JAKARTA - Five large technology companies in the United States (US) are suspected of having merged or acquired many companies without reporting the move to the Federal Trade Commission (FTC).
Seeing this, the FTC then carried out greater oversight of the gap in reporting requirements for mergers and non-competition at an open meeting on Wednesday, September 15. The agency released findings from its study during President Donald Trump's administration on underreported mergers by five big tech companies, including Google's parent company Alphabet, Amazon, Apple, Facebook and Microsoft.
From the findings, the five tech giants have made acquisitions of 616 companies from 2010 to 2019 whose value is above 1 million US dollars, but too small to be reported to antitrust agencies.
In fact, state regulations exist where companies are only required to report transactions that exceed $92 million under the Hart-Scott-Rodino Act (HSR), so the FTC is trying to understand patterns in how Big Tech companies acquire smaller businesses.
"I view serial acquisitions as a Pac-Man strategy. Any individual merger viewed independently does not seem to have a significant impact. But the collective impact of hundreds of smaller acquisitions, can lead to monopolistic behavior," said Commissioner Rebecca Slaughter, Democrat. , as quoted by Reuters, Thursday, September 16.
Meanwhile, the Justice Department said it was reviewing guidelines for vertical mergers and guidelines on horizontal deals, or mergers of competitors.
"The department's review has identified several aspects of the guidelines that merit scrutiny, and we will be working with the FTC to update them as appropriate," said antitrust chief Richard Powers.
FTC Chair, Lina Khan, also outlined three things that can be drawn from the report. The first is that the FTC must identify potential loopholes in HSR reporting requirements that allow some transactions to be below the stated value.
Second, the FTC should learn from its international counterparts, as about a third of the transactions studied involved foreign targets. Third, Khan said the FTC should do more research on the use of non-compete agreements in merger transactions.
Khan added he hoped the report would be useful to lawmakers and those considering changes to the antitrust law.
"While existing legislation uses deal size as a rough proxy for the potential competitive significance of an acquisition, digital markets in particular reveal how smaller transactions invite vigilance," explains Khan.
For information, the FTC rarely tries to stop vertical deals but last year sued Facebook, accusing the social media company of violating antitrust laws. He has asked the judge to cancel Facebook's deal to acquire Instagram and messaging app WhatsApp even though both were reviewed by the agency.
Citing CNBC International, the study was led by the FTC Office of Policy Planning and does not constitute a law enforcement investigation. Here are some of the key findings from the aggregate reports presented by FTC staff:
The five technology companies made 616 non-reportable transactions worth more than $1 million between early 2010 and late 2019. In addition, the companies disclosed other events such as patent acquisitions, transactions under $1 million, hiring events, and financial investments. other. The FTC found the most common unreported transactions among this group were acquisitions of majority voting securities and acquisitions of assets. The FTC found 94 transactions were above the HSR threshold at the time of settlement, possibly due to various possible reporting exceptions. In addition, nine more transactions will exceed the HSR threshold upon completion, if they incorporate deferred or contingent compensation into their purchase price. The FTC found that more than 79 percent of the transactions studied included such agreements for target founders or key employees. In 36 percent of the transactions studied, the acquiring company incurs some debt or liability from its target. Then, for 39 percent of transactions where the target company was available, the acquired company was less than five years old at the time of refinement.More than 75 percent of transactions include non-compete clauses for founders or key employees of the target company.
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