Three of the country’s biggest companies—tech giants
—stand a good chance of having federal regulators scrutinize their acquisitions under a new antitrust directive from President
an industry expert contends.
D.A. Davidson analyst
made his assessment based on the criteria laid out by Biden in an executive order last week. The president directed the Federal Trade Commission to closely examine the rise of “dominant internet platforms,” especially those that target growing competitors, offer free products, or collect user data. The mandate applies to all deals, even ones sealed for years.
In Forte’s estimation, Amazon (ticker: AMZN), Apple (AAPL), and Facebook (FB) all will be on the FTC’s radar, although he thinks Facebook has the most to worry about because it meets checks every one of Biden’s benchmarks.
First, Facebook logs user activity—a user’s browser history, who a user follows, when a user posts a comment, or what ad a user clicks on, for example. Privacy rights advocates have pushed back against the tracking for years.
Second, the website also offers up a host of free products—from its own Messenger, Instagram, and WhatsApp apps to samples and giveaways by companies and users.
Finally, Facebook has a history of scooping up promising competitors, notably Instagram for $1 billion in 2012 and WhatsApp for $19 billion in 2014. In June, the company notched a big win when a federal judge dismissed an FTC lawsuit seeking to spin off Instagram and WhatsApp. The agency, however, can still drag Facebook back into court by amending the complaint.
Facebook got into the deal-making game more than a decade ago, not all that long after
launched the website in 2004. The company made 16 deals in 2012—the same year it acquired Instagram—and has made five to nine deals every year since 2015, FactSet data shows. Last year, the company made or announced seven deals—including its acquisition of image-sharing app Giphy—and has announced three deals so far in 2021.
As for Amazon, Forte predicts that the FTC is most likely to scrutinize the company’s acquisitions of warehouse robot maker Kiva Systems for $775 million in 2012, videogame streaming platform Twitch for $970 million in 2014, and Whole Foods for $13.7 billion in 2017. He also pointed out that the president’s directive could make the company’s pending $8.45 billion acquisition of movie studio MGM Holdings more challenging.
With Apple, Forte said investors have less to be concerned about. The $3 billion acquisition of Beats in 2014 was one of Apple’s largest, and Forte wrote that he has found no evidence the government is examining the deal, or perceives it negatively. Beats makes headphones and other consumer audio gadgets.
Shares of the Big Tech stocks have mostly brushed off the news. In the past three trading days, Apple rose 1.8%, and Facebook (FB) advanced 2%. Amazon.com declined, dropping 0.8%. In the same period, the S&P 500 index gained 1.5%.
Write to Max A. Cherney at [email protected]