By Ketki Saxena
Investing.com -- The Biden administration, on Wednesday, July 19, 2023, released draft guidelines that could lead to stricter scrutiny of future deals by major technology companies. The move is part of a broader shift towards a more aggressive stance on mergers and acquisitions, particularly within the tech sector.
The new guidelines were jointly issued by the Justice Department and Federal Trade Commission (FTC) and span across the entire economy. However, they contain specific provisions for large technology firms like Amazon.com (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL)'s Google. The guidelines focus on multi-sided platforms, which refer to firms that operate in multiple markets simultaneously.
The proposed rules suggest that antitrust agencies should closely scrutinize deals like Amazon.com's acquisition of video doorbell Ring in 2018. They highlight potential conflicts of interest when a platform operator is also a participant in the platform, as this could potentially give their own products and services an unfair advantage over competitors.
The 51-page document also suggests that mergers should not eliminate potential entrants in concentrated markets or create a situation where a firm acquires a company that provides inputs for its competitors.
According to data from LSEG Deals Intelligence, global deal volumes in the technology sector have dropped by more than half so far this year. Fiona Schaeffer, an antitrust partner with the law firm Milbank LLP, suggested that stricter antitrust enforcement could be one of the contributing factors.
However, critics argue that these guidelines may not necessarily be accepted by judges hearing merger challenges as they do not reflect recent court decisions on contested mergers. On the other hand, supporters like Senator Elizabeth Warren praised the guidelines as a much-needed update to counter corporate monopolies.
The draft guidelines are open for comment for 60 days before being finalized. They replace guidelines from 2010 on companies buying competitors and 2020 guidelines on companies merging with suppliers.
While the new rules are unlikely to impact ongoing mergers such as Microsoft (NASDAQ:MSFT)'s $69 billion deal to acquire "Call of Duty" developer Activision Blizzard (NASDAQ:ATVI), they are expected to influence future deals in the tech industry.
President Joe Biden had called for these new rules in 2021, aiming to prevent "more bad mergers that lead to mass layoffs, higher prices, fewer options for workers, and consumers alike." The guidelines also reflect Biden administration's focus on labor issues associated with mergers and acquisitions.