Technology

How the New FTC Technology Task Force Could Crush Already-Closed Mergers

Jon C. Ogg

Published: February 26, 2019 3:59 pm

Last Updated: January 31, 2020 12:15 am

Technology giants should consider that they have been put on notice. An announcement was made on Tuesday, February 26, 2019, by the Federal Trade Commission (FTC) that its Bureau of Competition is creating a task force dedicated to monitoring competition in U.S. technology markets. The FTC’s new Technology Task Force also will investigate any potential anticompetitive conduct in those markets and will take enforcement actions when warranted. While it is far too soon to speculate what the targets and implications would be, the reality is that technology giants now have a reason to fear further reviews, potential fines, and even potentially face future break-ups.

What all of those enforcement actions will be remains undefined at this time. Still, technology giants now have a formal watchdog in their industry and this will create yet one more regulatory review hurdle for when technology giants want to merge or make acquisitions.

24/7 Wall St. has featured the top technology companies as a part of this review. After all, they dominate the markets and it’s rather obvious that the FTC doesn’t go after small cases. So far these technology giants’ share prices do not seem to be reacting negatively to the task force announcement.

The FTC release specified that the new task force will conduct prospective merger reviews in the technology sector — but it specified that this will also cover reviews of consummated technology mergers.

How to retroact certain mergers is never an easy topic. Still, it has been done before and this could set the stage for the FTC to potentially be able to retroactively de-merge some companies.

The FTC’s Technology Task Force will draw upon existing staff and expertise and will focus on technology-related sectors of the economy. The FTC specified that this includes markets in which online platforms compete and will be modeled on the FTC’s Merger Litigation Task Force which was launched in 2002. The aim of the technology markets task force is said to ensure that they are operating within antitrust laws and to take action where they are not.

Tuesday’s announcement showed that the new merger task force will be led by Patricia Galvan, the current Deputy Assistant Director of the Mergers III Division, and by Krisha Cerilli, currently Counsel to the Director. This unit team will also include approximately 17 staff attorneys with expertise in complex product and service markets and ecosystems. The task force will also include a Technology Fellow to offer technical assistance and expertise to support investigations.

The task force will be overseen by Director Bruce Hoffman, Deputy Director Gail Levine, and Associate Director for Digital Markets Daniel Francis. will work closely with economists from the FTC’s Bureau of Economics and will coordinate with the FTC’s Bureau of Consumer Protection who also focus on technology platforms.

The areas and markets of concern were outlined in technology and now in the media and communications sectors, as follows:

• online advertising;
• social networking;
• mobile operating systems and apps;
• and platform businesses.

FTC Chairman Joe Simons said of the new unit:

The role of technology in the economy and in our lives grows more important every day. As I’ve noted in the past, it makes sense for us to closely examine technology markets to ensure consumers benefit from free and fair competition. Our ongoing Hearings on Competition and Consumer Protection in the 21st Century are a crucial step to deepen our understanding of these markets and potential competitive issues. The Technology Task Force is the next step in that effort.

Again, breaking companies up is not an easy task and the effort can take years to accomplish. Still, it can be done — just ask those who remember the breakup of the AT&T of the 1980s into the Baby Bells.

The technology giants do not seem to be phased by the news at all, but we have shown the respective market capitalizations and business highlights of each company.

Amazon.com, Inc. (NASDAQ: AMZN) dominates in anything related to online retail sales and the cloud and its shares were up $1.10 at $1,634.10. Amazon and Jeff Bezos have personally been called out by President Trump in the recent past. Its market cap is $802 billion. What does it mean when 50% of retailers believe they are in trouble?

Alphabet Inc. (NASDAQ: GOOGL) dominates online web search, advertising (DoubleClick), it is strong in online operating systems, it has YouTube and has too many other units to easily discuss. Alphabet shares were still up $6.83 at $1,124.16 and it has a $778 billion market cap.

Apple Inc. (NASDAQ: AAPL) has the iPhone that is now the other side of the duopoly in mobile operating systems, and Apple has been in some cases thought of as taking app-makers hostage when it comes to allowing companies into its ecosystem. Apple’s shares were last seen up 35-cents at $174.58. Apple has an $823 billion market cap. Still, Apple has asked the FTC to crack down on data traffickers.

Facebook, Inc. (NASDAQ: FB) dominates in social media, and it can arguably squash or duplicate any service or application that it wants to. Just ask any would-be entrant if they think they can be successful if Facebook wants their fiefdom. Facebook has acquired Instagram and WhatsApp and some industry outsiders have pointed to Facebook having out-snapped Snap Inc. (NYSE: SNAP). Facebook’s shares were last seen trading up $0.77 at $165.39 and its market cap is $472 billion currently but in 2018 it had reached $600 billion before its more privacy woes and implications in election tampering. Will this temper some of the rekindled bullish calls by analysts? And will the Merrill Lynch social media trends for 2019 play a role? Activist groups have already gone after Facebook to make leadership changes.

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Microsoft Corp. (NASDAQ: MSFT) was last seen up $1.10 at $112.68 with an $864 billion market cap. Microsoft doesn’t dominate the tech landscape as it did back when the world was dominated by PCs, Windows and Explorer, but it is still a technology giant and one of the leaders in the cloud. One firm even just called for Microsoft to soon top the $1 trillion market cap hurdle.

Before considering reviewing the top technology companies as any small measure, these five technology and related sector companies above account for the first four highest-ranked market caps in the S&P 500. Facebook was ranked as sixth place of the top 10 companies by market cap.

AT&T Inc. (NYSE: T) has a $227 billion market cap with its shares up 18 cents at $31.31, and there has been some ongoing efforts to block its already-closed acquisition of Time Warner.

How this will play out may take years to see. Stay tuned.