Top antitrust officials of the Biden administration unveiled tougher guidelines against tech mergers on Wednesday, prompting deeper scrutiny of the industry despite recent court losses in their efforts to block tech bargains.
Federal Trade Commission Chairwoman Leena Khan and the Justice Department’s top antitrust official Jonathan Cantor released draft guidelines for the merger review, which for the first time focused on digital platforms and how leading companies can use their scale. To harm future rivals.
The guidelines – which generally provide a road map for whether regulators block or approve deals – reflect the Biden administration’s commitment to an aggressive antitrust agenda aimed at reducing the power of companies such as Google, Meta, Apple and Amazon.
The guidelines, which are not enforced by law, continue to lose in the courts. A ruling last week blocked the FTC from delaying the closing of Microsoft’s $69 billion acquisition of video game maker Activision Blizzard. In January, a court sided against the FTC in its lawsuit to block Vidin’s purchase of virtual reality app maker, Meta.
The blatant antitrust posture is a pillar of President Biden’s agenda to address economic inequality and encourage more competition. “Promoting competition to drive down costs and supporting small businesses and entrepreneurs is a central part of Bidennomics,” a senior administration official told reporters.
The new guidelines will be applicable to all deals across the economy. But they highlight the barriers to competition between digital platforms, including how the acquisition of a nascent rival could be aimed at eliminating future competition. Such deals, known as killer acquisitions, are prevalent in the tech industry and are at the center of an FTC antitrust lawsuit against Meta, which owns Facebook, Instagram and WhatsApp. The agency has accused Meta of buying Instagram in 2012 and WhatsApp in 2014 to prevent future competition.
The FTC and the Justice Department also said they would look into how the companies used their scale, including large numbers of users, to avoid competition. These so-called network effects have helped companies like Meta and Google maintain their dominance in social media and internet search.
The agencies also pointed to ways in which mergers involving “platform” businesses, the model used by Amazon’s online store and Apple’s App Store, could harm competition. The draft guidelines said an acquisition could harm competition by giving a platform control over a significant stream of data, echoing concerns that tech giants use their vast information to crush rivals.
“As markets and commercial realities change, it is critical that we adapt our law enforcement tools to keep pace so that we can protect competition in a way that reflects the complexities of our modern economy,” Mr. Cantor said in a statement. “Simply put, competition looks different today than it did 50 – or 15 – years ago.”
Although they lack the force of law, the guidelines could influence how judges approach challenges to mergers and acquisitions. The effort to update the guidelines has been closely watched by businesses and corporate lawyers who conduct regulatory scrutiny of megadeals.
The guidelines were last updated in 2020. In 2021, Mr. Biden ordered the Justice Department and the FTC to update them again as part of a broader effort to improve competition in the economy. The agencies will take public comment on the proposals and may make revisions before adopting final guidelines.
“These guidelines include significant updates while ensuring fidelity to the mandate given to us by Congress and the legal precedent on the books,” Ms Khan said in a statement.
While the FTC recently suffered court losses, it has forced some companies to drop some big deals, including chip maker Nvidia and aerospace giant Lockheed Martin. The Justice Department blocked publisher Penguin Random House from buying Simon & Schuster, using an unusual argument that the merger would harm authors who sold publishing rights to their books.
