Young Research & Publishing Inc.

Investment Research Since 1978

Compensation was paid to utilize rankings. Click here to read full disclosure.

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Retirement Compounders®
  • Free Email Signup

Increased Scrutiny and DOJ Lawsuits Temper Tech M&A

November 30, 2020 By Jeremy Jones, CFA

By kenkistler @ Shutterstock.com

In the Financial Times, Tom Braithwaite reports on how lawsuits and a changing climate in Washington D.C. are affecting Big Tech’s interest in acquisitions. He writes:

Today’s tech giants were built on innovation — just not always their own. At key moments in their history, Google and Facebook made savvy acquisitions of smaller companies that supercharged their growth or snuffed out future competition.

Now that strategy has big obstacles. The latest sign came this month when the US Department of Justice sued to halt Visa’s $5.3bn acquisition of fintech group Plaid. The deal “must be stopped”, the government lawyers wrote, as it would “eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers”.

Visa controls about 70 per cent of online debit transactions in the US. Plaid, which was founded in 2013 as a developer of software to share financial data between bank accounts and third-party apps, is not even in the payments market but is developing its own debit tool.

The DoJ peppered its lawsuit with incriminating-sounding messages from Visa’s executives. Acquiring Plaid when it was preparing to launch a “threat to our important US debit business” would be an “insurance policy”, chief executive Al Kelly told his CFO. Another executive is quoted as saying: “I don’t want to be IBM to their Microsoft.”

Colourful though this may be, substantively it is all quite weak. The clue is in the word “nascent”.

“Normally, with mergers you worry about, one firm has 40 per cent and another has 30 per cent,” said George Hay, a professor and antitrust expert at Cornell Law School. “It’s nothing like that here. No matter how you define the market, Plaid is tiny. There’s not a lot of good case law on acquisitions of very small firms that might grow into a potential competitor.”

As Mr Hay points out, the government’s case has an additional prong that might prove more effective: going after Visa as a monopolist. The main reason the DoJ is likely to prevail, however, is nothing to do with the merits of the case. Companies tend to abandon mergers rather than fight the government in court, even when they have a significant chance of victory.

Most companies do not need a lawsuit to know the mood music in Washington has changed. In 2007, Google’s acquisition of internet advertising platform DoubleClick was approved by competition authorities. Facebook’s acquisitions of photo app Instagram in 2012 and messaging app WhatsApp in 2014 were waved through. Yet in the past few weeks, the Federal Trade Commission has been reported to be reviewing those acquisitions all over again and the DoJ has sued Google, accusing it of illegally protecting a monopoly in search advertising. A growing number of lawmakers want big tech companies broken up.

Read more here.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Small Deals by Big Tech Coming Under Increasing Scrutiny from FTC
  • Tech Loses its Biggest Stars
  • The Problem with Tech Stocks Today
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. CNBC has ranked Richard C. Young & Co., Ltd. as one of the Top 100 Financial Advisors in the nation (2019-2022) Disclosure. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • Money Market Assets Hit Record High: $5.4 Trillion - May 26, 2023
  • The Mania in AI Stocks Has Arrived - May 25, 2023
  • The Wisdom of Sam Zell - May 24, 2023

Search Young Research

Most Popular

  • Wellington and Wellesley Funds Not Managed by Vanguard
  • The Single Worst Market Timing Event in History
  • “No Way I’m Spending That Much on Those”
  • The Power of a Compound Interest Table
  • Should America Move Closer to the Saudis, or Push them Away?
  • The War Machine's Manpower Problem
  • Will the Fed Hold Up Its End of the Bargain?
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • “You Didn’t Eat That Again, Did You?”
  • Mr. Protect and Preserve: For Where We’re Going

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

The Importance of a Balanced Portfolio

Invest with Peace of Mind and Comfort

What Kind of Life Are You Investing For?

RSS The Latest at Richardcyoung.com

  • The Elephant in the Room
  • “Then One Day the Grandfather was Gone”
  • My Key West Garden Office
  • Does a New Antiviral Covid Drug Do More Harm than Good?
  • The Biden Regime Treats Americans Worse than Illegal Immigrants
  • Key West #1 Wine Shop & Wine Expert
  • California – First to Enact Statewide Gun and Ammo Tax
  • “No Way I’m Spending That Much on Those”
  • How Much Can Grid Battery Storage Help?
  • Fighting Russian Power with a Hill of Crosses

RSS The Latest at Yoursurvivalguy.com

  • “Then One Day the Grandfather was Gone”
  • “No Way I’m Spending That Much on Those”
  • What Trade Policy Serves America’s National Interest Best?
  • California Wants to Make the 2nd Amendment Unaffordable
  • “You Didn’t Eat That Again, Did You?”
  • Is McCarthy Up to the Task?
  • Rising Costs Are Hammering Commercial Real Estate
  • Your Survival Guy Fishing with Dolphins
  • Judge Shatters California High Capacity Magazine Ban
  • Is Your Water Safe to Drink? NOLA Residents Aren’t Sure

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2023 | Terms & Conditions

 

Loading Comments...
 

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.