Regulators and antitrust advocates are particularly worried about acquisitions by Silicon Valley giants. While big acquisitions, like Amazon’s plans to purchase MGM, are the subject of press scrutiny and regulatory attention, hundreds of other purchases fly under the radar because of financial market guidelines and antitrust laws, which only require companies to disclose their largest deals. As they seek to take on tech titans’ power, regulators are increasingly paying attention to how tech companies gobble up smaller potential competitors before they have a chance to develop enough to provide consumers with serious alternatives.
But limited resources, and what some regulators consider an outdated antitrust framework, represent a direct threat to the administration’s goal of cracking down on what it sees as excess corporate power in certain industries. The White House, key policymakers such as FTC Chair Lina Khan and progressives on Capitol Hill have signaled intense interest in taking on monopolies, and the inability to keep up with the pace of mergers represents a major challenge.
Courts also have been deeply skeptical of arguments that tech giants are illegal monopolies, issuing two recent decisions rejecting antitrust allegations made against Facebook and Apple.
That means the quiet and rapid acquisitions of other companies by tech giants is having an unforeseen effect on the economy, experts warn.
“We won’t know the effects of the concentration that’s happening for some time, and neither will the general public,” said Krista Brown, a senior policy analyst at the American Economic Liberties Project, a liberal think tank that studies antitrust policy. “If we don’t have a record of what’s happening or what type of oversight and competition enforcement are working, then we will have missed an opportunity to know where things are slipping.”
The FTC requires companies to report every acquisition worth more than $92 million. In a study released Wednesday, the FTC said Microsoft, Apple, Google, Facebook and Amazon together made 616 acquisitions from 2010 to 2019 that fell below that reporting threshold but were worth at least $1 million. Many of those acquisitions probably were never disclosed at all.
“This study highlights the systemic nature of their acquisition strategies,” FTC chair Lina Khan said in releasing the study. “It captures the extent to which these firms have devoted tremendous resources to acquire start-ups, patent portfolios and entire teams of technologists, and how they were able to do so largely outside the purview of the antitrust agencies.”
Even when a deal is worth more than $92 million, companies can ask the FTC to keep it secret, meaning that the FTC and its partners at the Justice Department are the only ones who see it. On top of that, the FTC is swamped, leading it to say earlier this summer that it didn’t have the capacity to effectively evaluate the potential impact of each takeover across all industries.
The lack of transparency in Big Tech acquisitions is getting more attention as regulators and politicians intensify their scrutiny of the power these companies wield, as well as their overall effect on consumers.
Spokespeople for Microsoft, Google and Facebook declined to comment. Spokespeople for Amazon and Apple did not return requests for comment. (Amazon founder Jeff Bezos owns The Washington Post.)
The sheer size of tech giants is also a factor in whether a deal gets disclosed to the broader public. Each of the companies is now valued at over $1 trillion by shareholders.
Even when companies have to tell the Federal Trade Commission they bought another firm, they’re not required to tell the public or their investors unless the deal is considered “material” — a slippery term that has no clear definition.
In Google’s case, for example, even a billion-dollar acquisition would be less than 0.1 percent of its $1.4 trillion market capitalization. Securities and Exchange Commission guidelines say companies must disclose acquisitions that would represent a significant amount of their revenue or total market value, but the regulator doesn’t provide specific percentages.
The biggest tech companies are so rich in cash and stock that they can afford to buy virtually any start-up, whether to nab skilled employees, win innovative patents or simply eliminate a potential competitor.
While Facebook, Apple, Google and Amazon were celebrated as driving American innovation during the 2000s and most of the 2010s, politicians from both parties are now skeptical: Democrats fear their sheer size is limiting competition while social networks rewire American society in damaging ways and Republicans accuse big tech of censorship.
Now, acquisitions by the tech giants that once sailed past regulators with little scrutiny — such as Facebook’s purchase of Instagram for $1 billion in 2012 and WhatsApp for about $16 billion in 2014 — are widely seen as helping to cement their dominance over the Internet. Prominent members of the Biden administration have even advocated for unwinding some of those deals.
“There’s an unmistakable movement afoot to subject those transactions to intense scrutiny, especially if the buyer has a significant market position,” said William Kovacic, an antitrust law professor at George Washington University who served as the FTC’s chair from 2008 to 2009.
“A very powerful criticism of U.S. antitrust enforcement, especially over the past 20 years, is that the failure of the agencies to bear down on smaller acquisitions, including acquisitions of — at that time — small companies like Instagram, allowed the preeminent digital firms of today to acquire unassailable positions of dominance.”
The threshold for telling the FTC about a deal was established by law in 1976. Once notified, the agency can investigate or block deals it thinks would harm competition. But skyrocketing valuations and a general rise in the number of acquisitions has left the agency struggling to keep pace.
In July, the FTC was tasked with reviewing 343 deals across all industries — three times as many as in July 2020. In a statement, the agency bemoaned the “tidal wave of merger filings that is straining the agency’s capacity to rigorously investigate deals.”
As it works to staff up under Khan, its new chair and a known tech critic, the FTC has begun alerting companies that it reserves the right to challenge their deals at a later time.
Brown urges public disclosure of all deals reported to the FTC, arguing that it’s “nearly impossible to fully analyze what’s happening in each industry if we cannot have a full picture.”
Khan said the study on small acquisitions shows the need for the agency to examine reporting requirements for companies under existing law, and to scrutinize whether the agency has created “loopholes” that allow such deals to close undetected.
More than 75 percent of the deals included noncompete clauses for founders and key employees, and Khan also said the FTC should study how companies are using these terms to “lock up key talent.”
Over the past two decades, Amazon, Google, Apple and Facebook have each used acquisitions to increase the range of products they sell and the markets in which they compete. A Washington Post review of publicly available company filings, academic research and lists compiled by researchers found the four companies had together made more than 600 acquisitions throughout their life spans, 431 of which were in industries outside the companies’ original business areas.
The FTC study suggests that number is actually much higher, as do some of the companies’ comments.
Earlier this year, Apple CEO Tim Cook told investors at the company’s annual shareholder meeting that the firm had purchased more than 100 firms over the past six years — an average of more than one a month.
That’s a lot more than the company publicly disclosed. And it’s not alone.
For example, when Amazon began building its cloud-computing business, it went on an acquisition spree, buying at least 13 cloud tech companies from 2012 to 2020, according to the Post’s analysis. That included firms like Thinkbox Software, a maker of cloud-based design tools, and security company Sqrrl Data; in neither case did Amazon disclose the purchase price.
Both are now part of Amazon Web Services, which has over $45 billion a year in revenue and held 41 percent of the global cloud-computing market last year, according to market research firm Gartner.
Similarly, Google built an empire that competes at every level of Internet advertising by launching its own acquisition spree — starting with the $3.1 billion purchase of advertising technology provider DoubleClick in 2007. Google’s advertising business is now the target of an antitrust lawsuit by the Texas attorney general.
FTC Commissioner Rebecca Kelly Slaughter said the agency’s recent study reveals how “serial acquisitions” have become “a Pac-Man strategy.”
“Each individual merger, viewed independently, may not be seen to have significant impact,” Slaughter said at a recent FTC meeting. “But the collective impact of hundreds of smaller acquisitions can lead to a monopoly behemoth.”
Chris Alcantara and Jennifer Jenkins contributed to this report.
An earlier version of this article misstated the name of the university where William Kovacic is a law professor. He works at George Washington University. This article has been corrected.