May 20, 2020

Antitrust regulators have an eye on Big Tech’s spending spree

Share Now on:
HTML EMBED:
COPY
The latest round of acquisitions, including Facebook buying Giphy, may be enough to prompt agencies to react.

In the past several weeks, we’ve seen a lot of acquisitions in the tech industry. Uber is looking to buy food-delivery service Grubhub. Facebook bought the GIF database Giphy. Apple is buying a virtual reality startup and several other companies.  

Before we all went into quarantine, the Federal Trade Commission was actually opening an investigation into past mergers in the tech industry, signaling that they’d be a lot tougher on companies trying to gobble up their rivals. So, how does that square with what’s happening now? 

I spoke with Mark Lemley, a law professor at Stanford, where he teaches antitrust and internet law. The following is an edited transcript of our conversation.

Mark Lemley (Photo courtesy of Lemley)

Mark Lemley: This seems, today, to be an issue that unites the left and the right. Both the Democrats and the Republicans seem concerned about antitrust in tech and concerned about some of these acquisitions. That suggests that there’s a possibility for government action here that otherwise we might be skeptical of.

Molly Wood: Is there anything that has stuck out to you over the last couple of weeks? Obviously, Uber and Grubhub got some immediate reaction. Facebook says it’s going to buy Giphy, Apple buying NextVR. Have you seen anything over the past couple of weeks that made you go, “That’s not gonna fly”?

Lemley: None of those are worse than some of the ones that actually did make it through in the last several years, with the possible exception of Uber/Grubhub [because Grubhub] does seem like it’s directly competing with Uber Eats and Uber’s existing entry into that market. I think it might just be a cumulative problem. It’s not that Facebook buying Giphy is worse than Facebook buying Instagram or WhatsApp. It might just be a point at which the government says, “You know what? Enough. There’s been enough consolidation among a few players here. We should cut it off now, even though arguably we should have cut it off some time ago.” The agencies may just say enough is enough.

Wood: I guess there’s an argument that it could be a little unfair, or that this heightened antitrust scrutiny on these tech companies could put them in a position where they’re saying, “Look, we actually do need to make certain acquisitions or make certain moves to keep our businesses strong in a recession that might be blocked or overly scrutinized.” Is there a world in which it might get a little unfair to them?

Lemley: I think the more common version of the argument is the acquired company won’t survive. That argument has prevailed in previous recessions, but I think it’s used a lot of times when it’s not actually true. I think one of the things you want to know is, is this company really a failing firm and is the buyer the only white knight that’s available before we say a dominant firm ought to be able to just go ahead and buy up a company that might otherwise be well positioned to build a platform that is adjacent to it and reduce the footprint of the [acquiring] company.

Related links: More insight from Molly Wood

In a sign that antitrust regulators are indeed not superdistracted by what’s happening all around us right now, The Wall Street Journal has reported that state and federal officials will probably file antitrust lawsuits against Google sometime this year. 

Two former Obama officials — a former special counsel in the U.S. Justice Department’s antitrust division and the former chief economist in the same division — put out a paper this week called “Roadmap for a Digital Advertising Monopolization Case Against Google.” Wired has a nice breakdown of what’s in there. It’s basically focused on advertising and ad tech specifically, and it lays out how Google is the dominant player in almost every one of the technology layers between a company paying for an ad and that ad showing up online. It identifies 20 behaviors that might be anti-competitive, and, yes, one of them is acquisitions.

Also watching

Facebook launched a whole new e-commerce-business-slash-baby-Amazon-competitor called Shops. Businesses can list their products for free on Facebook or Instagram. Customers will be taken to the businesses’ websites to order things, or they can shop through Instagram direct messages, WhatsApp and Messenger. Facebook is testing its own program called Checkout, where you can just shop and do transactions without ever leaving the Facebook universe. Facebook said it hopes the free listing service will result in businesses buying more ads on Facebook. 

A couple of weeks back, Shopify, the e-commerce platform that makes it easy for businesses to sell online, launched a new app called Shop, which would also let small businesses list products online for people to buy. So, while Mark Zuckerberg was announcing Shops, there was a moment where Shopify’s stock just basically fell off a cliff and then rebounded in real time when Shopify’s CEO appeared on the Facebook live stream to show off their Shop app. I bet the makers of the Shop app couldn’t be more thrilled to help Facebook launch a direct competitor called Shops.

Listening makes you smarter…
donating makes it all possible.

Our mission is to raise the economic intelligence of the country, exploring the intersection of the economy, tech, and our daily lives. As a nonprofit news organization, we count on your support – now more than ever before.

Secure the future of public service journalism today when you become a Marketplace Investor.

The team

Molly Wood Host
Michael Lipkin Senior Producer
Stephanie Hughes Producer
Jesus Alvarado Assistant Producer