Banning Big Tech acquisitions could be a disaster for innovation in the US

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:

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.

14 June, 2021

Subscribe for updates

Subscribe for weekly advice covering product strategy, development operations, building teams and more.

Privacy and terms

I care about privacy as much as you do. I will only use your email address to send you this newsletter or to reach out to you directly, and you can unsubscribe at any time. I will not share, sell, or rent your email address to any third party, though I do store it the software I use to dispatch emails.

The information provided on this blog is for informational purposes only and should not be considered investment advice. The content on this blog is not a substitute for professional financial advice. The views and opinions expressed on this blog are solely those of the author and do not necessarily reflect the views of other organizations. The author makes no representations as to the accuracy, completeness, currentness, suitability, or validity of any information on this blog and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its use. The author may hold positions in the companies or products discussed on this blog. Always conduct your own research and consult a financial advisor before making any investment decisions.