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.

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