Technology giants used ‘loopholes’ to avoid merger reviews, FTC says

Hundreds of deals by U.S. technology giants flew under the radar of merger watchdogs, fueling the companies’ unchecked growth in the digital economy, according to a Federal Trade Commission study.

The data on acquisitions by Apple Inc., Amazon.com Inc., Alphabet Inc.’s Google, and Microsoft Corp. show that antitrust enforcers must be more aggressive in making sure companies aren’t taking advantage of “loopholes” to avoid reporting deals to regulators, FTC Chair Lina Khan said Wednesday.

“This study highlights the systemic nature of their acquisition strategy,” Khan said about the tech companies during an FTC public meeting. “Digital markets in particular reveal how smaller transactions invite vigilance.”

The findings could bolster arguments that competition cops need to step up scrutiny of acquisitions by tech platforms to curb their power. In July, President Joe Biden vowed tougher merger enforcement of tech companies, saying the industry’s biggest players have used deals to shut down emerging threats to their businesses.

“Too often, federal agencies have not blocked, conditioned, or, in some cases, meaningfully examined these acquisitions,” the administration said.

The data comes from a study the FTC announced last year to examine deals between 2010 and 2019 by the five tech giants to better understand whether acquisitions occurring outside the view of antitrust enforcers could be undermining competition.

The FTC issued orders to the five companies requiring them to provide information about past acquisitions that weren’t reported to antitrust agencies. The companies identified 819 such transactions, including acquisitions of voting control of companies, partial investments, patent acquisitions, and what the FTC called “hiring events” in which a group of employees were hired from another company.

Although the FTC didn’t identify specific transactions by companies, one example is Facebook’s acquisition last year of image library Giphy for about $400 million. Bloomberg News reported last month that before the takeover, Giphy paid a dividend to investors. While perfectly legal, the payment lowered the value of Giphy’s assets so that antitrust officials didn’t have to be notified of the deal under the reporting thresholds at the time.