April 21, 2024

Top antitrust officials in the Biden administration unveiled tougher guidelines on tech mergers and acquisitions on Wednesday, a sign of deepening scrutiny of the industry despite recent court losses in their attempts to block tech deals.

FTC Chairman Lina Khan and the Justice Department’s top antitrust official, Jonathan Kanter, released draft guidelines for merger review that, for the first time, include a focus on digital platforms and how dominant firms can use their size to harm would-be competitors.

The guidelines typically provide a road map for whether regulators block or approve deals, signaling the Biden administration’s commitment to an aggressive antitrust agenda aimed at undermining the power of companies like Google, Meta, Apple and Amazon.

The guidelines, which are not enforced by law, have suffered a losing streak in court. A ruling last week prevented the FTC from delaying the completion of Microsoft’s $69 billion acquisition of video game maker Activision Blizzard. In January, a court sided with the FTC in a lawsuit blocking Meta’s acquisition of virtual reality app maker Within.

A strong antitrust stance is the backbone of President Biden’s agenda of eliminating economic inequality and encouraging greater competition. “Promoting competition to lower costs and support small businesses and entrepreneurs is a core part of Biden’s economics,” a senior administration official told reporters.

The new guidelines will apply to all transactions across the economy. But they highlighted barriers to competition between digital platforms, including the potential for acquisitions of nascent rivals to wipe out future competition. Such deals, known as “killer acquisitions,” are common in the tech industry and are at the heart of the FTC’s antitrust lawsuit against Meta, which owns Facebook, Instagram and WhatsApp. The agency accused Meta of buying Instagram in 2012 and WhatsApp in 2014 to prevent future competition.

The FTC and Justice Department also said they would study how companies use their size, including large numbers of users, to fend off competition. These so-called network effects have helped companies like Meta and Google maintain their dominance in social media and Internet search.

The agencies also laid out ways in which mergers involving “platform” businesses — the model used by Amazon’s online store and Apple’s App Store — could harm competition. Acquisitions could harm competition by giving platforms control of vast data flows, the draft guidance said, echoing concerns that tech giants use their vast amounts of information to suppress rivals.

“As markets and business realities change, we must adapt our enforcement tools to keep pace so we can protect competition in ways that reflect the complexities of modern economies,” Kantor said in a statement. “In short, competition today looks different than it did 50 or even 15 years ago.”

While lacking the force of law, these guidelines can influence how judges view merger challenges. The update to the guidelines has been closely watched by corporate and corporate lawyers tasked with conducting regulatory scrutiny of large deals.

The guidelines were last updated in 2020. In 2021, Biden ordered the Justice Department and the Federal Trade Commission to update those guidelines again, as part of a broader effort to improve competition across the economy. The agencies will seek public comment on the proposals and may make changes before the final guidelines are adopted.

“These guidelines contain important updates while remaining true to the mandate given to us by Congress and the legal precedent set in the book,” Ms. Khan said in a statement.

While the FTC recently lost a case in court, it has forced companies including chipmaker Nvidia and aerospace giant Lockheed Martin to walk away from some big deals. The Justice Department blocked publisher Penguin Random House’s takeover of Simon & Schuster on the grounds that a merger would harm authors who sell their book publishing rights.

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