ICYMI: Experts Discuss Finding the Right Balance in Competition Enforcement and Start-up Acquisitions

BY Heather Greenfield
April 5, 2022

Washington – FTC Commissioner Noah Phillips gave the keynote address at the Computer & Communications Industry Association’s annual panel on digital competition issues Tuesday ahead of  the American Bar Association (ABA) Antitrust Spring Meeting. Phillips told those at the lunch panel the two biggest antitrust changes he expects under the Biden administration FTC will be rulemaking and merger review.

This year’s panel, “Competition Enforcement & Start-up Acquisitions: What is the Right Balance?” focused on the benefits of start-up acquisitions; the necessary tools to assess the competitive effects of these transactions; and whether any changes are needed for merger control in this area.

Phillips opened his keynote with what is at stake in getting antitrust policy right, noting U.S. tech industry innovation and start-up culture were the envy of the world.

“Antitrust policy and proposed legislation should be careful not to take away incentives for entrepreneurs and investors to start a new business or invest in a new company,” Phillips said. 

As for Congressional bills that would ban acquisitions by some tech companies, Phillips said, 

“These proposals effectively close off exit through acquisition for many startups because their would-be acquirers would be prohibited from acquiring smaller firms or because the burden of proof would be flipped on its head, requiring the merging parties to prove the competitiveness of their merger rather than the government having to prove why the merger is anticompetitive.”

He went on to describe the antitrust landscape and choices ahead amid the increasingly politicized atmosphere: “Progressive and populist conservative antitrust reformers have a hostile view of M&A, the latter focused rhetorically on large technology companies, but applied throughout the economy. The Administration and antitrust agencies have adopted that hostility.”

CCIA’s Vice President of Global Competition and Regulatory Policy Krisztian Katona moderated the panel afterwards, asking about how to evaluate startup acquisitions and the potential impact of pending legislation on innovation and consumers. Notable statements from the panel of experts included:

Christopher Yoo, John H. Chestnut Professor of Law, Communication, and Computer and Information Science at the University of Pennsylvania Law School, speaking on the antitrust proposals before Congress:

Yoo said he was cynical about legislative proposals that target company size rather than market power, saying it didn’t seem like “a rule that is evidence based or designed to help consumers.”

Diana Moss, President, American Antitrust Institute, speaking on the antitrust proposals before Congress:

“The bills largely just apply to the top 5 companies and are missing all these other firms.”  If developing rules (for mergers and acquisitions) they need to apply to all the sector “not just the top five.”

Aurelien Portuese, Director of The Schumpeter Project on Competition Policy, Information Technology and Innovation Foundation; Adjunct Professor, Global Antitrust Institute, George Mason University speaking on the need to focus on the facts: The idea that the market has “never been as concentrated as now is not backed by evidence.”

And later on how to encourage the ability of inventors to secure funding and both start up and eventually pay back investors:

“We need to not just focus on entry barriers, but exit barriers.”

John Yun, Associate Professor of Law and the Deputy Executive Director at the Global Antitrust Institute (GAI), George Mason University Antonin Scalia School of Law, noting the details and evidence on mergers and acquisitions matter:

“Most acquisitions are small in value, only involving a handful of employees, who are often older. This result contradicts the blockbuster headline of the so-called killer acquisitions.”

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