Mar 10, 2022 - Technology

Tech's dealmaking cry: Damn the lawsuits, full speed ahead

Data: Axios reporting; Chart: Jared Whalen/Axios
Data: Axios reporting; Chart: Jared Whalen/Axios

Google is plowing ahead with a $5.4 billion acquisition as it fends off a Justice Department lawsuit charging monopolistic practices and inquiries by lawmakers who argue the search giant is already too big.

Why it matters: An increasingly hostile regulatory climate over the past five years hasn't stopped Big Tech giants from making billion-dollar deals.

State of play: Google's bid to buy cybersecurity firm Mandiant is the latest in a string of high-dollar acquisitions by Big Tech.

  • Microsoft announced a $68 billion deal for video game company Activision Blizzard in January.
  • Amazon is still under regulatory review of its $8.45 billion purchase of Hollywood studio MGM announced last year.
  • Meta (then Facebook) bought Kustomer for $1 billion and Giphy for $400 million in 2020, just a few months before the Federal Trade Commission sued the social media company over past acquisitions.

Between the lines: Google is already facing a lawsuit from the Justice Department accusing it of illegally monopolizing the online search and search advertising markets.

  • The Justice Department is expected to review the Mandiant deal.

What they're saying: Google argues that the cybersecurity industry has plenty of competition.

  • Mandiant will join Google Cloud and the deal is meant to bolster Google's cloud services, which trail Microsoft and Amazon.
  • "The voices that want acquisitions blocked simply because the acquirer is a Big Tech company are probably going to be disappointed," Adam Kovacevich founder and CEO of Chamber of Progress, told Axios. "That's just not how mergers of this type are evaluated."

The other side: Big Tech's firms "were built on illegal mergers and the complicity of enforcers who cheered them on," said Sarah Miller, executive director of the American Economic Liberties Project. "But make no mistake, the new generation of antitrust enforcers will not be bullied out of upholding the law."

  • Lawmakers like Sen. Elizabeth Warren (D-Mass.) and Rep. David Cicilline (D-R.I.) have spoken out against corporate consolidation for years, and a number of competition bills are moving through Congress after lengthy investigations and hearings with tech CEOs.

Biden's antitrust enforcers are flexing their muscles around mergers, too.

  • Chip supplier Nvidia abandoned its $40 billion acquisition of U.K. chip designer Arm after the FTC sued to block the deal.
  • DOJ antitrust chief Jonathan Kanter warned in a January speech that he is skeptical of conditions imposed by regulators that are meant to "fix" mergers, and will instead seek to block deals likely to reduce competition.

The big picture: Kanter and FTC chair Lina Khan are widely expected to step up antitrust enforcement, bringing more cases against companies and acquisitions.

  • But that means companies go into mergers expecting to fight regulators and take their chances in court, Kovacevich said.
  • "I think most Big Tech companies have already accepted that the enforcers are going to bring more cases and they may sue to block their deals," Kovacevich said. "But there's also greater willingness to litigate."

Meanwhile, in Europe: the EU is working on the Digital Markets Act, which would would set standards for treating large online platforms as "gatekeepers," based chiefly on how many users they have.

  • That law would prevent Big Tech companies from preferencing their own services over rivals, and could prevent companies from "killer acquisitions" of rival firms.

What to watch: The FTC is reportedly closing in on a mid-March deadline on whether to challenge Amazon's acquisition of MGM, according to a Wall Street Journal report.

  • But with the commission deadlocked at two Democrats and two Republicans, it's unclear Khan would have the votes necessary to bring a case.
  • The European Commission is expected to bless the MGM deal by next week, Reuters reported.
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