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FTC will review M&A deals by Amazon, Apple, Facebook, Google and Microsoft

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The Federal Trade Commission is looking at the details of small acquisitions made by the five largest U.S. tech companies to determine whether they resulted in diminished competition.
(Antonov Mladen / AFP/Getty Images)

U.S. technology giants face a new wave of scrutiny from antitrust officials, as the Federal Trade Commission demands information about their acquisitions of start-ups that may have eliminated emerging competitors.

The FTC issued orders to Alphabet Inc.’s Google, Apple Inc., Facebook Inc., Amazon.com Inc. and Microsoft Corp. for information on the terms and purposes of transactions they closed from the beginning of 2010 through 2019, the agency said Tuesday.

“Digital technology companies are a big part of the economy and our daily lives,” FTC Chairman Joe Simons said in a statement. “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.”

The FTC’s move, which will probably entail reviews of hundreds of deals, comes amid widespread criticism that antitrust officials have been too permissive in allowing tech giants to buy rivals, strengthening their dominance. The agency’s orders take aim not at big deals, but those that were too small to be reported to regulators but may have targeted nascent competitors.

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The study, which is focused on “research and policy,” can lead to enforcement action, including unwinding transactions the FTC finds were problematic, Simons told reporters Tuesday.

The orders also require companies to provide information and documents on their corporate acquisition strategies, voting and board appointment agreements, pacts to hire key personnel from other companies, and post-employment covenants not to compete.

The FTC is also seeking details about post-acquisition product development and pricing, including whether and how acquired assets were integrated and how acquired data has been treated.

Some of the tech companies’ shares traded lower following the news.

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U.S. merger law sets monetary thresholds that are updated annually for when deals must be reported to antitrust regulators for approval. The 2020 thresholds are deals valued at $94 million. An alternative threshold is based on company sales.

“One of the things they may want to do is understand whether some change needs to be made to the Hart-Scott-Rodino Act to capture more transactions that are potentially problematic,” said Jennifer Rie, a Bloomberg Intelligence senior analyst, referring to the law that required companies to disclose certain deals.

The FTC has authority under a measure known as Section 6(b) of the FTC Act to collect non-public information from companies. The agency then publishes a “special report” that can boost understanding of markets, shift enforcement strategies and lead to voluntary industry guidelines and best practices. The studies can also be used in antitrust investigations, though they need not have a law enforcement purpose, according to the FTC’s website.

Bilal Sayyed, who is overseeing the effort as director of FTC’s Office of Policy Planning, told reporters that the agency is aiming to “move quickly” and predicted it would look at transactions above the $94 million threshold that companies didn’t report due to exemptions.

Groups that advocate for stepped-up antitrust enforcement in tech applauded the move, saying that digital markets tend to favor a single dominant company that can spot, and scoop up, promising firms early.

“In those types of markets it’s really important to look at small mergers because a small company is really the only type of company that can exert any competitive pressure,” said Charlotte Slaiman, senior policy counsel at Public Knowledge.

The agency is studying past tech deals as it conducts an antitrust investigation of Facebook. The inquiry is among several inquiries that target large technology companies. The Justice Department is investigating Facebook as well as Google, while state attorneys general are also probing both companies.

The inclusion of Microsoft, the world’s largest software maker, in the inquiry may be met with dismay at the company, which lost a bruising antitrust battle with U.S. regulators two decades ago, but has mostly avoided the same level of criticism and scrutiny as the other tech giants in recent years.

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Here’s a look at past small acquisitions by the five tech companies:

Google

The new investigation could potentially look at dozens of small acquisitions made by Google in the last 10 years. The company often does “acqui-hires,” buyouts with the purpose of bringing on a small team of talented engineers who may not even have a viable business on their own yet. Some of these deals aren’t even publicly announced.

From about 2010 to 2014 Google made many acquisitions in the advertising technology space as it sought to build up its business in that industry. Some were relatively large, such as the $250-million buyout of Wildfire Interactive, but most were small, and therefore passed beneath the radar of regulators.

A Google representative had no immediate comment.

Apple

Apple has purchased hundreds of companies since 2010, but most of them have been small deals focusing on technologies to enable specific new device features.

For instance, as the company built up its revamped Maps app, it bought lesser-known companies such as Embark, Locationary, BroadMap, Indoor.io, MapSense and HopStop.com. To develop its latest machine learning and voice control software, it acquired start-ups such as Cue, VocalIQ, Turi, Lattice Data, TupleJump and Perceptio.

It’s also bought firms to help it develop chips, build augmented reality features, wireless charging, software testing, its magazine subscription service, and new camera features.

Apple didn’t respond to a request for comment.

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Facebook

Although many of Facebook’s most high-profile deals are well known — Instagram, WhatsApp, Oculus — the social networking giant has acquired dozens of other, smaller start-ups over the years in various industries. The purchases of Instagram and WhatsApp were approved by the FTC.

In some cases, these acquisitions were meant to help Facebook compete directly with rival social networks and consumer apps. It bought Onavo, a service for tracking a person’s mobile activity, in 2013, and used the data for years to keep tabs on competing products and identify new entrants.

After Snapchat popularized augmented-reality face filters, Facebook purchased its own face-filter app, MSQRD, to build the technology into the cameras on Facebook and Instagram.

In other cases, acquisitions gave Facebook the technology to enhance the company’s advertising features, or provide developer tools to other businesses. Sometimes Facebook simply bought companies for their engineering and product talent.

Facebook didn’t respond to requests seeking comment.

Amazon

Amazon’s small acquisitions in recent years include companies working on internet-connected smart home, networking devices and cloud-computing applications that were folded into the Amazon Web Services division. Among them are a members-only retail site called BuyVIP, cloud computing start-up E8 Storage and Eero Inc., a Wi-Fi system maker.

The company’s biggest acquistion, Whole Foods in 2017 for $13.6 billion, received regulatory approval.

Amazon declined to comment on the FTC’s orders Tuesday.

Microsoft

Although big deals such as LinkedIn and GitHub get the most attention, the vast majority of Microsoft’s acquisitions are smaller ones meant to gain promising technology or employees.

The company made at least nine such purchases in 2019, including Mover, which makes it easier to move cloud files to Microsoft’s 365 services from rivals, and data security firm BlueTalon. In 2018, Microsoft acquired Bonsai to combine it with research efforts around machine automation and PlayFab, which allows Microsoft to help video game companies run their games in Microsoft’s cloud.

The software maker didn’t return calls seeking comment.


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