The FTC review found that 94 of 616 unreported acquisitions exceeded the Hart-Scott-Rodino Act’s reporting threshold of $92 million.
The Federal Trade Commission has indicated it will take action to address loopholes that allow large tech firms to avoid reporting acquisitions of smaller companies.
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The agency’s policy planning office on Wednesday Conclusions Released From a study that focused on more than 600 unreported acquisitions by Alphabet, Amazon, Apple, Facebook and Microsoft between January 1, 2010 and December 31, 2019.
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NS Review found that 94 of 616 acquisitions valued at $1 million or more were in excess of the Hart-Scott-Rodino (HSR) Act. transaction limit size. Under the law, companies are required to report transactions valued at more than $92 million. About 65% of the 616 transactions were between $1 million and $25 million.
“While the Commission’s enforcement actions have already focused on how digital platforms can stand out from competition, this study highlights the systemic nature of their acquisition strategies,” said FTC Chair Leena Khan in a statement. Statement. “This shows the extent to which these firms have devoted tremendous resources to acquiring start-ups, patent portfolios, and entire teams of technologists—and how they were able to do so at a scale largely outside our scope. “
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About 36% of transactions involved the acquirer, involving some amount of debt or liabilities, while more than 79% involved “deferred or contingent compensation to founders and key employees” and more than 75% involved founders and key employees. Non-competitive clauses were included for. Institutions.
In addition to the 94 transactions found to exceed the HSR size of the transaction limit, FTC employees noted that adding debts and liabilities to the total purchase price would have exceeded the limit and an additional nine transactions would have exceeded the limit. When adding deferred or contingent compensation to their purchase price.
Asset and control transactions, including voting security controls and non-corporate interest control transactions, were the most common unreported acquisitions found by the FTC. At least 39% of transactions where the age of the target company was available showed that the acquired firm was less than five years old at the time of termination.
FTC Commissioner Rebecca Kelly Slaughter said the study’s release will allow officials to “understand the big picture patterns among the largest tech platforms” and help the agency better target its enforcement efforts.
“I think of the serial takeover as a ‘Pac-Man’ strategy,” Slaughter said. “Each individual merger, viewed independently, may not seem to have a significant impact, but the collective effect of hundreds of smaller acquisitions can lead to a monopolistic one.”
According to Khan, the findings underscore the need for the FTC to closely examine the HSR Act’s reporting requirements and to identify areas where the agency may have “made loopholes that could lead to flying unreasonably under the radar.” Enabling deals for
He also stressed the importance of working closely with international counterparties, citing the report, which found that less than two-thirds of the unreported acquisitions involved acquisitions of domestic assets or firms. In addition, Khan called for further investigation into the non-competing streams in the merger transactions.
Khan said, “While the commission should ensure that we use these findings to address the shortcomings in our current work, I hope this study will also prove useful to lawmakers as they discuss reforms in antitrust laws.” consider.”