The Federal Trade Commission (FTC), on February 11, ordered Alphabet (including Google), Amazon, Facebook, Microsoft and Apple “to provide information about prior acquisitions not reported to the antitrust agencies under the Hart-Scott-Rodino (HSR) Act”. These companies will have to provide information such as the terms, scope, structure, and purpose of such transactions made between January 1, 2010 and December 31, 2019. Two FTC commissioners wanted to scope expanded to Privacy and Data Security as well. More on that below.
The companies will also have to reveal information related to post-acquisition product development and pricing, including how acquired assets were integrated and how the acquired data was used. We have reached out to Google, Facebook, Apple and Microsoft for comment, and will update the story when they reply. Amazon declined to comment.
What is the HSR Act? The HSR Act requires companies to file pre-merger notifications with the Federal Trade Commission and the Antitrust Division of the Justice Department for certain acquisitions. However, companies are not required to report acquisitions less than $50 million.
FTC’s objectives: With this, the agency aims to asses whether these companies made potentially anticompetitive acquisitions of nascent or potential companies, and examine trends in acquisitions and the structure of deals. It also wants to deepen its understanding of how big tech companies report their transactions to federal antitrust agencies, and learn how small firms perform once they are acquired. FTC said that this exercise will help it in deciding whether smaller transactions should be subject to pre-merger notification requirements under the HSR Act.
- It is worth mentioning that this study is part of a follow-up from the FTC’s 2018 ‘Hearings on Competition and Consumer Protection in the 21st Century,’ held during the fall 2018 – spring 2019.
- The hearings examined whether broad-based changes in the economy, evolving business practices, new technologies, or international developments might require adjustments to competition and consumer protection law, enforcement priorities, and policy.
What the tech companies will have to do: As part of the exercise, Alphabet, Amazon, Microsoft, Facebook and Apple will have to provide information similar to that requested on the HSR notification and report form. Additionally, documents related to corporate acquisition strategies, voting and board appointment agreements, agreements to hire key personnel from other companies and post-employment agreements not to compete with the company, will also have to be submitted.
Why this matters: Acquisitions involving a large sum of money, such as Facebook buying WhatsApp and Instagram, are reported by the companies, and are thus, open to regulatory scrutiny. However, that is isn’t always the case with smaller acquisitions, which often go unreported: Apple’s CEO Tim Cook last year claimed that the company acquires a company every two to three weeks, and often doesn’t announce these deals because these are usually “small companies” and Apple is “primarily looking for talent and intellectual property”.<
FTC Commissioners wanted scope expanded to Privacy and Data Security
Following FTC’s announcement, Commissioners Christine S. Wilson and Rohit Chopra urged the agency to also explore consumer protection issues arising from the privacy and data security practices of technology companies, including social media platforms.
- The FTC should also study how content curation and targeted advertising practices impact data collection, use and sharing, and look into how the monetisation of data helps these causes, the Commissioners recommended. They also said that the agency should launch a similar examination of the healthcare and pharmaceutical industry next.
- In a series of tweets, Commissioner Chopra said that several companies get big by “swallowing and shutting down potential threats,” and often, these acquisitions are “all about big data”. He said that neither did Google invent YouTube nor did Facebook invent Instagram. The FTC review will “provide clarity on why boardrooms are shelling out billions for our personal data,” he added.
Many giant companies are convinced that their dominance is due to their genius and innovation. But the truth is that so many can get big by swallowing up or shutting down potential threats. They don't need to invent killer apps if they can stay on top through killer acquisitions.
— Rohit Chopra (@chopraftc) February 11, 2020
Big Tech is being probed for violating anti-trust laws in the US:
- In July 2019, The US’ Justice Department opened a broad investigation of “market-leading” online platforms to review if they engage in practices that reduce competition, stifle innovation or harm consumers.
- In June 2019, Justice Department was granted authority to investigate Apple for potential antitrust violations.
- In May 2019, reports came out claiming that an antitrust investigation of Google from the US Department of Justice was imminent because of the company’s search business.
- At US’ Attorney General Barr’s confirmation hearing in January 2019, he told Senators that the Justice Department should take a harder look at whether companies like Google and Amazon were abusing their market dominance.