Big tech buyout fantasies may be on hold

US government’s ambitious case against tech giants faces many hurdles, but curbing M&A activity seems certain.

Facebook CEO Mark Zuckerberg testifies before the House Judiciary Subcommittee on Antitrust in July Picture: AFP

While much remains uncertain about the federal government’s ambitious case against big tech, at least one outcome seems highly likely: Tech giants won’t be able to buy their way to growth anytime soon.

Late Tuesday saw the release of the much-awaited report from the Democratic staff of the House Antitrust Subcommittee following a 16-month investigation into Apple Inc., Amazon.com, Facebook and Alphabet Inc.’s Google. As expected, the 449-page report was highly critical of the market power amassed by the four tech giants whose combined market value still tops $5 trillion, even after the market’s sharp selloff over the last month. It also advanced the argument for breaking the companies up, calling for “structural separation and line of business restrictions.”

Actually splitting the companies is a tall order. It would amount to actions like Apple separating from its App Store and the other three unwinding businesses that are now deeply intertwined. The companies themselves would strongly oppose such measures, as evidenced by an internal document prepared by Facebook’s legal team that described breaking up as a “nonstarter.” And hyperpartisan Washington remains far too divided to amass support for such an ambitious plan. The Republican side of the panel issued its own report, focusing on their frequent claims that the tech giants censor conservative online speech.

But limiting Big Tech’s efforts to expand into new business lines is very possible. The report highlighted several recent transactions such as Google’s pending acquisition of fitness device maker Fitbit, Amazon’s deal to buy autonomous vehicle company Zoox and even Facebook’s pickup of GIF search engine Giphy—the last which went for a price too small to warrant disclosure. It even mentioned Apple’s buyout of Beats Electronics from 2014. None of the above deals add any significant revenues to the companies’ existing business lines, but the report still argued that such moves “strengthens their market power and can close off market entry.” Google’s Fitbit acquisition is already drawing scrutiny from regulators.

The Wall Street Journal