New FTC and DOJ antitrust guidelines could prevent tech merger

Washington’s main antitrust regulators—the Federal Trade Commission and the Justice Department—created joint declaration on Tuesday that they intend to look at major tech mergers through a different lens in the future.

The two agencies held a joint news conference on Monday morning to announce the start of a joint process to consider horizontal mergers or to write new guidelines between companies competing in the same market. (Agencies use a different set of guidelines for considering vertical mergers of companies within the same supply chain).

Such guidelines may be used, for example, by the FTC to decide whether to file it. current case Against Facebook, which seeks to unravel the social networking giant’s previous acquisitions of WhatsApp and Instagram.

FTC President Leena Khan said, “This investigation, initiated by the FTC and the DOJ, is designed to ensure that our merger guidelines accurately reflect modern market realities and that we need to enforce the law against illegal deals by force.” Prepare to implement.” Khan, who was appointed FTC chairman by President Biden last year, has been a thought leader and a champion for more aggressive regulation of Big Tech. They have championed a more holistic way of measuring the true costs and effects of technological mergers, including the effects on competition, labor and supply chains.

Without giving details, Khan’s FTC has suggested that the new guidelines could include tools to evaluate acquisitions by tech companies—particularly ones such as Meta, Google and Amazon that don’t charge consumers directly for services. , rather earn money by using personal data. Collect on your platforms.

Mines’ chief economist John Quova said on Monday that many issues related to digital markets, such as data aggregation, were not “fully addressed” in the agency’s current horizontal merger guidelines, which were issued in 2010.

“Previous guidelines, issued a decade ago, didn’t pay any specific attention to the technology,” says Joel Mitnick, partner at law firm Cadwallader’s Antitrust and Global Litigation Group. But tech is now a huge part of the economy, and tech company mergers are bigger and more consequential.

On services like Google’s Gmail and Meta’s Facebook, the real cost is personal data.

Mitnick points out that the guidelines are meant to reflect the experience of regulators dealing with specific industries. And the FTC and DOJ have gained a lot of experience with the tech industry over the past five years, he says. “Some of the learnings in tech deals have resulted in a specific analysis regarding network effects, free products, and the acquisition of massive amounts of data.”

Mitnick says the FTC is currently trying to determine the role that consumer privacy will play in its merger guidelines. On services like Google’s Gmail and Meta’s Facebook, the real cost is personal data. In fact, users pay with their privacy. And regulators do not yet have a consensus on how to factor the cost of privacy into merger analysis.

Ultimately the guidelines will settle that debate. The FTC and DOJ stress that they want to talk to a number of consumers and industry stakeholders before finalizing the guidelines.

sympathetic ear

When the FTC or DOJ decides to stop the merger they must file a lawsuit and prove their case in court. In recent history, it has not been easy. Since the 1970s US courts have been hesitant to intervene in mergers that do not lead to a clear price increase for consumers.

But the new guidelines could also change the way the courts view tech mergers, Mitnick tells me.

“These guidelines are changed at most once a decade, and they claim to be another decade’s worth of economic learning,” Mitnick says. “They have proven highly influential on the courts in the past.”

So FTC and DOJ attorneys may be more confident in filing a lawsuit to block the merger if they have a more sympathetic ear in court.

Just the notion of this change could cool the air around future tech mergers. As the risk of government interference increases, so does the risk that the suing company may lose all of its time and money already invested in courtship, including due diligence, searches, legal fees. And potential breakup charges are involved. Companies may decide that the risk of failure outweighs the benefits of success.

The FTC and DOJ press conferences came within hours of Microsoft announcing its intention to acquire gaming company Activision Blizzard for about $69 billion.