September 25, 2019
Facebook Inc. sent a clear signal with its agreement to buy brain computing startup CTRL-Labs for at least $500 million: heightened regulatory scrutiny and intensifying antitrust probes won’t slow down its pace of acquisitions. Joel Mitnick comments.
Excerpts from “Facebook Defies Antitrust Warnings With Latest Startup Deal,” Bloomberg, September 25, 2019:
“This deal is certainly likely to get closer scrutiny than it otherwise would have if it occurred a year or two or three ago,” said Joel Mitnick, an antitrust lawyer at Cadwalader, Wickersham & Taft LLP. “It’s not because of the nature of the deal so much. It’s because big tech, including Facebook, is under microscopic scrutiny.”
Startup acquisitions in artificial intelligence warrant special scrutiny, according to a U.K. report on digital platforms. Large tech companies are best-positioned to take advantage of AI because of their control over massive amounts of data needed to power the technology, according to the report. The authors warned that competition from new entrants can be shut out through acquisitions that receive little or no scrutiny.
In the CTRL-Labs deal, antitrust enforcers will look at whether Facebook has plans to develop technology that would compete with the smaller firm’s, according to Mitnick at Cadwalader. That’s a traditional antitrust analysis of whether the acquirer’s intent is to eliminate a potential competitor.
A tougher case, he said, is based on the theory that Facebook is using the CTRL-Labs deal and other acquisitions as a way to eventually dominate the augmented technology market. That will require demonstrating that, without a challenge from antitrust enforcers, Facebook will be able to acquire new companies to tip the market in its favor.
“At the end of the day, is the FTC really going to bring an action that’s going to establish a new frontier of antitrust law?” Mitnick said. “To do that they’re going to have to pick a really good test case. I’m not sure what a really good test case would look like, and I don’t think the FTC knows either.”
Pro Bono Report 2019