The FTC puts out a report on how big tech eats up small tech. After showing the results of a study of a decade’s worth of Big Tech company deals that weren’t reported to the agency, Lina Khan, chair of the Federal Trade Commission, said that the way the agency looks into acquisitions will change.
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Why it’s important:
Tech’s business ecosystem is built on big companies buying up small startups, but the antitrust agency’s message this week could slow mergers and acquisitions in the sector.
What they found:
The FTC looked at 616 deals worth $1 million or more that Amazon, Apple, Facebook, Google, and Microsoft did not report to antitrust authorities between 2010 and 2019.
94 of the deals were worth more than the amount of money that makes companies have to report a deal. The deals might have been able to get around other rules.
79% of transactions gave founders and other key employees deferred or contingent pay, and almost 77% of them had non-compete clauses.
In 36% of the deals, the buyer or seller took on some amount of debt or liability.
What they’re saying:
In a statement, Khan said that the report shows that loopholes may be letting deals “slip under the radar in an unfair way.”
Matt Stoller, who is in charge of research at the American Economic Liberties Project, said that the high number of non-compete clauses was especially worrying.
Stoller said, “If nothing else, it’s clear that the goal is to just take talent and keep it from competing with you.” “And there are only so many smart people in tech.”
On the other hand:
Neil Chilson, a former FTC adviser, said that nothing in the report shows that rules were broken or that the deals hurt competition.
“I think the message from the chair is pretty clear: She’s suspicious of mergers, no matter how big or small, because she thinks that mergers of any size are suspicious and should be looked into,” Chilson, who is now a senior research fellow for tech and innovation at Stand Together, told Axios.
“The law definitely doesn’t support her, and I don’t think the economics do either, and nothing in the report backs up that claim.”