performance of the other 493 companies on the list. The stocks are known as the “Magnificent Seven.”
Those companies have made trillions of dollars for Americans with 401(k) plans and are leading the U.S. challenge to our European, Japanese, and Chinese competitors.
But the Biden administration’s Justice Department and Federal Trade Commission have instead hauled five of the seven firms into court for the unforgivable sin of providing consumers what they want at a price they are willing to pay. A sixth, Tesla, is being investigated by the Environmental Protection Agency.
The latest Biden absurdity is a Justice lawsuit against Apple. It complains that iPhones and iPads don’t allow apps on Apple platforms for some of their rivals’ online products. This is said to be illegally “impeding rivals.”
It’s an incoherent lawsuit because iPhones have been falling in price for years and are wildly popular.
The antitrust laws were supposed to be protecting consumers, but the Justice challenge asserts that Apple is harming its rivals.
It’s clear the Biden antitrust policy is being run by ideological left-wing opponents of free markets and is heavily tinged by politics.
The latest example of this drift is coming out of the $8 billion hostile takeover attempt that Choice Hotels International, which operates 7,400 hotel properties, is making for Wyndham Hotels & Resorts.
Wyndham’s board has rejected the Choice offer because it says it undervalues the company’s growth potential and in attempting to combine two behemoth companies, there will be legitimate antitrust objections. Wyndham operates some 9,300 hotels, including the Howard Johnson, Super 8, and Travelodge brands.
The irony in the Choice–Wyndham tussle is that the major worry is that the normally aggressive FTC’s hostility to mergers may fall by the wayside in favor of a more permissive approach that many analysts believe would genuinely hurt consumers.
The proposed shotgun wedding of Choice and Wyndham has been criticized by the Asian American Hotel Owners Association, which represents 20,000 members who own about 60 percent of the hotels in the United States.
“A merger with these two very large hotel franchisors would mean 16,500 hotels across 46 brands all come under one franchisor,” AAHOA president and CEO Laura Lee Blake has warned. “To suddenly have one franchisor have such dominance and control is frightening.” A survey of her organization’s members found that nearly 70 percent of owners with either a Choice Hotels or Wyndham property said it would be unlikely, or very unlikely, that they would remain with any new merged company.
Normally, creating such a franchising behemoth would raise genuine antitrust concerns because consumers could be harmed by the enormous market dominance of the new company and resulting higher prices. Eventually new competition would bring that down, but there is little doubt of it initially. This would be a company with 16,700 hotels — the biggest concentration of lodging in history. But sources indicate that in an election year, the Biden antitrust watchdogs might be more interested in looking the other way and ignoring the problem.
A big reason might be the gigantic Democratic political firepower represented by the Choice Hotels hostile takeover. The chairman of Choice Hotels is Stewart Bainum Jr., who has been a powerhouse in Democratic Party politics in his native Maryland ever since he served in the state legislature in the 1970s and 1980s.
In 2020, Bainum gave $2 million to the Biden super PAC Unite the Country and donated another six figures to the Biden Victory Fund. Last June, he hosted a fundraiser at his Maryland estate that was attended by Biden, the third such time that the president has journeyed out to Bainum’s home to scoop up cash. In turn, Bainum spends time at the White House: He was invited as a guest to the first state dinner of the Biden presidency honoring French president Emmanuel Macron.
Bainum has also jumped into the progressive media pool. In 2021, he founded a nonprofit called the Venetoulis Institute for Local Journalism that now publishes an online newspaper called the Baltimore Banner. According to Bainum friend and adviser Jim Friedlich, the institute was named after the late Ted Venetoulis, who was elected Baltimore County executive as a Democrat and whom Friedlich hails as a “progressive mover and shaker.”
The eight-member board that Choice has named to replace Wyndham’s board also skews to the left. Only three of the eight have given even traces of money to a Republican candidate, and in two of those cases they were only to Liz Cheney and John Kasich, two passionately anti-Trump former members of Congress.
Richard Clarke, managing director at AB Bernstein, isn’t optimistic that the proposed takeover would be good for consumers or shareholders.
“I don’t think that adding the two businesses together is going to suddenly make them better and the hotels, the underlying product, great,” the analyst told Hospitality Investor magazine. Michael Bellisario, a senior analyst at Baird, an investment bank, said he nonetheless can see the deal going through: “I suppose the FTC could approve it with conditions, but it doesn’t really make sense to combine those two companies with fewer brands or hotels.”
So let’s summarize. The hostile takeover of Wyndham doesn’t seem to make sense to its board of directors, a hotel industry trade association, or industry analysts. But Choice Hotels is exuding confidence that the deal would be approved by Joe Biden’s fiercely progressive Federal Trade Commission.
Perhaps the billionaire Bainum’s hotel combine has compelling arguments that aren’t obvious to industry observers. Or perhaps it thinks it has so much clout due to its outsized influence in Bidenworld that it doesn’t have to worry about antitrust concerns.
In any event, the Biden FTC’s politicized track record should give any smart Washington observer some pause and bears close watching in this election year.