How has the FTC and in particular Lina Khan affected mergers and acquisitions in the technology sector?

Answer
Lina Khan's tenure as FTC Chair has significantly impacted mergers and acquisitions in the technology sector in several ways:
  1. Increased scrutiny and challenges to tech mergers: Under Khan's leadership, the FTC has taken a more aggressive stance in challenging mergers and acquisitions by large tech companies. For example, the FTC sued to block Meta's acquisition of virtual reality company Within and Microsoft's acquisition of gaming company Activision Blizzard. While the FTC ultimately lost both of these challenges in court, it signals a heightened level of scrutiny for tech deals.
  2. New merger guidelines: In 2023, the FTC announced proposed updates to its merger guidelines, which aim to limit mergers and acquisitions more broadly. These guidelines could make it more difficult and expensive for tech companies to pursue M&A activities.
  3. Focus on unreported acquisitions: In 2021, the FTC presented a report on nearly a decade of unreported acquisitions by major tech companies like Alphabet, Amazon, Apple, Facebook, and Microsoft. This report highlighted how these companies were able to make numerous smaller acquisitions outside of regulatory purview.
  4. Emphasis on start-up acquisitions: Khan has expressed particular concern about large tech companies acquiring start-ups and potential competitors. The FTC report found that in more than half of the transactions studied, the acquired company had 10 or fewer employees.
  5. Broader interpretation of antitrust concerns: Khan's FTC is looking beyond traditional measures of market competition and consumer welfare, considering factors like data accumulation and potential future competition.
  6. Increased litigation costs: The FTC's more aggressive stance has led to increased litigation costs for tech companies pursuing mergers and acquisitions. This may disproportionately impact smaller companies that cannot afford prolonged legal battles.
  7. Potential chilling effect on innovation: Some critics argue that Khan's approach could discourage innovation by making it harder for start-ups to be acquired, which is often a key exit strategy for new tech ventures.
While Khan's FTC has faced some setbacks in court, her tenure has clearly signaled a shift towards stricter antitrust enforcement in the tech sector, particularly regarding mergers and acquisitions. This has created a more challenging environment for tech companies looking to grow through acquisitions, especially for deals involving larger, established firms.
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