Big Tech's small deals pose a quandary for regulators

As regulators review a decade of tech industry acquisitions for signs of monopolistic behavior, proposing remedies is going to be a tough challenge.

Why it matters: Tech companies like Google and Facebook grew giant in part by rolling up startups that are now fully integrated into their businesses. Despite heated antitrust rhetoric, it would be a tall order for regulators to reverse hundreds of deals or force divestitures of the essential business lines those transactions helped build.

Driving the news: Bloomberg reported last week that, when Google bought ad tech company Invite Media in 2010, the firm dumped cash to stay below the size threshold that would trigger federal scrutiny of the deal.

• Now the FTC says it's going to review even smaller acquisitions by Google and other tech giants going back an entire decade as it weighs antitrust action.
• The Invite Media story doesn't prove any wrongdoing, but it suggests prior acquisitions may have involved efforts to hide information from federal regulators.

By the numbers: Bloomberg counted a total of 362 acquisitions made by Alphabet/Google, Amazon, Apple, Facebook and Microsoft between 2010 and 2019 that were small enough to escape FTC review.

Where it stands: The FTC is now embarked on a review of precisely those deals — those struck from 2010 on that weren't reported to antitrust authorities.

• The agency is conducting the review under its authority to perform studies outside of law enforcement investigations. But FTC Chairman Joe Simons isn't ruling out the possibility of enforcement action stemming from the inquiry, up to and including unwinding anticompetitive acquisitions.
• That's on top of separate antitrust probes into Big Tech from the Justice Department, House Judiciary antitrust panel and state attorneys general.

What's next: Candidates and policymakers like Elizabeth Warren have framed undoing anticompetitive tech mergers as a straightforward matter. But such efforts would face years of court battles and uncertain outcomes.

• That's the case for major acquisitions that resulted in subsidiaries distinct from the core company, such as Facebook's purchase of Instagram — never mind hundreds of tiny deals.
• "It's very hard to unscramble the eggs," Bill Baer, DOJ antitrust chief under the Obama administration, told Axios. "Once a business is integrated, especially with a technology company, it is awfully hard to unwind."

Be smart: Washington still has some tools to help counter competitive harms stemming from past mergers. Regulators could use the courts or a settlement to get companies to put up assets or money to seed a new competitor, for instance.

• The DOJ did just that before green-lighting T-Mobile's Sprint acquisition.
• If the FTC concludes that tech giants escaping scrutiny with their extended run of small acquisitions ultimately harmed competition, that could up the odds of tougher antitrust moves by other regulators at the Justice Department — or from Congress amending antitrust law to address the issue.
• "I think it is challenging but realistic to change the rules going forward to allow for more scrutiny. It is much more difficult to unwind transactions that are many years old," said Baer.