Will the FTC redefine anticompetitive behavior after its big tech acquisition inquiry?

Discussion
YouTube cafe at the Googleplex campus - Photo: Google
Feb 12, 2020
George Anderson

Big tech is on notice. Yesterday, the Federal Trade Commission (FTC) ordered five large technology companies — Alphabet, Amazon, Apple, Facebook and Microsoft — to provide details on past acquisitions of small firms that were not previously provided to the government because the deals were too small to be covered under the Hart-Scott-Rodino Act.

The government is looking to see if the tech giants have made “potentially anticompetitive acquisitions of nascent or potential competitors.” The FTC has said that its objective is not to find specific violations, even though officials acknowledge that it could happen. More so, the FTC wants to determine if it needs to make rule changes going forward.

In addition to identifying acquisitions not previously reported to the government, the FTC is asking the tech companies to provide information and documents related to their individual corporate acquisition strategies, voting and board member agreements, agreements on key personnel hired from other companies and post-employment agreements.

Specifically related to acquisitions, the FTC wants the tech giants to disclose what happened to smaller firms after they were acquired. The agency has asked for details on product development, pricing, how acquired assets were used and how data obtained through acquisitions was treated.

“Digital technology companies are a big part of the economy and our daily lives,” said Joe Simons, chairman of the FTC, 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. This will help us continue to keep tech markets open and competitive, for the benefit of consumers.

DISCUSSION QUESTIONS: Do you think anticompetitive behavior in the technology sector is having negative effects on retailers and consumer brands? Is current governmental oversight and regulation capable of policing anticompetitive behavior in the technology sector?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Current oversight does an OK job of policing anti-competitive behavior – the problem is that technology is advancing faster than governmental processes designed to police it."
"The government has this upside-down. The bigger problem is by far the M&A of large companies. Not big companies buying smaller companies."
"While big tech sucks the air out of true innovation, under such governmental oversight where does the risk/reward for small tech companies go?"

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19 Comments on "Will the FTC redefine anticompetitive behavior after its big tech acquisition inquiry?"


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Art Suriano
Guest

It’s hard to say what negative impact, if any, retailers have experienced from anticompetitive behavior in the technology sector. The more significant issue is the government involvement and their ability to police these companies and all that takes place. Intentions are generally good but unfortunately, too often things do not work out as one may have hoped. I look back to the 1980s when the Carter administration broke up the phone companies claiming it was a monopoly. Is it better today? We have AT&T, Verizon, Sprint, and T-Mobile. That’s about it, and the first two listed are enormous, both guilty of buying up smaller companies. Whether the government can even get the information they will be looking for is questionable and, unfortunately, when there is this much capital involved, often the people behind the scenes who should be investigating are easily bought off. So we’ll have to see what happens. But I remain very skeptical.

Neil Saunders
BrainTrust

No, I do not think the impact is negative on retail. Most challenged retailers and consumer brands are in that position because of their own shortcomings, not because of the ascendancy of Amazon or any other technology firm. Sure there may be issues around privacy, data use, and security among the technology players but blaming them for failed retailers’ inability to get the basics of retail right isn’t credible.

Bethany Allee
BrainTrust

Current oversight does an OK job of policing anti-competitive behavior – the problem is that technology is advancing faster than governmental processes and procedures designed to police technology. I also believe technical strategy can be extremely difficult to understand, unless you are entrenched in the technology and the business.

I’m curious how far back this inquiry will go, because if they’ve really decided to recognize the issue, they need to go back to the mid 1990s. That is when some of the most impactful long-term acquisitions were made.

Zel Bianco
BrainTrust

When even the largest tech firms are finding it almost impossible to compete with the giants at the top of the tech world, something needs to be done. The question becomes, what is there to do in terms of putting some fairness back into this huge imbalance?

Cathy Hotka
BrainTrust

If anything, the FTC has been asleep most of the past few years. Beyond that, it’s hard to imagine that the current administration would complete an action against Big Tech when it knows that horse-trading for favors is now apparently OK. I wouldn’t read too much into this very preliminary inquiry.

Ryan Mathews
BrainTrust

Cathy, while I agree it’s premature to start the deep analysis, and (as my post shows) I totally agree the FTC has been asleep, I think I disagree a bit with your thoughts on the current administration. The President hates Bezos and we know what happens to people/companies he hates.

Cynthia Holcomb
BrainTrust

So many opposing considerations. Startups abound in hopes of an exit. Big tech companies acquire smaller companies for competitive advantage. The government oversight described could in practice slow down big tech acquisitions of small tech. While big tech sucks the air out of true innovation, under such governmental oversight where does the risk/reward for small tech companies go? What motivation is there to innovate? Protecting retailers and consumers from the anti-competitive behavior of big tech is important. As is common in the case of government oversight of rules and regulations, big tech lawyers up and small tech companies are never founded under high risk and low reward. The FTC needs to be careful, the goal of controlling big tech could kill innovation in the tech sector. This is the law of intentional, unintended consequences.

Harley Feldman
BrainTrust

Usually the main results of anticompetitive behavior are limited purchase options and higher prices. If retailers are feeling any effects of anticompetitive behavior, it will be in these two areas. Having said that, these issues will likely affect all retailers at the same time.

The government review will provide data about the behavior of the technology companies. Whether the government will learn enough information to determine anticompetitive behavior from the data provided or if it will be able to propose new rules that might change behavior remains to be seen.

Paula Rosenblum
BrainTrust

I don’t think the FTC has a consistent policy when it comes to “anticompetitive behavior” at all. The logic around who can merge and who cannot is incredibly inconsistent.

Does this have an impact on retailers, as far as the tech sector is concerned? Well, I can say that prices have definitely gone up — but as we’ve seen over and over again, after the quiet period is over entrepreneurs tend to go out and start a new, better version of the technology they just sold, so that’s the extent of barriers to entry: the quiet period.

Camille P. Schuster, PhD.
BrainTrust

These large tech companies have enough money to search out new research, technologies, or services and acquire the companies creating them. Acquiring small innovative companies is a strategy that large companies have used for a long time as a way to position their businesses to be more competitive. Retailers may not know about these new technologies, products or services so it is difficult to know how they are hurt. Some consumer brands investigate these new technologies, tools, or services to see how they might use them. However, identifying and/or acquiring the new directions is only the first step. The second step is using them in a way that creates products or services consumers want to use. Yes, the process provides an advantage to companies that have a lot of money and good search teams. However success ultimately depends upon creating products and services that consumers want to purchase. That takes money and insight.

Ryan Mathews
BrainTrust
Sadly, antitrust enforcement has been more or less a regulatory joke for about the last 30 years. I suspect this has less to do with alleged “anticompetitive” behavior in the tech sector and more to do with the fact that Jeff Bezos owns the Washington Post. One person’s anticompetitive behavior, after all, is another’s shortcut to controlling R&D costs. As to the first question, IF there is actual anticompetitive behavior it takes the form of buying innovation before it gets too competitive. In some cases that’s bad because there is the potential to keep the best ideas out of the market, and in others it’s good because it allows those same innovations to scale and get to market earlier than they otherwise would. So the right answer is that it depends and every case has to be examined on an individual basis in terms of impact. As to the second question, no, the current oversight mechanisms aren’t sufficient to the challenge because bureaucrats aren’t technologists and so they aren’t in a position to fully evaluate… Read more »
Gene Detroyer
BrainTrust

Your comments deserve two or three thumbs up.

Doug Garnett
BrainTrust

Anticompetitive behavior defines big tech. And that was predicted by Brian Arthur with his discussions of lock in and increasing returns — a market action which has been long known but ignored by economists because it didn’t neatly fit their theories.

It’s not clear that government oversight can police this. At a minimum, it’s a classic situation where regulation always has to lag behind developments — otherwise the market is stifled. Unfortunately, the impact of lock in can be devastating to the market.

What about retailers? Retail’s troubles are primarily elsewhere — but Amazon’s appearance of substantive competition comes because it HAS locked in the vast majority of online sales. So yes, Amazon’s online dominance (without profit on those sales) is doing significant damage to retailers.

Gal Rimon
Guest

As the U.S. presidential campaign season heats up, any query about governmental oversight may have a tinge of political motivation. That said, is the issue about policing anticompetitive behavior or doing things at retail that serve to protect against (further) inroads by the e-commerce monoliths? Be it in the physical or digital domains, retailers need to find ways to create exceptional customer experiences. And that needs to start with the creation of an exceptional employee experience. The components of which are engaging, motivating, training, and managing – in real-time – those employees. Without their focused, energetic performance, government watchdogs won’t matter.

Shep Hyken
BrainTrust

The first thing that crossed my mind is that this is a roadblock to an American Dream! That is, starting a company that’s good enough to be bought – either by a company wanting to expand in that area or a competitor looking to grow.

Gene Detroyer
BrainTrust
Gene Detroyer
BrainTrust

The government has this upside-down. The bigger problem is by far the M&A of large companies. Not big companies buying smaller companies. The FTC has winked at anticompetitive M&A since the ’80s. For example, it looks like the T-Mobile/Sprint merger will happen, yet the U.S. has the highest prices for mobile phone service in the world. And anticompetitive behavior isn’t just about prices. It hurts labor, wages, suppliers, customers, et. al.

On the other side, many, many, many small entrepreneurs start their companies with their exit targeted to sell the company to large companies. Innovation largely comes from these small companies. The resources to expend, particularly in the case of tech, are with the larger companies. Would Android have been developed to the extent it has if Google would not have bought it?

Maybe this is just a headline to make us thing the FTC actually has an anticompetitive philosophy when it is actually the opposite.

James Tenser
BrainTrust
Acquisition of tech startups by giants is far less of a threat to consumers than the mergers of giants with giants. (Gene is spot-on in his observations.) The FTC’s present focus smells fishy to me — perhaps a red-herring to distract the population from the manipulations of telecom, agribusiness, defense and big pharma? I favor keeping taut reins on big digital too — but the definition of “anti-competitive” needs to be modernized in this context. Does the accrual of vast amounts of personal consumer data result in widespread consumer harm and unfair competitive advantage? Do consumers have sufficient choice when it comes to shopping for internet access — does that constitute a monopoly? When do technical standards (like operating systems) cross the line and become the equivalent of a cartel? I seriously doubt there is sufficient will or ability in Congress to re-examine the role and function of the FTC at present. The Sherman Antitrust Act was enacted in 1890; the Clayton Act in 1914. Circumstances have evolved in the last century but our laws… Read more »
Craig Sundstrom
Guest

I’m not sure Amazon belongs in the same category as Alphabet or Facebook. Sure, it uses “technology,” but not much differently than any other company that sells things online (I’m referring, of course, to the retail component, not the “cloud” services). And despite the name being (for many people) synonymous with e-tailing, it hardly dominates it in the way that Google dominates online search.

wpDiscuz
Braintrust
"Current oversight does an OK job of policing anti-competitive behavior – the problem is that technology is advancing faster than governmental processes designed to police it."
"The government has this upside-down. The bigger problem is by far the M&A of large companies. Not big companies buying smaller companies."
"While big tech sucks the air out of true innovation, under such governmental oversight where does the risk/reward for small tech companies go?"

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