Antitrust Chief: Tech Dealmaking Spawns ‘Great Efficiencies’

mergers and acquisitions

Is a green light flashing for dealmaking in tech land, allowing large firms to easily snatch up smaller ones?

There’s a verbal assent in place, according to the The Financial Times, that U.S. Justice Department’s Antitrust Chief Makan Delrahim sees value from such transactions.

Delrahim said in an interview with FT that “great efficiencies” could be wrung from such mergers and acquisitions of that size and scale. The end result has been that consumers have been the ultimate beneficiaries of such activity. As examples, he cited Google’s $1.7 billon deal to buy YouTube 12 years ago, and that same tech giant’s buyout of Waze for a little under $1 billion, five years ago.

As quoted by FT, Delrahim stated, “You wonder would YouTube be as useful and as [much of] a competing force to music or in video had it not been enhanced and improved through the tech resources that Google had? … I think there’s [sic] great efficiencies that could occur from a lot of these. You can’t, you know, in retrospect try to second guess that.”

Delrahim made his comments in context against what might be a shifting regulatory landscape in the U.S. and abroad, as lawmakers and regulatory agencies here and in Europe are looking at deals with more intensity. If antitrust laws do not meet the needs of a brave new digital world, and where business models have changed, they may need an overhaul. As an example, noted the FT, services are free for customers and are paid for by advertisers.

Looming across the pond in Europe is the European Commission, which is widely expected to fine tech giant Google billions of euros, as the firm had been cited for antitrust behavior tied to the Android mobile operating system.

“I think they’re well-intentioned and their law continues to develop there, so I don’t think anybody’s looking at it wrong,” said Delrahim. “But I think it’s really important to examine the effect those types of enforcement actions could have.”

The FT said of Delrahim that, He gave little impression he was concerned about the growing might of Silicon Valley technology companies.” As part of that sanguine view, he stated that there has not yet been evidence that firms have shut out competitors by relying on “vast stores” of data.

As for his own approach, Delrahim stated that the Microsoft antitrust case from 2001 would be a model for his own pursuits. The Department of Justice sued that tech behemoth for shutting out competing browsers, such as Netscape. The case was settled.

Delrahim said that he would pursue cases that show that market power is being used as leverage by tech companies to “disadvantage and discriminate against a new technology that would challenge that monopoly position” and where evidence comes in the form of documents showing focus on short circuiting competition, rather than helping the end consumers.

The FT held up his response to the “anti-steering” case that focused on American Express and its business practices, where the payments firm got a favorable ruling from the Supreme Court. The court said that Amex practices that bar merchants from encouraging customers to consider using cheaper cards did not, in fact, amount to antitrust behavior.  The ruling cited the fact that two-sided markets demand that benefits to both sides — the consumers and the merchants — must be considered. Delrahim had voiced concern that a ruling for the government suing Amex might have had a negative effect on such two-sided markets.

“It doesn’t mean that this is a free pass to Uber and Lyft to fix prices, you know we’ll put them in jail if that’s what happens,” he said, adding that,the public good, the efficiency, the increased output they have provided by introducing that technology into the marketplace. That business model is incredible.”


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.