The United States has signalled greater scrutiny of merger reporting requirements for big tech with revelations this week that Amazon, Apple, Facebook, Google and Microsoft made a total of 616 mergers or acquisitions they didn’t report to authorities. All of them were over $US1 million, and almost all didn’t qualify for reporting.
Under the Hart-Scott-Rodino Act (HSR), companies are only required to report transactions that exceed $US92 million in value. Many of these 600-plus mergers big tech made fell under that threshold.
The findings were revealed in a report from the U.S. Federal Trade Commission. In February 2020, the FTC issued Special Orders to the five tech giants asking for information on unreported acquisitions. This is the latest in a sweeping antitrust probe that has been considering a bunch of practices employed by the tech giants, including those concerning monopolisation.
“While the Commission’s enforcement actions have already focused on how digital platforms can buy their way out of competing, this study highlights the systemic nature of their acquisition strategies,” FTC chair Lina M. Khan said.
“It captures the extent to which these firms have devoted tremendous resources to acquiring startups, patent portfolios, and entire teams of technologists — and how they were able to do so largely outside of our purview.”
(Khan and the FTC have had a very busy day. Earlier, the FTC gave a gentle reminder to health apps about their data breach reporting requirements.)
Big tech report takeaways:
- Of the 616 transactions, 94 exceeded the HSR Size of Transaction threshold.
- Although most transactions that exceed the size threshold must be reported, in some instances parties may not need to file if certain other criteria are met or statutory or regulatory exemptions apply. Loopholes, you know.
- In 36% of the transactions, the acquirer assumed some amount of debt or liabilities. So the acquisition fell under $US92 million, yes, but when you add debt, they shot past. Another loophole for three transactions.
- More than 79% of transactions used deferred or contingent compensation to founders and employees. Without this loophole, nine additional transactions would have exceeded the reporting threshold.
- Of the 616 transactions, 65% were between $US1 million and $US25 million.
- At least 39% of the transactions in which the target company’s age was available involved firms that were less than five years old. Startups, in other words.
“I think of serial acquisitions as a PacMan strategy,” Commissioner Rebecca Kelly Slaughter added.
“Each individual merger, viewed independently, may not seem to have a significant impact, but the collective impact of hundreds of smaller acquisitions can lead to a monopolistic behemoth.”
She signalled the report would help understand the “bigger picture patterns” among big tech to better target enforcement efforts.