Originally published as Tech giants make record small acquisitions Regulators will crack down on "deals off the radar"
The world's tech giants are buying smaller rivals at a record rate, and deals that were previously unapproved, also known as regulatory "off-radar" deals, have caught the attention of U.S. regulators.
Since the beginning of 2021, technology companies have made $264 billion in acquisitions of less than $1 billion, the highest number since 2000 and twice as many as in 2000, according to Research Institute Reliitiv, with 9,222 deals, about 40 percent higher than in 2000. The deals come from tech giants such as Apple, Facebook, Google, Amazon and Microsoft.
Under current regulations, acquisitions worth less than $92m are not required to be reported to US regulators, which has led to a number of smaller acquisitions escaping regulatory scrutiny. Lina Khan, chair of the Federal Trade Commission, said areas that could lead to unfair takeovers should be identified.
Apple, Facebook, Amazon, Google and Microsoft made a total of 819 unregistered acquisitions between January 2010 and December 2019 because regulators did not require companies to report them, according to the FTC. Of these, 616 were made in excess of $1m, with nearly half of the acquisitions targeting start-ups less than five years old.
"This study shows how big technology companies are systematically using acquisitions of start-ups to eliminate future competitors." "Companies are spending a lot of resources on acquiring start-ups, patent portfolios and engineering teams, especially on how to avoid regulation," says Khan. ”
Microsoft, the tech giant with the largest number of small acquisitions, has completed nine deals so far this year that fall below the FTC's regulatory threshold. In second place was e-commerce giant Amazon, which completed eight deals that fell below the regulatory threshold.
Yu Yunting, senior partner of Shanghai Dabang Law Firm, told First Financial News: "Now is in the era of Internet and digital technology explosion, some small companies look humble, in fact, the business model has run through, once acquired by large companies will have the effect of excluding or restricting competition, so the bottom clause has to be used." ”
Yu Yunting said that when China reviews the concentration of operators, the standard also has a bottom-up clause, no limit on the amount. Where the concentration of business operators does not meet the reporting standards, but the facts and evidence collected in accordance with the prescribed procedures show that the concentration of operators has or may have the effect of excluding or restricting competition, the anti-monopoly law enforcement agency under the State Council shall conduct an investigation in accordance with the law.
"Another background is that the monopoly of big companies is now too damaging to the competitive order, and public opinion demands regulation." He told First Financial.
Compared with these small acquisitions, regulators in China and the United States have already made large-scale acquisitions of technology giants. The FTC is already investigating Facebook's acquisitions of Instagram and WhatsApp and has warned that even after some deals are completed, it could censor them and that the FTC has the right to cancel them and block other future deals if they are deemed illegal.
Amazon also announced a big deal this year to buy legendary film studio MGM for $8.45 billion. Microsoft has announced a $16 billion acquisition of voice technology company Nuance. The acquisitions will also face antitrust scrutiny.