FTC's change to policy could make for healthier mergers
Cornell's Robert Hockett said the FTC's recent decision to rescind a 1995 policy could help prevent bad mergers, as scrutiny of big tech acquisitions ramps up.
The Federal Trade Commission's change to a decades-old merger policy could tip the scales toward reducing monopoly power, one expert argued.
Last week, the FTC rescinded a 1995 policy for "prior approval and prior notice" provisions for mergers. The decision means companies that have proposed mergers the FTC found to be problematic will need to give the FTC prior notice and receive prior approval before they proceed with any future transactions with like companies.
The FTC has been facing mounting pressure to increase scrutiny of mergers that give more power to already large, powerful companies. This decision removes some of the burden from the FTC to prove that a merger is problematic, placing it, instead, on the companies seeking the merger to prove why it's not.
Robert Hockett, a law professor at Cornell Law School, said although the move isn't "massively game changing" for any merger currently, it's a change that could be significant over time.
"After 20 to 30 years of what amounts to a kind of presumption in favor of what private sector firms want to do with a kind of burden on anybody who is suspicious to show why we ought to be suspicious, there's a change in the nuance of that presumption," he said. "It's not like it's going to switch to a presumption of suspiciousness or nefarious purpose or market-harming behavior, but it is going to be something closer to sort of neutral."
Hockett said it's a "sober realization" that a significant amount of merger and consolidation activity over the last 30 years has concentrated markets to the point where efficiency gains that come through those companies coming together might be outweighed by the resulting growth in concentrated market power. He described market concentration as a balance between allowing mergers that can create efficiency gains for companies by, say, reducing product production prices and rejecting mergers that could create monopoly powers.
Robert HockettProfessor of law, Cornell Law School
Hockett argued that over the last three decades, the balance between the two has been off, leading to a concentration of market power seen in a handful of large, powerful companies today. The FTC's move to require prior notice and seek prior approval will help reestablish that balance, he said.
The FTC's decision doesn't prevent mergers from happening, Hockett said. Rather, providing prior notice and seeking prior approval may help stop bad mergers and acquisitions and prevent anticompetitive markets in the future, he said.
"Going forward on a case-by-case basis, [mergers] are going to be looked at, not with this, sort of, assumption or presumption that they're probably OK, unless somebody can show some dramatic harm," Hockett said. "Instead, everything is going to be looked at on its own merits, rather than under some, sort of, presumption. I think that's very healthy."
Also this week
- S. Judge James Boasberg of the U.S. District Court for the District of Columbia granted the FTC three more weeks to file an amended complaint to its antitrust lawsuit against Facebook, which was dismissed earlier this year along with a similar antitrust lawsuit filed by state attorneys general for a lack of evidence proving Facebook controlled a dominant share of the market. The FTC now has until Aug. 19 to file the amended complaint.
- The European Commission and Consumer Protection Cooperation authorities sent a letter to Google asking it for greater transparency around how Google ranks the results of consumers' searches and whether payments influenced the ranking. It also asked Google to comply with EU consumer protection laws.
- Amy Klobuchar, D-Minn., introduced the Health Misinformation Act, a bill that would strip Section 230 immunity from social media platforms like Facebook if its algorithms promote health misinformation. Section 230 of the Communications Decency Act provides immunity to companies like Facebook for third-party content shared on their site.
- New York Attorney General Letitia James sent a letter to Facebook this week urging it to address the spread of inaccurate information about the COVID-19 virus and vaccines, resulting in vaccine hesitancy among Facebook users. "As COVID-19 continues to spread across the nation and unvaccinated communities, particularly the Latino community, see the worst of the disease, Facebook and other powerful social media companies must choose lives over profits and take real action to combat the spread of destructive lies," she said in a press release.
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.