The Federal Trade Commission requires tech giants to disclose acquisitions that have not been reported to the antitrust authorities.
The Federal Trade Commission (FTC) would like to examine the extent to which companies such as Apple, Microsoft, Amazon, Facebook or Google could have acted anti-competitive in past acquisitions of companies. For this purpose, the authority requests comprehensive documents that should deepen the understanding of takeovers, which under the Hart-Scott-Rodino (HSR) Act Neither the FTC nor the Department of Justice have been reported. This exception applied to acquisitions up to $ 50 million until 2020.
Have tech giants unfairly strengthened their status through takeovers?
The FTC wants to clarify this question by providing insight into details of previous acquisitions. Alphabet Inc., Amazon.com, Inc., Apple Inc., Facebook, Inc., and Microsoft Corp. should disclose any acquisitions in the period from January 1, 2010 to December 31, 2019. According to the FTC Act the authority can order an investigation and the release of documents for studies, even if no immediate enforcement is expected.
Above all, the FTC wants to understand whether the major players on the digital market are behaving unfairly in that they buy up emerging or potential competitors for their own business areas at an early stage. Unless the cost of such acquisitions exceeds a certain amount ($ 94 million since 2020), such acquisitions do not need to be reported to the antitrust authorities, such as the FTC. Joe Simmons, Chairman of the FTC, said of the current investigation:
Digital technology companies are a big part of the economy and our daily lives. 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.
Trends in acquisitions are to be identified
The FTC requires the named companies to inspect the specific takeover protocols, but also documents on the strategy regarding the takeovers of a company in general. In addition, information is to be shared on how the tech giants vote on the supervisory board or hire new members and to what extent staff is recruited from competing companies. Contracts that preclude employment in a competitive environment after employment should also be disclosed. In addition, the FTC requests information on how products and services from acquired companies have been integrated and whether the price structure for them has changed.
With all this information, the agency wants to define trends in acquisitions by large tech companies in the digital market and examine the deal structure to determine whether it could have anti-competitive backgrounds. Ultimately, the Federal Trade Commission is also interested in the performance of smaller companies after they have been taken over by large corporations.
For Alphabet, Facebook and Co., this means no punishments immediately – provided they comply with the FTC's demands. However, they could fight them in court if there is an unwillingness to share specific data on company takeovers. Because if the FTC draws the conclusion from the planned study that the tech giants are actually doing harm to the competition through smaller takeovers of competing companies, this could lead to long-term consequences and more regulation. Politicians and data protection associations have been demanding these for some time now. The evaluation of the information should therefore be followed with interest by the industry; if it comes off smoothly.