FTC Looks Into Acquisition Strategies of Big Tech Companies

The Federal Trade Commission is focused on acquisitions made by Big Tech companies, ordering Alphabet, Amazon, Apple and Microsoft to turn over information on such past deals. Specifically, the FTC wants to know about the smaller deals — many less than $100 million — that the companies were not required to report to regulators, in hopes of learning more about potential antitrust abuses. FTC chair Joseph Simons noted that if they find “problematic transactions,” they can conceivably “initiate enforcement action.”

The New York Times reports Simons added that, “the orders for information were separate from the FTC’s continuing antitrust investigations into Big Tech companies but could inform the inquiries.” It also notes that the targeted purchases are “a tech industry practice known as ‘killer acquisitions,’ which smaller rivals have said was used to choke off competition.”

Stanford Law School professor A. Douglas Melamed, a former Justice Department antitrust official, said that, “the concern is that there were hundreds of acquisitions by big companies like Facebook and Google that were intended to nip in the bud the firms that might have ended up being important competitors and innovators that could have changed the paradigm.”

Underlining the rationale, in a tweet FTC commissioner Rohit Chopra pointed out that, “Google didn’t invent YouTube. Facebook didn’t invent Instagram. And the list goes on and on.”

The FTC also plans to look into “agreements to hire key personnel from other companies …  as a way of bringing in key talent — a practice known as “acqui-hiring.” The request for documents comes on the heels of testimony by Sonos and PopSockets executives who “told members of the House committee that tech behemoths like Google and Amazon had harmed their businesses.”

The FTC also asked about “whether certain purchases were a ‘data acquisition’ … [in which] venture capitalists and angel investors had stakes in the smaller companies.” The FTC’s requests will likely “generate a voluminous quantity of information.”

American Antitrust Institute president Diana Moss stated that, “other than the massive trusts of the late 1900s, I don’t think antitrust enforcers have had to deal with the kind of strategic motivation for M&A that the tech platforms appear to have.” Although a Microsoft spokesperson said the company looks forward to answering the FTC’s questions, NYT notes that, “the companies could file motions to quash the FTC’s requests.”