The Biden administration’s top antitrust officials unveiled tougher guidelines against tech mergers on Wednesday, signaling their deeper scrutiny of the industry despite recent court losses in their attempts to block tech deals from going through.
Lina Khan, chairwoman of the Federal Trade Commission, and Jonathan Kanter, the Justice Department’s top antitrust official, released draft guidelines for merger reviews that, for the first time, include a focus on digital platforms and how incumbents can use their scale to hurt future rivals.
The guidelines, which typically provide a roadmap for whether regulators block or approve deals, show the Biden administration’s commitment to an aggressive antitrust agenda aimed at reducing the power of companies like Google, Meta, Apple and Amazon.
The guidelines, which are not enforced by law, are on a losing streak in court. A ruling last week prevented the FTC from delaying closing on Microsoft’s $69 billion acquisition of video game maker Activision Blizzard. In January, a court ruled against the FTC in its lawsuit to stop the purchase of Within by Meta, a maker of virtual reality apps.
The aggressive antitrust stance is a pillar of President Biden’s agenda to eradicate economic inequality and encourage greater competition. “Promoting competition to reduce costs and support small businesses and entrepreneurs is a core part of Bidenomics,” a senior administration official said on a call with reporters.
The new guidelines would apply to all deals across the economy. But they highlight obstacles to competition among digital platforms, including how the acquisition of a nascent rival may be intended to kill off future competition. Such deals, known as killer acquisitions, are prevalent in the tech industry and are at the center of an FTC antitrust lawsuit against Meta, which owns Facebook, Instagram and WhatsApp. The agency accused Meta of buying Instagram in 2012 and WhatsApp in 2014 to avoid future competition.
The FTC and Justice Department also said they would look at how companies use their scale, including their large number of users, to avoid competition. These so-called network effects have helped companies like Meta and Google maintain their dominance in social media and Internet search.
The agencies also exposed ways in which mergers involving “platform” businesses, the model used by Amazon’s online store and Apple’s App Store, could harm competition. An acquisition could hurt competition by giving one platform control of a significant flow of data, according to the draft guidelines, echoing concerns that tech giants would use their wealth of data to overwhelm rivals.
“As markets and business realities change, it is vital that we adapt our enforcement tools to keep pace so that we can protect competition in a way that reflects the complexities of our modern economy,” Kanter said in a statement. “Simply put, today’s competition looks different than it did 50, or even 15, years ago.”
While they lack the force of law, the guidelines can influence how judges view challenges to mergers and acquisitions. The effort to update the guidelines has been closely watched by companies and corporate lawyers navigating regulatory scrutiny of mega deals.
The guidelines were last updated in 2020. In 2021, Mr. Biden directed the Department of Justice and the FTC to update them again as part of a larger effort to improve competition throughout the economy. Agencies will receive public comment on the proposals and may make modifications before the final guidelines are adopted.
“These guidelines contain critical updates while ensuring fidelity to the mandate Congress has given us and legal precedent on the books,” Ms. Khan said in a statement.
While the FTC has experienced recent court losses, it has forced some companies, including chipmaker Nvidia and aerospace giant Lockheed Martin, out of some major deals. The Justice Department stopped publisher Penguin Random House from buying Simon & Schuster, using the unusual argument that the merger would hurt authors who sold the publishing rights to their books.