Good morning. Andrew here. For all the talk of deregulation from the Trump administration, dealmakers are worried about an increasingly aggressive regulatory power that is often overlooked. DealBook contributor Tamzin Booth explores this emerging dynamic and how it is altering the calculus in boardrooms. Also: DealBook’s Sarah Kessler sits down with the Wharton School’s Ethan Mollick to discuss the dawn of A.I. agents. And don’t miss this week’s news quiz — Elon Musk aficionados should spot the answer immediately. (Was this newsletter forwarded to you? Sign up here.)
States are the new antitrust warriors
Dealmakers have historically spent very little time thinking about state attorneys general. But during the second Trump administration, the threat of state interference has become a major part of every merger conversation. As federal agencies take a laissez-faire approach to deals, states are ramping up their antitrust enforcement to compensate. They sued to try to stop Paramount Skydance from buying Warner Bros. Discovery for $110 billion and to prevent Nexstar Media Group’s $6.2 billion merger with Tegna. Another state coalition (unsuccessfully) tried to unwind Hewlett Packard Enterprise’s $14 billion purchase of Juniper Networks. State attorneys general are also challenging nonmerger conduct. In April, a bipartisan state coalition won an antitrust lawsuit against Live Nation after the Justice Department separately settled with the company during the trial. Trying to use politics to sail through the federal merger review process will backfire because other regulators are now involved, the antitrust chief at one large (red) state told DealBook. The rapid increase in state antitrust lawsuits has frustrated business executives, who say merger approval by 50 states and two federal agencies isn’t efficient. Uncertainty over whether and when states will intervene is acting as an invisible tax on dealmaking and a drag on the U.S. economy, said Jon Orszag, who is a founding partner of Econic Partners, an economics consulting firm, and has advised on deals worth roughly $500 billion since early 2025. Other corners of America’s antitrust community have applauded the uptick in state action. “Each episode of apparent manipulation by lobbyists is an opportunity for the states to stand tall and say we’re the last guardians of what is good about America’s antitrust system,” said William Kovacic, a former chair of the Federal Trade Commission. But what could end up mattering most is something both sides agree on: States have relatively few resources to become powerful antitrust enforcers. The question on everyone’s mind is whether they can escalate enough to make a lasting difference, and on a large number of deals and cases. The new hierarchySix years ago, states collectively employed 151 antitrust lawyers, according to a Yale survey. The federal agencies had all the muscle — around 1,000 antitrust and economics experts and staff. That hierarchy has changed. States are still collaborating with federal agencies, but they have staffed up their own antitrust departments and are increasingly willing to go it alone. The states’ role in antitrust predates federal laws: Iowa passed the world’s first antitrust statute in 1888, before the 1890 federal Sherman Antitrust Act. In recent years, the rise of Big Tech prompted a higher degree of activism, starting with states’ 1998 action alongside the Justice Department against Microsoft. As big tech companies expanded and made acquisitions during the Obama administration, the F.T.C. and the Justice Department were slow to respond. In 2019, 50 states and territories led by Texas launched an action against Google, describing it as a necessary backstop against possible inaction by federal enforcers. During President Trump’s first term, some F.T.C. commissioners, disappointed by the limits of what the agency could do to stop mergers in “kitchen table” sectors like hospitals, egged on the states to take independent actions. When Lina Khan took over as F.T.C. chair in 2021 and embarked on a no-holds-barred enforcement agenda aimed at reining in corporate power, the states were further inspired and emboldened. The second Trump administration took the opposite approach, with leaders at the F.T.C. and the Justice Department quickly signaling they were open to remedies. By the time concerns about White House influence over the Justice Department started to grow and its antitrust chief, Gail Slater, was ousted, the states were staffed up and ready to go. With some notable exceptions, such as the coalition against Paramount Skydance’s acquisition of Warner Bros. Discovery, most of the states’ recent actions have been bipartisan. Uncertain futurePhil Weiser, attorney general of Colorado, recently called for Congress to devote federal funds to states’ antitrust efforts, noting that the Justice Department spends $250 million a year on competition enforcement, several times the sum of all state antitrust budgets. Lacking capacity, the states have taken on only a handful of high-profile cases. The states have more lawyers than in the past, but only a tiny group employ full-time economists to examine the effects that proposed transactions could have on competition. When they do, the economists are often recently qualified, lack a Ph.D. or lack a background in industrial organization economics, the basis for empirical analysis of market structures. One strategy that states have used to overcome their limited bandwidth is to pool resources and work together. The National Association of Attorneys General, based in Washington, once used sizable litigation-support funds from large settlements with companies to make loans for new antitrust actions. Critics said money from such settlements should go to state treasuries, not to a private association, but NAAG still funds antitrust actions as well as training and coordination. In 2021, 45 state attorneys general and NAAG wrote to Congress asking for funds to support state antitrust enforcement (without success). They are likely to seek federal funding again, as Colorado’s Weiser recommended in September. He also demanded new legal powers that would allow states to block anticompetitive mergers without rushing to obtain temporary restraining orders, a difficult and burdensome process for states and courts. More money and beefed-up legal rights would entrench the states as a permanent obstacle on the antitrust landscape. It’s also possible that the states’ enthusiasm for antitrust fizzles. Supporters of the federal agencies say states may back away from aggressive action if attorneys general, who are politicians, overstretch and lose too many cases in federal court. The suit against the Paramount-Warner merger, for example, is widely regarded as something of a defeat for the states because they settled for behavioral remedies after Rob Bonta, California’s attorney general, publicly insisted that they would accept only structural divestitures. But for now, the states’ ambition is still growing. “Time and again, when the federal administration has stepped back from enforcing our antitrust laws,” Letitia James, attorney general of New York, told DealBook in an email, “state attorneys general have stepped up.”
Kevin Warsh vowed to tame inflation. The Federal Reserve chairman’s comments at the annual meeting of the International Monetary Fund on Friday calmed investor fears that the central bank would raise borrowing costs this month. They followed a hot inflation reading released on Wednesday, with a 3.7 percent annual increase in consumer prices driven largely by higher energy costs. The F.B.I. arrested an OpenAI employee accused of spying. The now former employee, Abdulrahman Alfozan, a Saudi Arabian national, was charged with bugging a conference room at the company. The incident adds to concerns around security at other A.I. labs. President Trump’s new press secretary was fired after less than a week. Katie Zacharia had a rough start at her first press briefing on Tuesday, and faced questions about whether she misrepresented herself as a lawyer despite failing a bar exam. Anthropic prepared for its I.P.O. Several investors who attended presentations held this week by the A.I. giant reportedly lowered their expectations for what could be the largest-ever public offering, citing an apparent slowdown in the company’s annual revenue, Reuters reported. On Wednesday, Anthropic executives told a room full of investors that its revenue for the third quarter had jumped about 45 percent from the prior quarter to $16.8 billion. More big deals: Netflix laid off about 6 percent of its work force amid slowing growth. JPMorgan Chase and Wells Fargo reported revenue short of analyst expectations. U.S. mortgage rates remained at three-year highs, while home sales plunged to a near-12-year low. When (and when not) to use A.I.It has been two years since Ethan Mollick, an associate professor at the Wharton School, published “Co-Intelligence,” his popular playbook for using artificial intelligence. In the fast-moving world of A.I., that means we’re now in a new era. His new book, “Co-Existence,” is “about the era of the agent,” he told DealBook. Mollick and DealBook’s Sarah Kessler discussed how business leaders should think beyond the chatbot. The interview has been condensed and edited for clarity. You write that management skills are essential to using A.I. well. Explain that. Everyone used to say that A.I. is like an intern. Not anymore. You should think about A.I. as almost an external organization. If you are good at writing out what you want to have done, the way you want it done and when you want things checked in with you, you get good output from the A.I. There’s a nice study out of Anthropic that suggests managers actually produce better code the first time using A.I. coding tools than coders do, because they specify the outputs they want rather than worrying too much about the details. One of the most common tasks that managers say they automate with A.I. is writing performance reviews. You argue that’s not a great use of A.I. Why? There are systems where the value comes from having a human involved. And as soon as you cross a line where they’re being automated, the entire value of the system collapses. Even if Claude more accurately gives you feedback on what you’re doing, I don’t need the objective feedback as much as I need, subjectively, what does my boss think I’m doing right or wrong? Your list of potential outcomes for A.I. has changed a lot since 2024. When I wrote the first book, there was a real possibility that A.I. could hit a wall of some sort. I don’t think that’s possible anymore. I think that people are still too much thinking about a world where A.I. is static and we can make assumptions based on the models of today. If I had one message, as somebody who talks to lots of businesspeople and C-level executives, it’s that the biggest mistake you could make is assume that this is as good as it gets and make plans based on that. Is there anything else you wish business leaders were thinking about more? Their role in shaping how this technology is used as augmentation or automation. A lot of what I read is that A.I. is something happening to us, and so what do we do in response? Rather than acknowledging that there’s an easy path, the path of automation, which I think will lead to trouble in a lot of ways. And then there is a harder path, which is how do we reinvent the organization around these systems that include both humans and A.I.? Executives seem pretty dismissive of the argument that they can choose augmentation instead of automation, or that doing so can be practical. Let’s say you were one of those companies that automated all of your marketing writing with Claude, because it was a very good writer back in January when no one was using these systems. Now anyone who has been on the internet can sniff out Claude writing, and it makes them vaguely nauseous. Congratulations, you automated away a competitive advantage. And maybe there was a way to integrate human writers with A.I. in a way that makes everything better. The way you get rid of your moat is you make your product just like everybody else’s and you make a company just like everyone else’s. That doesn’t mean that some jobs don’t get automated, but I think that there has to be a more careful balance, or you’re going to end up running your company based on someone else’s mediocre models — because you went with a vibe.
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