The Biden administration’s top antitrust officials unveiled tougher guidelines against tech mergers on Wednesday, indicating they are watching the industry with increasing scrutiny despite recent court losses in their efforts to block tech deals from being made.
Lina Khan, the chair of the Federal Trade Commission, and Jonathan Kanter, the Justice Department’s top antitrust official, have released draft guidelines for merger reviews that for the first time pay attention to digital platforms and how dominant companies can use their scale to harm future rivals.
The guidelines — which generally provide a roadmap for blocking or approving deals by regulators — show the Biden administration’s commitment to an aggressive antitrust agenda aimed at curtailing the power of companies like Google, Meta, Apple and Amazon.
The guidelines, which are not enforced by law, follow a losing streak in the courts. A ruling last week prevented the FTC from delaying the completion of Microsoft’s $69 billion acquisition of video game maker Activision Blizzard. In January, a court sided with the FTC in its lawsuit to stop Meta’s purchase of Within, a maker of virtual reality apps.
The strong antitrust stance is a pillar of President Biden’s agenda to eradicate economic inequality and encourage more competition. “Promoting competition to reduce costs and support small businesses and entrepreneurs is a central part of Bidenomics,” a senior government official told reporters.
The new guidelines would apply to all deals across the economy. But they point to obstacles to competition between digital platforms, including how an acquisition of a budding rival may be designed to kill future competition. Such deals, known as cutthroat takeovers, are common in the tech industry and are at the heart of an FTC antitrust case against Meta, which owns Facebook, Instagram and WhatsApp. The agency has accused Meta of buying Instagram in 2012 and WhatsApp in 2014 to avoid future competition.
The FTC and Justice Department also said they would look at how companies used their scale, including their large number of users, to fend off competition. These so-called network effects have helped companies like Meta and Google maintain their dominance in social media and web search.
The agencies also laid out ways in which mergers involving “platform” companies, the model used by Amazon’s online store and Apple’s App Store, could harm competition. An acquisition could hurt competition by giving a platform control over a significant stream of data, the draft guidelines said, echoing concerns that tech giants are using their vast trove of information to crush rivals.
“As markets and commercial realities change, it is vital that we adapt our law enforcement tools to keep pace so that we can protect competition in a way that reflects the intricacies of our modern economy,” Mr Kanter said in a statement. “Simply put, the competition looks different today than it did 50 – or even 15 – years ago.”
Although they don’t have the force of law, the guidelines could affect how judges view M&A challenges. Efforts to update the guidelines have been closely watched by companies and corporate lawyers overseeing mega deals by regulatory authorities.
The guidelines were last updated in 2020. In 2021, Mr. Biden directed the Justice Department and the FTC to update them again as part of a broader effort to improve competition across the economy. The agencies will provide public comment on the proposals and may make changes before the final guidelines are adopted.
“These guidelines provide essential 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 has suffered recent court losses, it has forced some companies, including chipmaker Nvidia and aerospace giant Lockheed Martin, to forego some major deals. The Justice Department blocked publisher Penguin Random House from buying Simon & Schuster, citing an unusual argument that the merger would hurt authors who sold the publishing rights to their books.
