What just happened? The FTC is going after Big Tech, and it doesn't just want the henchmen; it wants the "mob bosses." Those are the words of agency Chair Lina Khan, who wants to target those in the industry who are causing the most harm, rather than increasing the number of cases.
Khan made the mafia analogy while speaking at TechCrunch's Strictly VC event in Washington, D.C., earlier this week. "One thing that's been important for me is to make sure that we're actually looking at where we see the biggest harm."
"Where do we see players that are systematically driving these illegal behaviors? Being able to go after the 'mob boss' is going to be more effective than going after the henchman at the bottom," the FTC Chair added.
Khan's comments come at a time when the FTC is going after tech giants like never before. It was reported by the Wall Street Journal last week that the commission is investigating Microsoft's deal with AI startup Inflection. Microsoft hired Inflection's CEO and co-founder Mustafa Suleyman in March to become CEO and EVP of Microsoft AI. The Windows maker agreed to pay Inflection $650 million to license its AI software.
The FTC is looking into whether the Redmond firm structured the Inflection partnership to avoid a government antitrust review of the transaction.
The FTC has also taken an interest in the AI market. It recently struck a deal with the Department of Justice to investigate Microsoft, OpenAI, and Nvidia. Team Green, which has gained a $3 trillion valuation thanks to its advanced AI hardware sales, is being scrutinized to discover if it broke antitrust laws. OpenAI and its biggest investor, Microsoft, are also under the FTC spotlight.
During today's @StrictlyVC event, @FTC Chair @linakhanFTC says the agency's enforcement strategy prioritizes going after "the mob boss" pic.twitter.com/fIxAiIPj1a
– TechCrunch (@TechCrunch) June 11, 2024
Other tech giants have been the target of FTC investigations over the years, including Meta, Google, and Apple. Its antitrust investigation into Amazon started in 2019. The suit's main allegation is that Amazon abuses its dominance in the market to reward merchants who use its logistics (warehousing, shipping) and advertising services, punish those who don't, and block lower prices on competing websites.
Khan said if it is successful in the cases it brings against Big Tech, it can have a beneficial impact on the marketplace. It can also act as a deterrent for other companies as they might reconsider taking part in any potentially law-breaking deals over fears of an FTC probe.
"Five or six or seven years ago, when you were thinking about a potential deal, antitrust risk, or even the antitrust analysis, was nowhere near the top of the conversation," Khan said. "And now, it is up front and center. And so, for an enforcer, if you're having companies think about that legal issue on the front end, that's a really good thing, because we're not having to spend as many public resources taking on deals."
Khan said there are up to 3,000 merger filings reported in the US annually, but just 2% of them get a second look from the government. She added that it's safe to assume 98% of these deals go through, and that even for startups looking for an acquisition, it would be better to have six or seven or eight potential suitors rather than one or two as it would promote competition and ensure they get a better valuation.
