Diagnosing “Killer” Acquisitions: FTC Market Study to Review Past M&A Deals in Big Tech

John Eichlin, Marie-Marie de Fays; Linklaters

The Federal Trade Commission (FTC) launched a rare market study to investigate whether non-reportable past acquisitions by the major tech companies included “killer” acquisitions of nascent competitors. The study is intended to determine if changes to merger control rules are appropriate to cast a broader net and ensure that potentially problematic deals are reviewed proactively. The initial focus of the review is on the tech sector, but it potentially has much broader implications for the merger rules across industries. And the FTC may turn next to healthcare and other innovative sectors.

Merger
reportability rules in the spotlight

The FTC has sent information requests to five large tech companies (Alphabet / Google, Amazon, Apple, Facebook and Microsoft). These requests reportedly ask the recipients to document their acquisition strategies and outline the details of the transactions they completed over the past decade. In addition to focusing on potential “killer acquisitions” that fell short of the notification thresholds, the requests also target other arrangements, including voting and board appointment agreements and agreements to hire key personnel. Consistent with the FTC’s parallel focus on employment-related issues, the requests also call for information on related post-employment non-competes for key employees.

The FTC has special authority to conduct studies separate from its law enforcement authority. Under this process, the FTC can issue legally-binding orders to companies to obtain information and documents. Typically, the outcome of such studies results in a report summarizing findings, and sometimes including recommendations for further actions. Based on this study, the FTC could explore possible measures to expand reportability requirements or introduce notification rules, without needing congressional involvement, and with implications beyond the tech sector…

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