A Blog by Jonathan Low


Feb 13, 2020

Implications of US Gov't Investigating A Decade Of Big Tech Startup Acquisitions

This investigation cuts to the core of big tech's economic dominance. Analysts have long believed that acquisitions of startups by Silicon Valley behemoths extended their services and power through relatively inexpensive purchases of crucial technologies that enhanced their offerings while stifling competition that threatened their position.

Should government actually force these companies to undo some of their more crucial acquisitions,- though an outcome which seems remote at the moment -  it could weaken companies like Google, Apple, Amazon and Facebook, significantly reshaping global tech. JL

Tony Romm reports in the Washington Post:

U.S. regulators (will) probe past mergers by Alphabet, Apple, Amazon, Facebook and Microsoft, seeking to study the ways tech giants gobbled up their rivals. (This) requires them to explain acquisition strategies and the way they ingested startups - and the data they amassed - into their own services. The heightened interest in Big Tech and the mergers that helped enhance tech giants’ footprints comes when regulators are intensifying scrutiny of an industry that long avoided it. Actions (could) include “unwinding” anti-competitive mergers and acquisitions.

U.S. regulators said they would probe past mergers by Alphabet, Apple, Amazon, Facebook and Microsoft, seeking to study the ways tech giants gobbled up their rivals — and if the acquisitions skirted federal antitrust laws.
The new effort by the Federal Trade Commission will require the five companies to provide information about the smaller players they’ve purchased over the past 10 years, including documents for deals that may not have been large enough to warrant deep, closer inspection by government watchdogs at the time.

The records the FTC amasses could ultimately influence its thinking about Silicon Valley and its size, sparking investigations, resulting in tough punishments or prompting the commission to seek further enforcement powers from Congress once it concludes its work.“All of our options are on the table,” FTC Chairman Joseph J. Simons said Tuesday, later adding that the range of actions the agency could take includes “unwinding” anti-competitive mergers and acquisitions.

Amazon, Apple, Facebook and Alphabet, which owns Google, declined to comment. Microsoft did not immediately respond. (Amazon founder and chief executive Jeff Bezos owns The Washington Post.)
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 about major changes in the markets and companies it studies. With Big Tech, the FTC is particularly interested in the smaller start-ups purchased by Apple, Amazon, Facebook, Google’s parent company and Microsoft. Such deals typically aren’t large enough to require companies under law to report them to agencies such as the FTC, which would then review them for competition concerns. The document demands sent to the five tech giants require them to demystify these transactions, explaining their acquisition strategies and the ways they ingested start-ups — and the data they amassed — into their own services.
“The acquisition practices of the leading tech companies long have been the subject of tremendous scrutiny, and this will be an opportunity to assemble the best body of data on how many of these deals took place and what their competitive significance was,” said William Kovacic, a top professor at George Washington University’s law school who previously served on the FTC.
“It can lead you either to go to the Congress and say, ‘We need change in the law,’ and it can guide your own law enforcement decision-making.”

The FTC’s heightened interest in Big Tech — and the mergers that helped enhance tech giants’ footprints — comes at a moment when regulators around the country are intensifying their scrutiny of an industry that long had avoided it. Amazon, Facebook and Google each are facing a raft of investigations by state and federal authorities, including the FTC, which has focused in particular on the social networking giant’s past acquisitions of WhatsApp and Instagram.
The Justice Department also has embarked on a wide-ranging probe of search engines, social networking and e-commerce, exploring dominant companies in those industries. That probe will take companies to San Francisco this week, as regulators seek to learn the extent to which tech giants such as Facebook and Google have crowded out investment in new companies that might challenge them.
Lawmakers on Capitol Hill have embarked on their own review of the industry, exploring whether federal antitrust law needs to be updated for the digital age. Some members of Congress who long have questioned Silicon Valley’s corporate footprint praised the FTC, urging it to use the data it gathers to take aim at Big Tech.
“While I welcome this announcement, it’s no substitute for action,” Sen. Richard Blumenthal (D-Conn.) said in a statement. “The FTC must demonstrate a willingness to forcefully stand up to Big Tech by scrutinizing every deal and taking vigorous action to stop the dangerous and destructive consolidation in the tech industry.”


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