FTC, DOJ Launch Consultation To Tighten Grip on Big Tech M&A 

On Tuesday, the Federal Trade Commission (FTC) and the Justice Department’s Antitrust Division launched a joint public inquiry to review merger rules to strengthen enforcement and clamp down on big mergers, especially in digital markets. 

“Illegal mergers can inflict a host of harms, from higher prices and lower wages to diminished opportunity, reduced innovation, and less resiliency,” said FTC Chair Lina M. Khan. “This inquiry launched by the FTC and DOJ is designed to ensure that our merger guidelines accurately reflect modern market realities and equip us to forcefully enforce the law against unlawful deals.” 

The review will focus on how to assess mergers that include free services where the traditional antitrust analysis may not bring accurate results. The agencies are also seeking input to update the market definition analysis to better account non-price competition. In advertising businesses such as those where Google and Facebook operate, a price-increase assessment does not always fit. Probably one of the first examples where traditional antitrust tools didn’t properly foresee the effects of a deal was in Facebook’s acquisition of Instagram and WhatsApp in 2014. Just last week, the FTC obtained a second opportunity from a judge to challenge these acquisitions. 

Another important aspect of the review is the role of “potential and nascent competition” in merger review. While this aspect has always been part of an investigation, it didn’t have much weight on the final decision. However, some precedents from the last two or three years have shown that startups or small competitors in new markets could represent a source of competition if they are allowed to continue growing. For instance, Visa’s attempted acquisition of Plaid and Illumina’s bid for Pacific Bioscience were both blocked because regulators considered that despite the targets being small, compared to the acquirer, and operating in different markets, they could be significant players in the near future.  

The role of potential competition has played a very important role in Europe and the U.K. in assessing mergers by big tech firms. The most recent examples are Amazon’s non-controlling acquisition of Deliveroo, approved after a second phase review with a lot of controversy, and Facebook’s acquisition of Giphy, where the regulator used its powers to order Facebook to unwind the merger. 

“We need to understand why so many industries have too few competitors, and to think carefully about how to ensure our merger enforcement tools are fit for purpose in the modern economy,” said Assistant Attorney General Jonathan Kanter. 

President Biden picked Ms. Khan and Mr. Kanter to lead the FTC and DOJ Antitrust Division with a clear goal to strengthen its grip on big tech firms. This inquiry is part of a broader package of measures to clamp down on Big Tech. On Thursday, a Senate panel is expected to vote on legislation aimed at preventing big platforms from manipulating marketplaces to promote their own products.  

To provide the agencies with sufficient resources to review the increasing number of filings, the Senate passed a bill last year increasing the filing fees for mergers and the agencies’ budgets. While this bill didn’t change the merger guidelines, the additional resources will allow the agencies to conduct more reviews and more thoroughly.  

The announcement of the merger guidelines review comes the same day that Microsoft announced its $70 billion bid for Activision Blizzard, which may be subject to antitrust scrutiny. While the new guidelines may not be ready by the time of the merger review, the deal may be in the spotlight given the political context in Washington. 

See Also: Microsoft’s $70B Bid for Video Game Maker May Test Market Definitions