The Biden administration’s top antitrust officials have unveiled new guidelines aimed at increasing scrutiny of tech mergers. Lina Khan, chair of the Federal Trade Commission, and Jonathan Kanter, the top antitrust official at the Department of Justice, released draft guidelines for merger reviews that specifically address digital platforms and the potential harm that dominant companies can inflict on future competitors. These guidelines demonstrate the administration’s commitment to an aggressive antitrust agenda, with a focus on curbing the power of tech giants like Google, Meta (formerly Facebook), Apple, and Amazon.
Although the guidelines are not legally enforceable, they serve as a roadmap for regulators when determining whether to approve or block deals. This move comes after recent setbacks in court, including the ruling that prevented the FTC from delaying Microsoft’s $69 billion acquisition of Activision Blizzard and the court’s decision against the FTC in its lawsuit to stop Meta’s purchase of virtual reality app maker Within.
The forceful antitrust stance aligns with President Biden’s agenda to address economic inequality and promote competition. A senior administration official stated that “Promoting competition to lower costs and support small businesses and entrepreneurs is a central part of Bidenomics.”
The new guidelines apply to deals across various industries but emphasize the challenges to competition in the digital platform space. They specifically address “killer acquisitions,” which involve acquiring nascent rivals to eliminate future competitors. The FTC has accused Meta of such behavior, alleging that the company acquired Instagram in 2012 and WhatsApp in 2014 to stifle future competition.
Additionally, the FTC and Justice Department will examine how companies utilize their scale, including their large user bases, to fend off competition. The concept of network effects, which contribute to the dominance of companies like Meta and Google in social media and internet search, will also be scrutinized.
The agencies also identified potential harm to competition in mergers involving “platform” businesses like Amazon’s online store and Apple’s App Store. Acquisitions that grant a platform control over significant streams of data can undermine competition, echoing concerns about tech giants using their vast amounts of information to crush rivals.
Jonathan Kanter, in a statement, emphasized the need to adapt law enforcement tools to reflect the complexities of the modern economy. He stated, “Simply put, competition today looks different than it did 50—or even 15—years ago.”
While the guidelines do not carry the force of law, they can influence judges when evaluating challenges to mergers and acquisitions. Businesses and corporate lawyers navigating regulatory scrutiny of major deals closely watch the effort to update the guidelines.
The guidelines were last updated in 2020, and President Biden requested their further update in 2021 as part of a broader initiative to enhance competition in the economy. The agencies will seek public comment on the proposals and may make amendments before adopting the final guidelines.
In a statement, Lina Khan highlighted that the updated guidelines contain critical updates while remaining faithful to Congress’s mandate and existing legal precedent.
Despite recent court losses, the FTC has succeeded in halting some significant deals, forcing companies like Nvidia and Lockheed Martin to abandon their plans. Additionally, the Justice Department blocked Penguin Random House’s acquisition of Simon & Schuster, using the argument that the merger would harm authors who sold publication rights to their books.
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