Big Tech’s Takeovers Finally Get Scrutiny
What cool things have we lost because mammoth companies swallowed up innovative start-ups?by Kara Swisher
With all the noisy news flooding the zone in Washington this week — including President Trump doing his best Michael “Fredo, you broke my heart” Corleone in taking out his perceived enemies as if it’s the end of “The Godfather: Part II” — it was easy to miss one of the most important moments in the ever-growing face-off between Big Tech and regulators.
That would be the move by the Federal Trade Commission to look at acquisitions by Amazon, Apple, Facebook, Alphabet and Microsoft over the last decade. The F.T.C. calls it a “wide-ranging” inquiry that doesn’t have “a specific law enforcement purpose.”
This might make the effort seem innocuous — with a great possibility of going nowhere fast. And it’s not quite a blockbuster announcement, like an antitrust investigation or a huge privacy lawsuit against the usual suspects in tech.
But the fact that a major federal agency is planning to do the quiet and critical work to suss out how the underground pipes of innovation might be getting clogged is an important moment for those seeking to rein in the power of the industry’s giants.
Most of the discussion around the dominance of Big Tech companies has been on the bigger and splashier acquisitions — like Facebook’s grab of Instagram and WhatsApp, or Amazon’s swallowing of Whole Foods, or Google’s wrangling of Nest and Fitbit. But it’s actually the smaller purchases that could turn out to be the best way to see Big Tech’s overreach.
Putting all the tiny little puzzle pieces of the picture together may, in fact, be devastating, especially if it yields important conclusions about strategy, about how a big company can stifle and mothball competition and, yes, what was said in the rooms where it all happened.
The F.T.C. commissioners voted unanimously for this expansion of their current investigations. That means a large pool of tech start-ups, numbering in the hundreds, will be in their microscope, and the inquiry aims to throw light on to those deals that were not subject to antitrust review and even those that were so small that they were unknown to the F.T.C.
Most of these acquisitions were usually under $100 million. Have you heard of ClusterK or Graphiq, used in Amazon Web Services? Or Parse, which went to Facebook, or Sparrow, taken over by Google? Neither have I.
Many of these small companies were bought because they provided technologies that filled a development gap in the purchaser’s organization. Or, sometimes, companies were acquired purely for the talent that came with the smaller business. This is called an “acqui-hire” and has been a common practice in Silicon Valley, with most of the products made by the smaller companies’ engineers suspended and many of the employees put on a rest-and-vest plan.
But in some cases that are not talked about as much, these kinds of acquisition efforts are more sinister in nature, designed to essentially strangle the baby start-up before it gets too big.
Is it too dramatic to compare it to “Knives Out”? No, since this move is known in Silicon Valley as a “killer acquisition.”
And if a giant tech company can’t make a purchase with murder in mind, and it’s spurned by the start-up in its sights? Well, I’d like to introduce you to the long-suffering Snapchat, which is still under siege from Facebook after declining its kind offer of enrichment.
There are many such examples, as the large companies in tech barrel down the highways like tractor-trailers, blocking all lanes and letting little past them. High in their fancy cabs, they think nothing of the damage they are doing below, with only open road ahead.
The F.T.C.’s chairman, Joe Simons, signaled as much in his statement: “This initiative will enable the commission to take a closer look at acquisitions in this important sector, and also to evaluate whether the federal agencies are getting adequate notice of transactions that might harm competition.”
And while the F.T.C. noted that this inquiry is essentially a fact-finding mission, it certainly could turn into more. “If during this study we see transactions that were problematic, all our options are on the table and it is conceivable we can initiate enforcement action with those deals,” Mr. Simons told reporters later.
Along with other investigations by the Justice Department and by aggressive state attorneys general, this F.T.C. information trove could yield a lot of insight about the past. That’s especially important since regulators have been hands-off with the tech industry since, well, forever, and this is just making up for lost time.
Still, what didn’t happen over the years because of the big tech companies’ aggressive maneuvering in reaching market dominance is something we’ll never know, no matter how many inquiries are done. All of the start-ups that were crushed, the life-changing products that were never fully developed. The entrepreneurs behind these companies have been scattered to the winds and their products long gone.
I asked the high-profile venture capitalist Ben Horowitz recently what he would not invest in going forward. He said: nothing in search (because of Google), social media (because of Facebook) and big commerce (because of Amazon).
We got another taste of these missed opportunities last month with congressional hearings featuring Sonos, Tile, Basecamp and PopSockets, all innovative start-ups that got crosswise with bigger tech players. I like to think of them — those brave enough to speak up — as the Resistance. Not surprisingly, after relating their struggles to compete, they warned that no one was safe as the giants move into arenas like health care, transportation and more.
“At some point, all companies will be competing against Big Tech, simply because Big Tech is bent on expanding until it does absolutely everything,” said Basecamp’s chief technology officer, David Heinemeier Hansson. “Help us, Congress. You’re our only hope.”
And perhaps, too, the F.T.C., which is woefully underfunded and understaffed for this battle — with a budget of just over $300 million and 1,100 employees — in comparison to the armies that tech can bring to bear, including endless lobbying mercenaries.
So, what else is there to say then, Mr. Simons, except that many of us are pulling for you?
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