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Many VCs must feel that the deck is currently stacked against them.
The Biden administration’s antitrust regulators are trying to prevent tech companies from amassing more power, including via acquisitions, at a time when the VC ecosystem is in desperate need of exits.
On Wednesday, officials at the Federal Trade Commission and the Justice Department released stringent new guidelines for evaluating regulatory approval of proposed mergers. The draft guidelines outline regulators’ aggressive antitrust approach over the last two years.
While the proposed rules could deter some acquisitions, antitrust attorneys say that the new guidelines are based on dated case law and, therefore, are unlikely to help the FTC and DOJ succeed at blocking mergers.
“This doesn’t change the law,” said Maureen Ohlhausen, antitrust and competition partner at Baker Botts. “You have the same chance of winning in court tomorrow that you had yesterday before these guidelines [were released.]”
So far, the administration has built a poor record of blocking mergers in the courts.
The FTC has yet to win a case that has been brought under Lina Khan, who was appointed as the agency’s chair in 2021. Last week, a federal judge denied the FTC’s motion to stop Microsoft‘s $69 billion acquisition of video game maker Activision Blizzard. The court also sided against the agency in its challenge of Meta’s $400 million purchase of Andreessen Horowitz-backed VR company Within.
Over the last 12 months, buyers have realized that getting a deal done may involve litigating a merger challenge in federal court. “That strategy doesn’t change under these guidelines,” said Jan Rybnicek, partner in Freshfields’ antitrust, competition and trade group.
Rybnicek said the regulators’ guidelines cite cases from 40 years ago. “The federal courts will obviously research, review and give weight, where appropriate, to the more modern cases,” he said.
Although the current antitrust regulators have been largely unsuccessful in blocking mergers, their approach is still likely to deter dealmaking. Acquirers have to be ready for a lengthy review process and increased legal costs.
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