FTC challenges consolidation in tech with revised merger guidelines – TechCrunch

It’s a sign of the times that the very morning the FTC and the Department of Justice announced a comprehensive review of corporate merger policies in an effort to prevent anti-competitive takeovers — and one megacorporation announced a $69 billion deal that would further consolidate an industry already dominated by a handful of players.

That’s not to say the Microsoft-Activision deal is necessarily anti-competitive, but they’ll certainly have their work cut out to prove that’s not the case. As a games publisher, platform, hardware manufacturer and service provider, Microsoft’s acquisition of Activision Blizzard places many of the world’s most popular game franchises firmly in its stable – and potentially out of its big rival Sony.

Maybe that’s how competition works these days. But what this FTC review presupposes is… maybe it shouldn’t?

The exact nature of the new rules is not yet defined, the announcement drew very obvious dotted lines around the areas that the agencies hope to control without naming names. In fact (as is often but not always the process of revamping the rules), public comment is called for on all issues, so areas of interest are ostensibly moot, even if one assumes that they have a project ready now. (In fact, I suspect FTC Chairwoman Lina Khan had it in her briefcase when it was confirmed.)

The review would seek to revisit the conditions under which a merger or acquisition would be viewed with suspicion, such as whether it “will tend to create a monopoly”, a somewhat technically vague phrase in the guidelines currently but not very well defined. .

It would also consider how the markets themselves are defined, which is key to establishing anti-competitive practices. For example, what market is Facebook in, legally speaking? Communications, “social media” (however we define it), advertising or what? Unless this sort of thing is figured out, companies can fall through the cracks, arguing one day that they’re an advertiser and the next that they’re a communications provider, usually whatever suits their needs. to evade regulation. (Broadband providers have drawn similar hesitation for decades.)

The FTC will also seek to update guidelines on “potential and nascent competitors,” the kind of competitors frequently bought in for tens of billions of dollars when it seems they can no longer be contained.

Monopsony power and its links to labor markets are also examined, i.e. when one firm (or several in collusion) dominates the market for the purchase of a particular service. Say if Uber for some reason employs 90% of all personal transportation drivers in a state, what opportunities for leverage and abuse does this present, and how can they be thwarted?

Perhaps the most explicit call, however, is the last item in the list of items:

Unique Features of Digital Markets: Agencies are looking for information on how to consider key areas of the modern economy such as digital markets in the guidelines, which often feature features such as zero-price products, multi-sided markets and aggregation of data that the current guidelines do not address in detail. .

What exactly is the effect of things like Amazon Prime, which, while unquestionably convenient in many ways, is part of a complex marketplace and system of marketplaces, and as such can prove problematic in the competition point of view? Without the ability to even ask and answer such questions, Amazon will fall through the aforementioned cracks and its policies may be blindly accepted as beneficial after cursory investigation.

Asking the general public if they think a company amounts to monopsony, or if acquiring a competitor is questionable, seems a bit inexplicable at first glance. But the public comment period does two things.

First, it creates an opportunity to solicit broad public support across the United States, establishing the process as good policy. Some shrewd reps may need a little convincing that their constituency cares about such things. Although, as we’ve seen with the push for net neutrality, that’s hardly enough to guarantee success.

Second, it allows for real input from interested parties – business associations, activists, NGOs, etc. – who can gather serious comments that make substantive suggestions for policy and research. Having a basket of nonpartisan think tanks to sprinkle in the form of footnotes justifying various approaches is a bulwark against rules seen as “arbitrary or capricious” and overturned or challenged.

A very readable statement from Khan sums it up nicely and gives important context to the idea of ​​updating the rules – it’s something we’ve been doing since the beginning, and it’s high time we did it again. It’s hard to put it better than she does, with the candor that made her Amazon’s Antitrust Paradox article so compelling:

Meanwhile, major technological and economic shifts have driven changes in how businesses compete and grow, creating new interconnections and dynamics across multiple dimensions.

Evidence suggests that decades of mergers have been a key driver of consolidation across all sectors, with this latest wave of mergers threatening to further concentrate our markets.

While the current merger boom has generated huge costs for investment banks, evidence suggests that many Americans have historically been losers, with reduced opportunity, higher prices, lower wages and lagging innovation. . 7 A lack of competition also appears to have made segments of our economy more fragile, as consolidated supply and reduced capacity investment can make us less resilient to shocks.

Just as we must revise our theories and models to adapt them to new facts and evidence, we must ensure that our merger guidelines accurately reflect the realities of modern economics. Matching our analysis to contemporary business strategy requires our tools to be dynamic and holistic rather than static and atomistic.

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