The Trump administration appears to have just declared war on technology sector mergers and acquisitions.
In an extraordinary announcement Tuesday, the Federal Trade Commission ordered five large tech companies— Alphabet (ticker: GOOGL), Amazon.com (AMZN), Apple (AAPL), Facebook (FB), and Microsoft (MSFT)—to provide data on all of their acquisitions over the last 10 years that weren’t previously reported to the FTC under the Hart-Scott-Rodino Act. That means basically all deals that had been considered too small to be subject to FTC review.
The FTC is asking for data and documents on the “terms, scope, structure, and purpose” of transactions that each company completed between Jan. 1, 2010 and Dec. 31, 2019.
The FTC said it has authorization to “conduct wide-ranging studies that do not have a specific law enforcement purpose,” and that the probe will “help the FTC deepen its understanding of large technology firms’ acquisition activity, including how these firms report their transactions to the federal antitrust agencies, and whether large tech companies are making potentially anticompetitive acquisitions of nascent or potential competitors that fall below HSR filing thresholds and therefore do not need to be reported to the antitrust agencies.”
And that’s the heart of the matter—the FTC apparently thinks the current rules on M&A don’t drill down far enough on the competitive damage they cause.
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“Digital technology companies are a big part of the economy and our daily lives,” FTC Chairman Joe Simons said in a statement. “This initiative will enable the Commission to take a closer look at acquisitions in this important sector, and also to evaluate whether the federal agencies are getting adequate notice of transactions that might harm competition. This will help us continue to keep tech markets open and competitive, for the benefit of consumers.”
The FTC is requiring the five companies “to identify acquisitions that were not reported to the FTC and the U.S. Department of Justice under the HSR Act, and to provide information similar to that requested on the HSR notification and report form.” The companies also are required to provide information and documents “on their corporate acquisition strategies, voting and board appointment agreements, agreements to hire key personnel from other companies, and post-employment covenants not to compete.”
The FTC is also asking for “information related to post-acquisition product development and pricing, including whether and how acquired assets were integrated and how acquired data has been treated.”
The commission said it would use the data “to examine trends in acquisitions and the structure of deals, including whether acquisitions not subject to HSR notification might have raised competitive concerns, and the nature and extent of other agreements that may restrict competition.” The FTC said it also wants “to learn more about how small firms perform after they are acquired by large technology firms.”
The FTC notes that under HSR it has the right to review deals above a certain size, and that the study will help the commission decide “whether additional transactions should be subject to premerger notification requirements.” And the FTC said the project will “support the FTC’s program of vigorous and effective enforcement to promote competition and protect consumers in digital markets.”
Ironically, toward the end of the announcement, the news release announcing the new study asks readers to “like the FTC on Facebook.”
Write to Eric J. Savitz at eric.savitz@barrons.com
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February 12, 2020 at 04:39AM
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FTC to Probe M&A Deals by Amazon, Facebook, and Other Tech Giants - Barron's
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