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Illustration: Sarah Grillo/Axios

There's a reason it's hard to gauge the impact of antitrust investigations: Their effect is often felt in the form of acquisitions that aren't made.

Driving the news: Facebook ditched negotiations that were underway late last year to acquire Houseparty, a video-based social network, the New York Times' Mike Isaac reported Monday. Facebook feared giving more ammunition to antitrust regulators who have paid it growing attention because of its dominant market position.

Why it matters: Acquisitions are the lifeblood of the tech economy, and reducing the flow of such deals could slow the whole sector down.

  • Established companies use them to supercharge their growth, bolster their talent pools, and defensively pre-empt competitive challenges.
  • For startups, the deals are how founders and early investors can cash out quickly without going through all the hard work (and risk) of building out a major company.

The big picture: Tech history shows that this is one of the most significant ways the threat of antitrust regulation can reshape the industry — and that effect kicks in the moment investigations begin, regardless of whether they move forward to a settlement or a suit.

Flashback: Microsoft, the last major technology company to face substantial antitrust challenge by the government, was sued by the Department of Justice and 20 states in mid-1998 for monopolistic practices in the browser market.

  • At almost exactly the same time, Larry Page and Sergey Brin were founding a tiny startup called Google.
  • As far as we know, Microsoft never came close to acquiring Google, though it appears to have made a serious run at the company in 2003, before deciding to build its own search competitor instead. (Yahoo also bid for Google more than once.)
  • Instead, Microsoft spent 1998–2004 fighting out the browser antitrust case in the courts. By the time Microsoft's final settlement was approved in late 2004, Google had become a public company with a valuation of over $20 billion, and Mark Zuckerberg was founding Facebook in his room at Harvard.

Between the lines: This tale is ancient history for most of us now. But it was a central formative experience for the founders of both Google and Facebook.

  • That's why the founders of dominant tech-industry giants have always scanned the horizon for nascent competitive threats: They know it's how they got their own start.
  • But today, Google and Facebook each face the reality of multiple antitrust investigations. If they spy an upstart startup that could become a future challenger, they'll be much less likely to be able to take it out of the game by acquiring it.

Most likely, Houseparty isn't that company. But it could be practically anyone with a great enough new idea.

Yes, but: Antitrust fears haven't yet stopped all big-tech acquisitions in their tracks. In June, Google acquired data analytics firm Looker for $2.6 billion.

Go deeper

Off the Rails

Episode 4: Trump turns on Barr

Photo illustration: Eniola Odetunde/Axios. Photos: Drew Angerer, Pool/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. Axios takes you inside the collapse of a president with a special series.

Episode 4: Trump torches what is arguably the most consequential relationship in his Cabinet.

Attorney General Bill Barr stood behind a chair in the private dining room next to the Oval Office, looming over Donald Trump. The president sat at the head of the table. It was Dec. 1, nearly a month after the election, and Barr had some sharp advice to get off his chest. The president's theories about a stolen election, Barr told Trump, were "bullshit."

In photos: Protests outside fortified capitols draw only small groups

Armed members of the far-right extremist group the Boogaloo Bois near the Michigan Capitol Building in Lansing on Jan. 17. About 20 protesters showed up, AP notes. Photo: Seth Herald/AFP via Getty Images

Small groups of protesters gathered outside fortified statehouses across the U.S. over the weekend ahead of President-elect Joe Biden's inauguration Wednesday.

The big picture: Some protests attracted armed members of far-right extremist groups but there were no reports of clashes, as had been feared. The National Guard and law enforcement outnumbered demonstrators, as security was heightened around the U.S. to avoid a repeat of the Jan. 6 U.S. Capitol riots, per AP.

Felix Salmon, author of Capital
9 hours ago - World

China's economy grows 6.5% in Q4 as country rebounds from coronavirus

A technician installs and checks service robots to be be used for food and medicine delivery in Jiaxing, Zhejiang Province, China, on Sunday. Photo: Hu Xuejun/VCG via Getty Images

China's economy grew at a 6.5% pace in the final quarter of 2020, the national statistics bureau announced Monday local time, topping off a year in which it grew in three of four quarters and by 2.3% in total.

Why it matters: No other major economy managed positive growth in 2020. Although the COVID-19 pandemic was first detected in China, the country got the virus under control and became one of the main positive drivers of the global economy even as the rest of the world was largely under lockdown.

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