U.S. Regulators Release New Guidelines Seeking To Block Mergers And Acquisitions

Saturday, 30 September 2023, 9:04 pm
Press Release: Hugh Grant

Back in July, United States antitrust regulators revealed new guidelines regarding the types of mergers and acquisitions they don’t support. The biggest concerns are in the tech sector, but they do extend to other industries. For example, the U.S. government recently filed an appeal to undo a merger in the sugar industry.

While they can sometimes be unfair, mergers and acquisitions help companies grow in their market and are oftentimes better for consumers when the acquiring company has an established reputation for quality products, services, and outstanding customer service.

Since 2021, numerous mergers have been challenged by the FTC and the U.S. Justice Department, mainly in the tech sector. However, these challenges haven’t all been successful.

For example, the FTC filed a motion asking the court to stop Microsoft from acquiring Activision Blizzard, makers of the popular video game “Call of Duty.” Microsoft got into the gaming industry with Xbox, and is now seeking to expand its reach in the market.

The Ninth Circuit Court of Appeals denied the FTC’s motion. The deal was ruled legal under antitrust law. Microsoft is poised to purchase Activision for $69 billion, the largest deal ever in the video game market.

Britain’s Competition and Markets Authority is set against this merger based on concerns that it would negatively impact competition for cloud-based video games. In response to these concerns, the proposal has been restructured to divest cloud gaming rights to Ubisoft and would not allow Microsoft to control the licensing terms for Activision games that run on competing cloud platforms.

The biggest concern is that if Microsoft can control the licensing terms, they can prevent other gaming platforms from hosting Activision’s games, and users would be forced to subscribe to Microsoft’s gaming platforms. However, Microsoft offered rivals ten-year licenses and promised to give Nintendo access to Call of Duty when the deal closes.

This deal is now under investigation and in the hands of British regulators.

Prior to this, the FTC also tried to stop Meta from purchasing the virtual reality company Within Unlimited. This motion also failed.

Regulators published a 51-page guide

Within the 51-page updated guidelines published by FTC and the Justice Department are example references to deals like Amazon’s 2018 acquisition of Ring, which they say should be scrutinized by antitrust agencies. The concerns over this deal have merit since many of Ring’s competitors sell products on Amazon, and Amazing might favor Ring by suppressing other products in the search results.

Reuters explains that this document also suggests not allowing deals that allow a firm to buy a company that provides inputs for their competitors.

Although these guidelines were published by official U.S. agencies, they are just that – guidelines. In any case, it’s up to the courts to determine what will be allowed and what deals should be blocked.

The good news is that attorneys agree that even if these new guidelines are adopted, that doesn’t mean they will be accepted by the judges who hear cases that challenge mergers because they aren’t in alignment with recent court decisions regarding contested mergers.

On the other hand, the guidelines lean heavily against consolidation, which is a relief for those who have been pushing hard for better antitrust enforcement. Those who are in favor of courts adopting these guidelines want to prevent the harm caused by corporate monopolies.

The Biden administration supports the guidelines

Since Biden was elected, the administration has been strict with their views on mergers mainly because it impacts labor. After a merger, there is usually less competition for employees, which tends to lower wages, eliminate benefits, and create worse working conditions.

Under the Biden administration, there have been 22 attempted injunctions on mergers. This is twice as many challenges compared to Trump’s first two years, and also outnumbers the challenges brought under Obama’s first two years in office.

Antitrust lawyers say we are seeing more merger challenges today than in their 25+ year careers. Of the 22 injunctions filed, 15 were granted, and most companies didn’t even bother to fight it in court.

We can expect the Biden administration to support the new guidelines, but there’s still no guarantee the courts will agree. Still, Biden’s antitrust appointees will not give up the fight because they believe corporate consolidation is excessive, hurts consumers, and punishes workers now more than ever.

Many companies facing these legal battles have vowed to fight all the way in court, and the recent wins for other litigants show some promising possibilities.

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