Ending the Urge to Merge: The House and Senate Take on Big Tech M&A

The Platform Competition Opportunity Act of 2021 can work in concert with the rest of the “A Stronger Online Economy” package to tackle the problem of Big Tech.

If competition against Big Tech were a card game, you probably wouldn’t think it was a particularly fair one. The proverbial deck is stacked in the incumbents’ favor through both natural and artificial competitive barriers — from network effects, to the increasing returns to scope and scale of data, to the unprecedented power over the user interface. Lax enforcement has allowed Big Tech to gobble up competitors and they can now wield their power to prevent any efforts to weaken their stranglehold on online markets. Combatting this power is not as simple as tweaking one or two minor things. We need an all-of-the-above approach to both change fundamental market dynamics and strip away the tools that Big Tech has used so effectively to gain and maintain their dominant position. 

Thankfully, the House Judiciary Committee is well aware of competitive problems inherent in online markets, given their year-long investigation and over-400-page report issued late last year. Their response is a package of bills designed to strip away the structural advantages and anticompetitive tools Big Tech has used to gain and keep market power. Worried about the gravitational pull of network effects towards large, incumbent platforms? The ACCESS Act of 2021 is your answer. Platforms using their market overseer role to self-preference and protect their power? Try the American Innovation and Choice Online Act. Antitrust agencies don’t have the funds to go toe-to-toe with ever-growing Big Tech legal teams and bring big, bold cases? The Merger Filing Fee Modernization Act should fix that. Troubled by Big Tech’s gargantuan size and the inherent conflicts of interest in their business models? The Ending Platform Monopolies Act is for you. 

Thankfully the House Judiciary Committee is not alone in this fight as we also have Senate champions for Big Tech accountability. Senators Amy Klobuchar, Richard Blumenthal, Chuck Grassley, and Tom Cotton are leading the way in issuing modified versions of the House competition package. Highlights have included The Open App Markets Act from Senators Blumenthal and Blackburn to target market abuses in app stores and the American Innovation and Choice Online Act from Klobuchar, Grassley, and a bipartisan team of a dozen senators. Senator Klobuchar and Cotton’s most recent endeavor mirrors a pillar of the House package, the Platform Competition and Opportunity Act of 2021 (the “mergers bill”).  

Public Knowledge has written extensively about the package. One post provides a broad overview of the entire package. Another tackles the thorny question of how the antitrust bills will affect content moderation (spoiler: not much, and if anything, positively). A third goes in depth on the ACCESS Act and interoperability. This post will offer an analysis of the House and Senate versions of the Platform Competition and Opportunity Act of 2021.

Big Tech earned their moniker through aggressive and unprecedented growth. The fuel for that growth and the key ingredient in maintaining their dominant market position? Mergers and acquisitions. The stagnant technology markets of today, with relatively unchallenged firms dominating personal fiefdoms in the online economy, are exacerbated by Big Tech’s past anticompetitive acquisitions. Google’s dominance of online advertising finds its roots in the acquisition of Doubleclick and AdMob. Facebook’s dominance of social networking might not have been possible without gobbling up Instagram and WhatsApp. Amazon ensured it would be the only “Everything Store” by buying up niche rivals like Zappos and Diapers.com. Apple’s walled garden has both expanded and grown more oppressive as a direct result of acquisitions like Beats Music and Siri. 

In hindsight, it’s easy to criticize antitrust enforcers for waving these mergers through. After all, antitrust is supposed to protect competition, but it is clear today that many of the aforementioned acquisitions have harmed both competition and consumers. Under the Clayton Act, today’s main merger law, acquisitions where the effect “may be substantially to lessen competition, or to tend to create a monopoly” are prohibited. Two generations of courts have favored strict interpretations of this provision, made especially difficult in the tech sector due to the necessity of predicting (and proving) what a market will look like in the future. 

Enter the Platform Competition and Opportunity Act of 2021. If enacted into law, this bill would shift the burden of proving whether a merger harms competition onto the Big Tech titans themselves. Similar to the rest of the package, the bill only applies to a narrow category of “covered platforms” which today would mean Apple, Amazon, Facebook, Google, and (most likely) Microsoft. These five would have to prove, by “clear and convincing evidence” that their proposed acquisition does not fall into any one of five categories, else the acquisition is prohibited. They are: 

1) Acquisitions not subject to the Clayton Act (Section 7A carveouts). These are the mergers that are extremely unlikely to affect competition in any meaningful way and are already explicitly permitted in antitrust law. This category includes de minimis acquisitions and those transactions that occur in the ordinary course of business (think a company buying office supplies). 

2) Not competing with the platform itself. A covered platform can’t acquire a company that competes with the platform for any product or service offered by that platform. This covers the bread-and-butter antitrust analysis of two companies directly competing in the same identified market. Think Google trying to buy DuckDuckGo. 

3) Nascent or potential competition. A covered platform isn’t just prohibited from buying companies that compete with it right now, but also those that are likely to compete in the future. Think of Facebook’s successful acquisition of WhatsApp (a flourishing messaging service that could have become a social network competitor) as the kind of acquisition this provision is meant to block.  

4) Increasing market power. Beyond competitive threats, a covered platform’s acquisition cannot “enhance or increase…market position” for a product or service that is offered on, or “directly related to,” the platform. Think Amazon buying FedEx. This would further entrench its online delivery market power and freeze out would-be rivals that currently use FedEx instead of Amazon. Logistics/package fulfillment is a service Amazon offers, and it’s certainly directly related to the online retail platform. 

5) Maintaining market power. Finally, a covered platform cannot acquire a company that would bolster its “ability to maintain its market position” with a product or service offered on the platform or otherwise related to the platform. Anything that would make the covered platform harder to dislodge from its current dominant position, such as buying up a critical input or downstream buyer, would fall into this category. Think Facebook’s acquisition of Instagram. Instagram was then just a small company, but it posed a serious threat to Facebook on mobile phones, which were quickly rising in prominence. The Instagram acquisition may also have violated other parts of this proposed legislation, but to the extent that the acquisition helped Facebook maintain its market position and weather the seismic shift to mobile, it could have been stopped by this legislation.                               

Both versions of the bill have a $50 million floor for acquisitions, so small deals which often lack a competitive concern (even given inflation, all of the deals we think of today as having been problematic were well north of the $50 million mark). There’s only one substantive difference between the House and Senate versions of the merger bill. While both bills cover online platforms with a $600 billion market capitalization (the five aforementioned companies), the House version allows for more companies to eventually fall under the bill’s restrictions, while the Senate version will only ever apply to companies initially designated under the bill. This “stickiness” in the Senate bill removes worries that the restrictions meant to rein in today’s Big Tech titans could be applied more broadly. Crucially, as stated above, the bill would only affect five companies right now, so it’s not completely changing the merger landscape. But for those covered platforms, expect this bill to significantly curtail their ability to acquire would-be rivals. 

If you’re thinking that those categories cover most types of acquisitions Big Tech companies might make, you’re not wrong. These bills would promote competition against Big Tech, so that fresh and diverse ideas, people, and companies set the direction of future innovation on the internet. No one vision will be imposed on the internet. Yet some critics are concerned about the bill’s effects on a pretty narrow category of people — startup founders whose companies are built to be bought by Big Tech. Some startups today are created as an additional feature or synergy with a Big Tech platform where the most lucrative exit ramp is simply to be bought by a Big Tech titan. This bill would effectively end that practice. As of today, entrepreneurs that promise to competitively challenge Big Tech get laughed out of a potential investor’s office, while those that offer minor enhancements to today’s same platforms get showered in investment cash. Ask yourself if this kind of “innovation” has really been beneficial for you and other consumers or just beneficial for some venture capital firms and Big Tech itself. Consumers benefit when companies duke it out and fiercely compete over their money and attention, not when those same companies can rest on their laurels because any competitive threats have already been neutralized. Real innovation that actually benefits consumers and disrupts the Big Tech status quo will be more likely as a result of this bill, not less. 

This bill has the potential to change the innovation game for the better. Startups still have a buyout off-ramp if they so choose — it just has to be any other company that buys them, not one of these five already dominant companies. The Big Tech companies themselves remain free to invest and innovate—the bill just prevents them from buying success instead of earning it. In a world with interoperability and nondiscrimination requirements creating open and fair markets, I think you’ll see a lot more funding of companies that directly challenge the Big Tech platforms. When these monopolies become competitive markets, consumers can expect more and better choices. Who knows what innovations you could be enjoying right now if we hadn’t been mired in a Big Tech Dark Age — completely different ways for communities to communicate or even new tools for information discovery. This bill could help restore innovation to the market by reinstating real competition. 


In short, the Platform Competition Opportunity Act of 2021 can work in concert with the rest of the “A Stronger Online Economy” package to tackle the problem of Big Tech. The bill would remove perhaps their most potent tool of growth — mergers and acquisitions, yet we need to fundamentally change the structure of Big Tech markets to really let competition flourish. The Senate taking action on nondiscrimination and mergers is huge progress, and we need to build on it. Next, we need Senate companions for interoperability and structural separations, and then to put the entire package on President Biden’s desk to become law. It’s time to unstack the deck and force Big Tech to play a fair game.