The Ones That Got Away at the FTC
Fishermen often tell tales about “the one that got away.” In these stories, a fisherman hooks an enormous fish that, after an extended struggle, ultimately manages to escape the hook, leaving the fisherman with nothing but a good story.
We are reminded of this thanks to a recent inquiry initiated by the Federal Trade Commission (FTC). Last month, the FTC, by a unanimous vote, initiated an inquiry and study into acquisitions by Apple, Amazon, Facebook, Google/Alphabet, and Microsoft over the past decade.
On the day the inquiry was announced, FTC Chairman Joseph Simons told the Associated Press that the inquiry grants the FTC the “opportunity and…ability to go back and challenge” transactions it deems “problematic,” all but confirming that the FTC might seek to actually unwind past acquisitions it now deems anticompetitive. It is as if, like many a fisherman, the FTC wants to go back and catch the elusive fish that got away.
The FTC investigation appears to be rooted in three related, but different, concerns:
(1) Has one or more of these companies been engaged in anticompetitive conduct?
(2) If so, is that conduct related to prior acquisitions?
(3) Was the merger review process used by the Department of Justice and the FTC over the past decade sufficient to detect and block anticompetitive acquisitions?
Yet the FTC inquiry itself focuses on just one—the third—of these questions.
By itself, the answer to the third question is of little interest if the answer to either of the first two is “no.” Indeed, it seems difficult to conceive how the FTC would meaningfully assess its prior merger review process except in terms of whether anticompetitive conduct resulted. Thus, if it were the case that, independent of their acquisition strategies, none of the companies had actually engaged in anticompetitive conduct, the FTC inquiry into acquisition practices would have no obvious meaning. Instead, it would be evidence that current federal antitrust policy and practices are working well and are not in need of change.
Perhaps the FTC has already determined that the answer to the first two questions is “yes.” But if that were the case, the FTC would, more reasonably, have opened separate investigations into each company, instead of combining them together.
The subjects of this inquiry are five of the largest companies in America. They range in age from 13 to 44 years old—in human years, adolescence through early adulthood. Many companies in America are much older than these five, but few others have similarly storied success. They are large not just by American standards, but also global ones.
Each of these companies has a different history and has grown substantially over the past decade. None have grown primarily by acquisitions. For example, Microsoft began its life selling desktop operating systems and office productivity software; today, it is a player in the cloud storage and PC consumer hardware businesses. Apple, meanwhile, has grown to sell everything from personal computers, to smartphones and tablets, to wireless earbuds and fitness watches.
Each of these companies has at various times been subject to both public and governmental concerns about potentially anticompetitive conduct. Crucially, though, most of these concerns have not been related to anticompetitive acquisitions, but instead to other forms of potentially anticompetitive conduct.
It may well be the case that many businesses, not just the largest tech companies in the world, engage in acquisitions for which government agencies like the FTC cannot fully understand either the relevant markets or the actual business motivations for the acquisition. In the fisherman’s tale, those acquisitions may be the ones that got away.
Nevertheless, it is counterproductive publicly to discuss unwinding a previously approved merger, particularly in the absence of current anticompetitive conduct. To be clear, if a business engages in anticompetitive conduct, that conduct should and must be remedied. But antitrust remedies for companies engaged in anticompetitive conduct should focus narrowly on that conduct. Such remedies might include a divestiture of assets tied to the anticompetitive conduct. But it makes no sense to focus on unwinding previously approved mergers when anticompetitive conduct is absent.
Ultimately, if previously approved mergers could be unwound, it would send a chilling signal to all merging parties that a future antitrust agency might one day unwind a merger, despite a current antitrust agency approving it. The rule of law is undermined when a government can revise laws today to outlaw prior lawful events. America’s founders were well aware of this.
The purpose of the Antitrust Division of the Department of Justice (DOJ) and the FTC, America’s twin federal antitrust enforcers, is to protect American consumers from anticompetitive conduct. Reviewing proposed mergers is but one of their powers. For example, the DOJ and the FTC are revising their vertical merger guidelines. And even when problematic mergers are not blocked, the antitrust agencies have substantial powers to investigate and block anticompetitive conduct. Indeed the DOJ appears to have such investigations well underway.
America’s antitrust enforcers should not become like Ahab, consumed by thoughts of the “big tech” white whale they think may have gotten away. They should instead focus on doing their job: protecting the interests of American consumers today.