Commentary

Launching Antitrust Investigation, FTC Wants Info On Big Tech's Smaller Deals

The Federal Trade Commission yesterday ordered Alphabet (including Google), Amazon, Apple, Facebook and Microsoft to disclose information about acquisitions over the past decade that were too small to trigger automatic antitrust review under the Hart-Scott-Rodino (HSR) Act.

The regulators are “seeking to determine whether the industry’s giants acquired smaller rivals in ways that harmed competition, hurt consumers and evaded regulatory scrutiny,”  write  John D. McKinnon and Deepa Seetharaman for The Wall Street Journal.

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“The new probe likely will involve hundreds of transactions that never drew federal scrutiny because they were under the dollar-value threshold for antitrust review, which is edging up to $94 million this year,” they add.

But that’s not all.

“The orders also require companies to provide information and documents on their corporate acquisition strategies, voting and board appointment agreements, agreements to hire key personnel from other companies, and post-employment covenants not to compete. Last, the orders ask for information related to post-acquisition product development and pricing, including whether and how acquired assets were integrated and how acquired data has been treated,” according to the FTC news release announcing the action.

“This will help us continue to keep tech markets open and competitive, for the benefit of consumers,” states FTC chairman Joe Simons. 

“Big Tech makes myriad smaller deals every year that are never announced and do not go through regulatory channels. For instance, Google closed on a $2.4 billion acquisition of software company Looker in 2019 and agreed to purchase Fitbit for $2.1 billion -- a deal that is still under review -- but also spent $1 billion to acquire other companies that the company does not name in its annual filing,” Jeremy C. Owens and Jon Swartz explain for MarketWatch.

“Apple largely avoids big-name acquisitions, but has spent more than $1.6 billion in the past three fiscal years on business acquisitions, according to its annual filing, and chief executive Tim Cook has said that Apple is buying a smaller company about every two to three weeks on average,” Owens and Swartz add.

“The inquiry announced Tuesday differs from a traditional investigation: Using what’s known as its 6(b) authority, the FTC can embark on wide-ranging reviews of entire industries without necessarily bringing a law-enforcement action. The agency in the past has invoked such powers to delve deep into drug prices, alcohol ads and gas gouging, experts said, often ushering [in] major changes in the markets and companies it studies,” Tony Romm writes  for The Washington Post.

Amazon, Apple, Facebook and Alphabet declined to comment and Microsoft did not immediately respond, Romm reports.

The move “comes amid widespread criticism that antitrust officials have been too permissive in allowing tech giants to buy rivals, strengthening their dominance. The agency’s orders take aim not at big deals, but those that were too small to be reported to regulators but may have targeted nascent competitors,” write  Bloomberg’s David McLaughlin and Ben Brody in the Los Angeles Times

“The study, which is focused on ‘research and policy,’ can lead to enforcement action, including unwinding transactions the FTC finds were problematic, Simons told reporters Tuesday,” they add.

“The queries come as the Justice Department, the FTC, state attorneys general and the House Judiciary Committee are investigating the big tech platforms, which are accused of unfairly using their clout to defend market share or expand into adjacent markets. Much of the criticism has focused on massive deals such as Facebook’s acquisition of Instagram and Amazon’s purchase of Whole Foods, but the companies also have spent billions on smaller companies, dramatically changing the competitive landscape in emerging tech sectors,” observe Reuters’ Diane Bartz and Nandita Bose.

On Monday, Sen. Josh Hawley (R-Mo.) published a proposal to relocate the FTC to the Justice Dept., “replace the five-member commission with a single director, and offer the agency a new set of tools to specifically take on Big Tech,” Emily Birnbaum reports for The Hill. “The proposal says the FTC in its current structure ‘lacks teeth,’ has a ‘divided’ jurisdiction, and ‘wastes time in turf wars with the Department of Justice (DOJ).’

“The agency as presently constituted is in no shape to ensure competition in today’s markets, let alone tomorrow’s,” it maintains.  

Yesterday, the FTC noted that “the study will help the commission decide ‘whether additional transactions should be subject to premerger notification requirements.’ And the FTC said the project will ‘support the FTC’s program of vigorous and effective enforcement to promote competition and protect consumers in digital markets,’” writes  Eric J. Savitz for Barron’s.

“Ironically, toward the end of the announcement, the news release announcing the new study asks readers to ‘like the FTC on Facebook,’” Savitz adds.

As of this morning, 79,839 accounts had done so -- but we imagine Sen. Hawley is not among them.

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