The United States is coming up with stricter guidelines for larger companies looking to make acquisitions. The new guidelines that have been presented seem to be aimed primarily at big tech, or Amazon, Facebook (Meta), Google (Alphabet) and Microsoft. This should give the FTC and the U.S. Department of Justice more power to block acquisitions.
For the first time, the new guidelines include mentions of digital platforms and the impact of data. Clearly, antitrust is a lot more important now and will be a bigger issue when getting approval for future acquisitions. These published guidelines give organizations an indication of the likelihood that an acquisition will be approved. In which big tech can expect quite a few additional headwinds.
The current guidelines date from 2020 and are not strong enough to stand up in court. Recently, the FTC lost several lawsuits surrounding acquisitions it sought to block. For example, the FTC wanted to investigate further and possibly block Microsoft’s acquisition of Activision Blizzard. Microsoft went to court to demand approval and was successfull, the FTC lost. The FTC also lost a lawsuit against Meta surrounding the acquisition of Within, a developer of virtual reality apps.
Biden’s goal is more fair competition
By revamping the guidelines and setting more demanding ones, anti-competitive acquisitions should become more difficult. The FTC and the Department of Justice will have more power to stop acquisitions. Whether the guidelines are strict enough for the courts must be seen in future court cases.
The ultimate goal of these guidelines is more fair competition. Big companies still use acquisitions to kill off competition. Biden wants more competition so that costs go down and there is more support for smaller companies and entrepreneurs.
Strong focus on tech companies
Although the new guidelines apply to all industries, they seem primarily designed to target the tech industry. For example, there are stricter rules for taking over a competing digital platform, as this may be to counter possible (future) competition. In the US, they call these “killer acquisitions.” This issue was at the center of the antitrust lawsuit against Meta surrounding its acquisitions of Instagram and WhatsApp. The FTC argued that Facebook (Meta) made these acquisitions to counter future competition.
In future acquisitions, how companies use their scale, such as their user database, to counter competition will also be investigated. These network effects have helped companies like Alphabet and Meta to stay big in search and social media.
Furthermore, stricter rules are coming for digital platforms. Through acquisitions, platforms are often enriched with data sets to strengthen their competitive position. The Apple App Store, as well as Amazon’s online store, are cited as examples.
The new guidelines will not yet have an effect for acquisitions already in progress. On new acquisitions, they will be enforced.