Bracing for a storm, Big Tech faces an uneasy future as the U.S. antitrust enforcement agenda gains momentum. President Joe Biden’s administration continues to scrutinize mergers and acquisitions, underlining the growing skepticism towards large-scale deals, particularly within the technology sector.
The hard stance on Big Tech’s mergers and acquisitions
Over the years, corporate amalgamations have become a formidable tool in the arsenals of tech giants. Yet, under Biden’s administration, regulatory forces have exhibited an uncompromising stance, challenging an unparalleled number of mergers.
Entities like the U.S. Justice Department and Federal Trade Commission (FTC) have emerged as prominent actors in this developing narrative, establishing the nation’s commitment to control consolidation within the industry.
Admittedly, their endeavors in court haven’t always ended in victory. The administration recently faced defeat in attempts to obstruct Microsoft Corp’s $69 billion acquisition of video game titan Activision Blizzard Inc.
Similar failures occurred in the FTC’s endeavor to block Meta’s purchase of a virtual reality content creator and in battles against mergers in the sugar and insurance industries.
Despite mixed results, regulatory forces remain undeterred. The Justice Department and the FTC have recently unveiled a 51-page guidelines document detailing their objections to certain types of mergers, without naming specific deals.
The document offers an insightful glimpse into the kind of mergers that would draw their scrutiny. These include acquisitions where the buyer could potentially favor its own products over competitors’, as seen in Amazon.com’s 2018 purchase of video doorbell maker Ring.
Looking ahead, several impending legal challenges loom on the horizon, such as the Justice Department’s resistance to JetBlue Airways Corp’s procurement of Spirit Airlines Inc.
As the legal battlefield prepares for the upcoming skirmishes, industry advisors have noted that corporations have already anticipated a tougher antitrust climate under Biden’s administration.
Courts and case laws: The ultimate arbiters
Despite the intensified antitrust regime, Kenneth Schwartz, an antitrust partner at Skadden, Arps, Slate, Meagher & Flom LLP, states that courts remain the ultimate adjudicators.
He notes that court decisions are guided by precedent and case law, indicating that the guidelines alone may not dictate the fate of future mergers and acquisitions.
Industry experts have differing views on the guidelines’ potential impact. Some believe that the guidelines may not substantially disrupt deal-making activities, while others fear a decrease in consolidation due to increased scrutiny.
Even so, Fiona Schaeffer, an antitrust partner with law firm Milbank LLP, asserts that the guidelines may not necessarily be accepted by judges, as they might not reflect recent court decisions on disputed mergers.
Beyond corporate consolidation, the new guidelines underscore the administration’s focus on labor issues.
They highlight concerns that mergers between employers could substantially lessen competition for workers, leading to a potential downturn in wages or a slowdown in wage growth, and even a worsening of benefits or working conditions.
As the regulatory landscape evolves, Big Tech remains on tenterhooks. The newly published guidelines are a symbol of the changing times, promising to shape the industry’s future direction.
With the guidelines open for comment for the next 60 days before finalization, only time will tell the degree to which they will influence the tech giants’ consolidation endeavors.
