Last week, House lawmakers announced their bipartisan legislative agenda to regulate Big Tech, led by Antitrust Subcommittee Chairman David N. Cicilline. This agenda consists of five bipartisan bills tackling Big Tech from multiple angles. While some proposals seem fair (i.e., updating filing fees for mergers for the first time in two decades), others, as is often the case with tech regulation, will likely come with unintended consequences.

One such proposal that could, in my opinion, be disastrous for innovation, is the Platform Competition and Opportunity Act of 2021, which effectively bans Big Tech from making acquisitions.

More specifically, all acquisitions by qualified companies are banned, unless the acquirer can demonstrate:

  • The parties don't have any competing products or services and don't have the likely potential to compete in the future.
  • The acquisition would not improve or help to maintain the acquirers market position for any existing products or services.
  • The acquisition does not improve or help to maintain the acquirers competitiveness for user attention.
  • The acquisition does not grant the acquirer access to new data that would improve or help to maintain the acquirers market position for any existing products or services.

This exemption criteria is so broad it effectively bans all acquisitions from large tech companies. Which, I think would lead to terrible outcomes for the whole technology industry in the US, given that the potentiality of a Big Tech exit (i.e., selling your company to one of the big industry players) is a major motivator for founders and investors to take risky bets on novel ideas. Taking this critical option for return on investment off the table would have a significant impact venture capital and innovation as a whole. The flywheel of each generation of tech success stories (and their alumni) funding the next generation has been a major reason for the success of Silicon Valley over other markets around the world.

Should acquisitions be further regulated at all?

All of this is not to say that technology acquisitions do not need reform. In fact, I think this is one of the most important areas for further regulation when it comes to Big Tech. It's very likely that there would be a lot more competition in social media, for example, if Facebook was not able to acquire WhatsApp and Instagram. But, there's a big difference between a Big Tech player like Facebook absorbing all of their direct competitors, and them acquiring an innovator like Oculus to legitimise the VR space and reward their founders and investors. I believe a bill with a narrower criteria could give Congress their desired outcomes without causing unintended harm to the wider technology industry.

Other proposals

As I mentioned, the House's agenda consists of five bipartisan bills, and these proposed limitations on acquisitions are only a part of the over all plan. Below is a summary of all five, from Cicilline's press release:

“A Stronger Online Economy: Opportunity, Innovation, Choice” consists of five bipartisan bills drafted by lawmakers on the Antitrust Subcommittee, which last year completed a 16-month investigation into the state of competition in the digital marketplace and the unregulated power wielded by Amazon, Apple, Facebook, and Google.

  • The “American Innovation and Choice Online Act” to prohibit discriminatory conduct by dominant platforms, including a ban on self-preferencing and picking winners and losers online. The bill is sponsored by Chairman Cicilline and co-sponsored by U.S. Rep. Lance Gooden (TX-05).
  • The “Platform Competition and Opportunity Act” prohibits acquisitions of competitive threats by dominant platforms, as well acquisitions that expand or entrench the market power of online platforms. The bill is sponsored by U.S. Rep. Hakeem Jeffries (NY-08) and co-sponsored by Ranking Member Buck.
  • The “Ending Platform Monopolies Act” eliminates the ability of dominant platforms to leverage their control over across multiple business lines to self-preference and disadvantage competitors in ways that undermine free and fair competition. The bill is sponsored by U.S. Rep. Pramila Jayapal (WA-07) and co-sponsored by U.S. Rep. Lance Gooden (TX-05).
  • The “Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act” promotes competition online by lowering barriers to entry and switching costs for businesses and consumers through interoperability and data portability requirements. This bill is sponsored by U.S. Rep. Mary Gay Scanlon (PA-05) and co-sponsored by U.S. Rep. Burgess Owens (UT-04).
  • The “Merger Filing Fee Modernization Act” updates filing fees for mergers for the first time in two decades to ensure that Department of Justice and Federal Trade Commission have the resources they need to aggressively enforce the antitrust laws. This bill is sponsored by U.S. Rep. Joe Neguse (CO-02) and co-sponsored by U.S. Rep. Victoria Spartz (IN-05).