These are challenging times for Big Tech as regulators in every corner of the globe take aim against Amazon, Apple, Facebook, Google, Microsoft Corp., Tencent and others.
Ioannis Kokkoris, professor of competition law and economics at Queen Mary University of London, told PYMNTS that this is Big Tech’s moment in the spotlight, and that may not be a good thing for them as regulators are getting ready for the next wave of acquisitions.
“Big Tech is in trouble,” he said. “This is the new era of authorities looking at Big Tech under the microscope … so things will become trickier for them. That doesn’t mean that business will stop, it just will not be business as usual.”
In a first-of-its-kind decision in November, the CMA ordered Meta’s Facebook to sell Giphy, the animated images platform which the tech giant acquired for a reported $400 million in 2020. Regulators determined the deal could harm social media users and U.K. advertisers. Facebook is appealing.
While critics of the CMA’s decision, which came 18 months after the purchase, said such a ruling could chill venture capital investment in startups like Giphy, Kokkoris is not so sure.
“I have not seen any data to convince me that this argument holds water, but I don’t think this is because the data doesn’t exist,” he said. “It’s because we are still in the process of collecting enough data to test the hypothesis that blocking such transactions would actually lead to less innovation.”
Still, he acknowledged, at one time, deals that involved investors in the past flew under the radar. Today, he said the environment is different as regulators take a closer look. Such deals may not be more difficult, he said, but they are lengthier and more demanding to close.
Kokkoris said there hasn’t been blanket prohibition against startup acquisition by Big Tech, which could significantly impact the involvement of venture capitalists. But he has seen transactions involving investors getting much more scrutiny. They receive a lot more requests for information and pressure from the authorities compared to the past. That’s not just on the Big Tech, but across the board in some markets and in some countries, he added.
At the end of the day, Kokkoris said, the Facebook/Giphy merger is just one transaction that was blocked by competition authorities compared to all the other transactions that are approved.
Kokkoris was asked if giant tech companies would proceed with a merger despite opposition from U.K. or European Union regulators, where the rules are tighter, and do business elsewhere, where there’s less scrutiny.
“I can see the appeal, but it would be difficult in practice because Europe and the U.K. are pretty big markets,” he said. “I think it’s difficult to carve out in markets in specific regions when we talk about being global.”
In the race to regulate the giant tech companies, the United States is late, he said.
“I think the U.S. has come a bit late in the enforcement game compared to the EU, for example, but they really want to catch up fast and they really are doing their best to do that,” he said. “And that’s what we see in the headlines.”
In a recent speech, the new U.S. Department of Justice (DOJ) Assistant Attorney General Jonathan Kanter, who oversees the Antitrust Division, said he will try to block mergers that impede competition. His plan, he said, is to implement enforcement remedies rather than settlements.
Kokkoris said U.S. regulators and law enforcement agencies have realized that they lost the first battle against mergers. Consider this: Big Tech has already collectively acquired more than 500 startups and mature companies in the drive to consolidate.
“What they’re trying to do now is preempt any future startups from being acquired,” he said. “That could be the next big thing in tech.”
All of this comes as the FTC and the DOJ have announced plans to process to rewrite merger guidelines for businesses signaling a tougher stance toward large deals.
“I prefer to have new guidance, which will explain exactly how the FTC, the DOJ, and the CMA assess a deal rather than being in a gray area and not being able to predict how the enforcement agencies will rule on a specific transaction,” he said.