FTC Study Finds Corruption with Big Tech Acquisitions
Last week, The Federal Trade Commission released a report revealing that Apple, Facebook, Amazon, Google and Microsoft made 616 acquisitions between January 2010 and December 2019. Unfortunately, these companies did not report many of the transactions.
Big deals like Amazon’s purchase of MGM receive much press and scrutiny, but hundreds of others get no attention because of the current antitrust laws.
The tech companies’ acquisitions can go under the radar because of the 1976 Hart-Scott-Rodino Antitrust Improvements Act. This U.S. law only requires deals that are over $368 million to be reported. In addition, sales under that threshold only need to be registered if the buyer or seller’s assets are worth more than $92 million.
Companies can use loopholes to lower the value of the company that they are buying. For example, last year, Facebook acquired Giphy for about $400 million. The image library paid a dividend to their investors, which lowered its value, so Facebook didn’t have to notify the deal to antitrust officials. This practice is entirely legal under the current law.
Unfortunately, this issue worsens because of the lack of resources to investigate the reported transactions. For example, between October 2018 and September 2019, a little more than 2,000 transactions were reported, but the FTC and the Justice Department could only review 10 percent of these.
This year, there has been an increase in mergers and purchases. According to federal data, it’s about 40 percent more than pre-pandemic times. These transactions are coming at a time when the White House is trying to crack down on Big Tech.
Separately, the FTC is investigating Facebook’s acquisitions of Instagram and WhatsApp. Even though the deals have been completed, the commission has warned that it may look at other transactions and nullify contracts if they see them as illegal.
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