‘Buy-or-bury’ the competition: study shows how big tech does it

Author Moonshot.news

Published on: 16/09/2021

The US Federal Trade Commission (FTC) has added arguments to its scrutinizing of big tech’s strategy to buy competitors and limit competition. The authority has said big tech companies use buy-or-bury scheme to maintain their dominance.  STC chair Lina M Khan said a study “highlights the systematic nature of their acquisition strategies”.

The STC study presents data on small acquisitions made by five big technology companies.

“While the Commission’s enforcement actions have already focused on how digital platforms can buy their way out of competing, this study highlights the systemic nature of their acquisition strategies,” said STC Chair Lina M. Khan.

“It captures the extent to which these firms have devoted tremendous resources to acquiring start-ups, patent portfolios, and entire teams of technologists—and how they were able to do so largely outside of our purview.”

The study focused on 616 transactions (that exclude hiring events and patent acquisitions) valued at or above $1 million. Among findings:

• More than 75% of transactions included non-compete clauses for founders and key employees of the acquired entities, with little variation in the percentage of transactions that had non-compete clauses across the five respondents. Higher value transactions were more likely to use non-compete clauses.

• Asset and control transactions, including voting security control and non-corporate interest control transactions, were the most common in each transaction range. For transactions exceeding $5 million, the majority were control transactions. Moreover, higher-value transactions were more likely to be control acquisitions.

• The majority of transactions in each transaction range were for domestic firms, with roughly two thirds of the entities acquired in each transaction range being domestic.

• At least 39.3% of the transactions in which the target company’s age was available involved firms that, as of the time of the consummation of the transaction, were less than five years old.

• The total number of transactions per calendar year across the five respondents ranged from 43 at its lowest per calendar year (in 2012) to 79 at its highest (in 2014), and remained relatively higher in 2015-2019 (ranging from 63 to 74 transactions) than in 2010-2013 (ranging from 43 to 63 transactions).
• The FTC board voted 5-0 to make the study public.