The FTC’s approach to antitrust enforcement is counterproductive

The message from regulators is clear: Big Tech’s excesses will no longer be tolerated. In recent months, the Federal Trade Commission and Department of Justice have issued an unprecedented number of legal challenges to tech mergers. In addition, the FTC has sued Amazon for “illegally maintaining monopoly power,” the DOJ is pursuing Google for “monopolizing digital advertising tech,” and both have proposed changes to M&A rules that would attach vastly more onerous transactional data requirements to pricier deals.

I absolutely share the FTC’s concerns about the tech giants being too powerful, and see the need for an interventionist watchdog to curb abuses of market dominance. Two important principles are at stake. First, no company should be more powerful than a country or government. That delicate balance of power between the private and public sectors is part of what has made the Western world an economic powerhouse.

Second, the laissez-faire approach has proven not to work. Left to their own devices, the tech giants have repeatedly abused their position, not least by going on shopping sprees to snap up potential rivals. This monopolistic behavior has stifled innovation, further entrenching the positions of a handful of all-powerful companies.

A longstanding critic of Big Tech, FTC Chair Lina M. Khan first set out her stall in an article for Yale Law Review Journal that focused on Amazon’s alleged anti-competitive practices, arguing that “the current framework in antitrust—specifically its pegging competition to ‘consumer welfare,’ defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy.”

U.S. antitrust laws are, indeed, no longer fit for purpose in today’s universe of hypergrowth and multi-sector behemoths, and the definition of anticompetitive behavior needs to be broadened beyond a narrow consumer welfare focus. For antitrust violations to be recognized by a U.S. court it has been necessary to prove that a merger would lead to price increases for consumers. But that’s almost a side issue in a tech ecosystem where investors tolerate losses for decades and the cost of adding a user is minimal, which opens the door to aggressive price dumping and market consolidation.

Yes, the need for a new paradigm in antitrust is acute. Yet as regulators hammer out the details, they should be guided by the principle that tech startups and innovation must be prioritized. That isn’t the case right now. The proposed M&A rule changes would require both parties to provide a raft of extra information, including details regarding previous acquisitions, the transaction’s rationale, projected revenue streams, transactional analyses, and internal documents describing market conditions, as well as data on employees. Such requirements would drive up legal costs, increase the time it takes for firms to prepare their filings, and make deal closure less certain (and potentially financially punitive should a deal fall through). These proposed changes, combined with the series of legal challenges to tech mergers, have already had a chilling effect on larger U.S. deals.

So, how best to strike a balance between clamping down on anti-competitive behavior and ensuring the startup economy thrives? Here are seven suggestions:

1. Focus regulatory interventions on those few deals which fundamentally alter market dynamics: Increasing the costs, burden, and time required to prepare filings for M&A transactions is not the right approach. Providing extra information and data to regulators is no more than a manageable annoyance for Big Tech, thanks to their expansive in-house resources. But placing this burden on small tech companies—which will have to outsource an administrative process that could take up to several months—could make it increasingly difficult for them to be acquired. The current screening process is sufficient. The key is what to do when it becomes clear that a merger is a potential issue. Government resources should only be allocated to deals that fundamentally distort the market, either because of their size or where a company makes a large number of small acquisitions over a short period. 
   
2. Focus regulatory interventions on those few deals which fundamentally alter market dynamics: Increasing the costs, burden, and time required to prepare filings for M&A transactions is not the right approach. Providing extra information and data to regulators is no more than a manageable annoyance for Big Tech, thanks to their expansive in-house resources. But placing this burden on small tech companies—which will have to outsource an administrative process that could take up to several months—could make it increasingly difficult for them to be acquired. The current screening process is sufficient. The key is what to do when it becomes clear that a merger is a potential issue. Government resources should only be allocated to deals that fundamentally distort the market, either because of their size or where a company makes a large number of small acquisitions over a short period. 
   
3. Focus regulatory interventions on those few deals which fundamentally alter market dynamics: Increasing the costs, burden, and time required to prepare filings for M&A transactions is not the right approach. Providing extra information and data to regulators is no more than a manageable annoyance for Big Tech, thanks to their expansive in-house resources. But placing this burden on small tech companies—which will have to outsource an administrative process that could take up to several months—could make it increasingly difficult for them to be acquired. The current screening process is sufficient. The key is what to do when it becomes clear that a merger is a potential issue. Government resources should only be allocated to deals that fundamentally distort the market, either because of their size or where a company makes a large number of small acquisitions over a short period. 
   
4. Focus regulatory interventions on those few deals which fundamentally alter market dynamics: Increasing the costs, burden, and time required to prepare filings for M&A transactions is not the right approach. Providing extra information and data to regulators is no more than a manageable annoyance for Big Tech, thanks to their expansive in-house resources. But placing this burden on small tech companies—which will have to outsource an administrative process that could take up to several months—could make it increasingly difficult for them to be acquired. The current screening process is sufficient. The key is what to do when it becomes clear that a merger is a potential issue. Government resources should only be allocated to deals that fundamentally distort the market, either because of their size or where a company makes a large number of small acquisitions over a short period. 
   
5. Focus regulatory interventions on those few deals which fundamentally alter market dynamics: Increasing the costs, burden, and time required to prepare filings for M&A transactions is not the right approach. Providing extra information and data to regulators is no more than a manageable annoyance for Big Tech, thanks to their expansive in-house resources. But placing this burden on small tech companies—which will have to outsource an administrative process that could take up to several months—could make it increasingly difficult for them to be acquired. The current screening process is sufficient. The key is what to do when it becomes clear that a merger is a potential issue. Government resources should only be allocated to deals that fundamentally distort the market, either because of their size or where a company makes a large number of small acquisitions over a short period. 
   
6. Focus regulatory interventions on those few deals which fundamentally alter market dynamics: Increasing the costs, burden, and time required to prepare filings for M&A transactions is not the right approach. Providing extra information and data to regulators is no more than a manageable annoyance for Big Tech, thanks to their expansive in-house resources. But placing this burden on small tech companies—which will have to outsource an administrative process that could take up to several months—could make it increasingly difficult for them to be acquired. The current screening process is sufficient. The key is what to do when it becomes clear that a merger is a potential issue. Government resources should only be allocated to deals that fundamentally distort the market, either because of their size or where a company makes a large number of small acquisitions over a short period. 
   
7. Focus regulatory interventions on those few deals which fundamentally alter market dynamics: Increasing the costs, burden, and time required to prepare filings for M&A transactions is not the right approach. Providing extra information and data to regulators is no more than a manageable annoyance for Big Tech, thanks to their expansive in-house resources. But placing this burden on small tech companies—which will have to outsource an administrative process that could take up to several months—could make it increasingly difficult for them to be acquired. The current screening process is sufficient. The key is what to do when it becomes clear that a merger is a potential issue. Government resources should only be allocated to deals that fundamentally distort the market, either because of their size or where a company makes a large number of small acquisitions over a short period. 

Rather than simply pursuing and attempting to “punish” Big Tech for making too much money (the tech giants and taxation is a whole other topic), the FTC has a once-in-a-generation chance not only to protect consumers but to lead the way globally in ensuring a vibrant and competitive innovation ecosystem. Relying on legal threats and requiring overburdensome transactional data is too narrow and, indeed, counterproductive. For maximum real world impact, regulators should prioritize these seven areas instead.

Techstars CEO Maëlle Gavet has been a senior executive at numerous large tech companies around the world, including Ozon, the Priceline Group (OpenTable, Kayak, Booking.com), and Compass. She was also a Principal at the Boston Consulting Group for six years. She is the author of Trampled by Unicorns: Big Tech’s Empathy Problem and How to Fix It.

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