It's old news that regulatory agencies are investigating big tech firms like Google, Amazon, Facebook, and Apple looking for antitrust violations. Today, the Federal Trade Commission (FTC) issued Special 6(b) Orders to five tech companies including Google parent Alphabet, Apple, Facebook, Amazon, and Microsoft. The five are being asked to provide the FTC with information about acquisitions it closed between Jan. 1, 2010 and Dec. 31, 2019. These deals did not have to be reported to U.S. antitrust agencies under the Hart-Scott-Rodino (HSR) Act.
Filing under the Hart-Scott-Rodino is not necessary for deals valued at approximately $90 million or less. Transactions of $200 million or more require that the FTC or the Justice Department receive a pre-merger notification. At that point, a waiting period must be completed before a deal closes. Usually, that period of time is 30 days and it allows one of the regulatory agencies to determine whether it will file a suit to block a deal based on antitrust regulations. If the 30 days expire with no word from the agency, the deal is free to close.
The FTC wants to see whether smaller acquisitions made by Big Tech are anticompetitive
Section 6(b) of the FTC Act allows the commission to conduct investigations (or "studies" according to the FTC website) even if there is no specific law-enforcement purpose for this action to take place. The studies allow the FTC to "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."
In other words, the section 6(b) investigations allow the FTC to examine small deals that normally would escape the scrutiny of the government's antitrust watchdogs because of their sizes. The information that the FTC will request from the five tech firms is similar to the data that it would have turned over in a Hart-Scott-Rodino filing. But some of this information is rather broad. For example, section 6(b) filings require that a company reveal its acquisition strategies, any agreements to hire personnel from other firms and any non-compete clauses.
The Special Orders request seeks information about deals that closed over the last 10- years. A panel in the U.K. determined that the five named tech firms have made over 400 acquisitions during the last decade. Senator Richard Blumenthal (D., Conn.) said, "It has been clear for a decade that Big Tech is stifling innovation through its catch-and-kill tactics and unfettered market dominance. Every time that Google, Amazon, Apple, and Facebook acquire the latest cutting-edge artificial intelligence startup, innovative wearable device or emerging social network, they irreversibly squash another generation of novel competitors that could benefit consumers and bolster our nation’s technological advancement."
If you think that all of this data really doesn't belong in the hands of the government, the FTC is also demanding information related to products that were developed following a merger and the strategies involved in post-merger pricing of products. The filing also requires a company to reveal how it integrated acquired assets and data into its operations. The FTC wants to examine how small companies perform after they are acquired by larger tech firms.
Explaining why all of this data is needed, FTC Chairman Joe Simons said, "Digital technology companies are a big part of the economy and our daily lives. 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 commission voted 5-0 in favor of issuing the Special Orders which it said will give it insight into whether smaller-sized mergers should be subject to Hart-Scott-Rodino filings. The FTC also says that issuing Special 6(b) Orders will help "...contribute broadly to the FTC’s understanding of technology markets, and thereby support the FTC’s program of vigorous and effective enforcement to promote competition and protect consumers in digital markets."
The only company among the five that made a statement about the FTC's request was Microsoft. The software giant simply stated that "We look forward to working with the FTC to answer their questions."