FTC Demands Ten Years of Information From Big Tech On Mergers and Acquisitions

The Federal Trade Commission (FTC) has issued an order to a number of large technology companies with an eye towards determining if the current threshold for federal examination of mergers and acquisitions is too high for a number of technology-related acquisitions. However, larger acquisitions above the threshold of about $90 million are not part of this examination such as Facebook’s $22 billion purchase of WhatsApp. Agency officials were also quoted as saying that the inquiry is bigger than anti-competitive issues as there may be ulterior motives for the rash of acquisitions in this sector. Moreover, this order was issued at a time when the agency, the Department of Justice (DOJ), state attorneys general, and the House Judiciary Committee are examining antitrust and anti-competitive practices in the technology world.

Nonetheless, the agency is asking that major technology firms turn over information on mergers and acquisitions that were too small for the FTC or the DOJ to investigate potential anti-competitive effects. And, while the information gleaned from such an inquiry may not be used for an investigation that could result in legal action, the FTC may do so under the FTC Act if it so chooses. In a conference call with reporters, FTC Chair Joe Simons remarked “[i]f during this study we see that there are transactions that turn out were problematic, all of our options are on the table.”

The FTC sent letters to Alphabet, Amazon, Apple, Facebook, and Microsoft “to provide information and documents on the terms, scope, structure, and purpose of transactions that each company consummated between Jan. 1, 2010 and Dec. 31, 2019” according to the agency’s press release.

In an FAQ, the FTC stated:

We plan to use the responses to our Special Orders to better understand acquisitions by certain technology companies. In particular, the study will help the FTC assess whether U.S. antitrust authorities are receiving adequate notice of transactions that might limit or eliminate competition. The Hart-Scott-Rodino (HSR) Antitrust Improvements Act requires premerger filings when the parties and the transaction meet certain size thresholds. The FTC will study whether large tech companies are making potentially anticompetitive acquisitions—including acquisitions of nascent or potential competitors—that fall below HSR filing thresholds.

The FTC explained that these orders are issued “under Section 6(b) of the FTC Act, which authorizes the Commission to conduct wide-ranging studies that do not have a specific law enforcement purpose.” The agency claimed that “[t]he orders 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.”

The FTC added

  • The Special Orders require each recipient 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 orders also require companies 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. Last, the orders ask 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 plans to use the information obtained in this study 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 Commission also seeks to learn more about how small firms perform after they are acquired by large technology firms. These and related issues were discussed during several sessions of the FTC’s 2018 Hearings on Competition and Consumer Protection in the 21st Century, and this study is part of the follow-up from those Hearings.

Simons stated that “[t]his 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…[and] will help us continue to keep tech markets open and competitive, for the benefit of consumers.”

In a tweet, Commissioner Rohit Chopra suggested the FTC may be interested in more than just anti-competitive mergers:

Companies across the economy are in an arms race to soak up every source of data and monetize it. Many of these mergers fly below the radar. The FTC orders will provide clarity on why boardrooms are shelling out billions for our personal data.

As noted, the FTC and DOJ are in the midst of investigations into big technology companies. However, the agencies had supposedly divided the investigation with the FTC looking at Facebook and Amazon and the DOJ investigating Google and Apple. However, there have been reports that the DOJ and the FTC have been fighting over who is investigating whom with the FTC and DOJ confirming a dispute in testimony before the Senate Judiciary Committee last fall.

The House Judiciary Committee’s Antitrust, Commercial, and Administrative Law Subcommittee held its fifth hearing on competition in digital markets in January and is expected to at least issue a report and possibly even legislative language to reform the antitrust and anti-competitive statutory and regulatory landscape.

Additionally, New York Attorney General Letitia James is leading an antitrust investigation of Facebook that almost all state attorneys general are part of while Texas Attorney General Ken Paxton is leading almost all state attorneys general’s investigation of Google for possible antitrust violations.

Finally, Senators Bernie Sanders (I-VT) and Elizabeth Warren (D-MA) have called for the breakup of large technology companies as part of their campaigns to secure the Democratic nomination for president.

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