A PYMNTS Company

FTC Taking a 10-Year Antitrust Look-Back at Big Tech

 |  March 3, 2020

Are These the First Steps Toward a New Approach to Merger Control?

Big Tech mergers make big headlines, but there is much more to a deal than how much money changes hands. More important questions need to be answered, such as how much future innovation might be lost, how much healthy competition will be eliminated, and what volumes of consumer data will suddenly be controlled by one or only a handful of companies.

Some lower-cost acquisitions fly under the radar of antitrust law enforcement agencies. But should they?

Criticized for ignoring “killer acquisitions” and going too easy on Big Tech – approving more and more mergers but not taking more enforcement action – the Federal Trade Commission (FTC) has decided to revisit all Big Tech deals consummated during the last 10 years.

Specifically, the Commission has demanded information about acquisitions not reported to antitrust agencies under the Hart-Scott-Rodino (HSR) Act. The FTC’s recent orders require Google, Amazon, Apple, Facebook, and Microsoft to provide information and documents on the terms, scope, structure, and purpose of transactions that each company consummated between Jan. 1, 2010 and Dec. 31, 2019.

The FTC issued the orders under Section 6(b) of the FTC Act, which authorizes it to study matters even if they do not have a specific law enforcement purpose. The FTC said the information it seeks will deepen its understanding of Big Tech’s acquisition activity, including how the companies report their transactions to federal antitrust agencies, and whether they are making anticompetitive acquisitions of nascent or potential competitors that fall below HSR filing and reporting thresholds. FTC Chairman Joe Simons said this effort will help evaluate whether federal agencies are getting adequate notice of anticompetitive transactions.

According to the orders, each company must identify acquisitions that were not reported to the FTC and the U.S. Department of Justice under the HSR Act and provide information similar to that requested on the HSR form. The FTC demands the companies provide information on their acquisition strategies, voting and board appointment agreements, agreements to hire key personnel from other companies, and post-employment covenants not to compete. The FTC has also demanded more information about post-acquisition product development and pricing, including “whether and how acquired assets were integrated and how acquired data has been treated.”

“The Commission plans to use the information obtained in this study to examine trends in acquisitions and the structure of deals, including whether acquisitions not subject to HSR notification might have raised competitive concerns, and the nature and extent of other agreements that may restrict competition. The Commission also seeks to learn more about how small firms perform after they are acquired by large technology firms,” the FTC press release said.

Supporters of this action say Big Tech has been able to gobble up innovative competitors at the expense of consumers. Critics call it a fishing expedition, question the Commission’s motives, and fear it could lead to the unwinding of deals as old as 10 years.

Commissioners Christine S. Wilson and Rohit Chopra issued a statement praising the study of the Big Tech competitive landscape and urged the Commission to next turn its sights on the healthcare sector.

“During the last three decades, the share of independent dialysis facilities has shrunk drastically and two national chains now own the majority of dialysis facilities and earn nearly all of the industry’s revenue, with most acquisitions occurring below the HSR thresholds. Similar patterns of ‘stealth consolidation’ have been observed in pharmaceutical and hospital markets,” Wilson and Chopra said.

Continue Reading…