Big Tech’s Takeovers Finally Get Scrutiny

What cool things have we lost because mammoth companies swallowed up innovative start-ups?

Comments: 42

  1. The FTC on a fact-finding mission. Why does this sound like a convenient undercutting of Senator Warren’s focus on breaking up large monopolistic companies? On Senator Sanders’ focus on the power of large corporations? We’re on it, says the FCC. Yeah, and a few years down the road, we might hear some results, probably that all those little companies are better off in the bellies of the whales. And are they going to be able to get behind any/all those nondisclosure clauses in the sales agreements? Subpoena witnesses to testify under oath? Look at emails, documents, records? Maybe they could ask the royal purse to declare an emergency- and increase their budget - in line with their new duties. Once again, this is what this administration, and Republican enablers have done to my trust in government. Go Bernie. Go Liz. Now, more than ever.

  2. In these times where what you buy, you do not own What you own you aren't allowed to repair as you like Where you're not a consumer, you are the product... Call me cynical that anything will change anytime soon.

  3. I'm not really sure what to make of this. I'm not a fan of Bill Gates, Zuckerberg or Bezos. Yet technology is the economy today. Last year's market rise was driven primarily through tech. There are ways to get around the Big Tech buyouts. One could have some really revolutionary tech (and let's be honest, Microsoft, Facebook, Google and Amazon are working with the tech of the early 2010s). If it's consumer tech you're worried about, then by all means, regulate Big Tech. But the revolutionary tech of the future will not be consumer tech.

  4. This is closing the barn door after horses have left. The acquisitions were approved for decades with no regard to the anti trust laws already in place and to common sense and basic economics, on the pretense that consumer does not get a hit on the pocket book. When pricing power and product design gets consolidated consumer and the workers always get hurt as well as innovation but it is not easy to quantify in the early stages. Oracle buying Peoplesoft, Retek, Siebel, IBM, Netezza and Red Hat; Cisco swallowing many, then there was the Digital, Compaq, HP dance... Did any of these render a market more competitive or innovative in any product category. FTC cannot undo what they did. Can they get a new legislative initiative started in the age of Trump? I doubt it.

  5. @me thx, yes, they have the authority, what I meant they cannot undo all those acquisitions I mentioned they let happen for years, it is unrealistic, and the big boys will fight back.

  6. My dad's friend Nathan 'Available' Jones was a Houston entrepreneur in the 50s who supplied drilling platforms with giant batteries to keep their government-mandated lights running. The story told in the book 'From Space to Earth', a history of the photovoltaic cell, was the story of Available buying the very first company who had achieved a commercially viable electric return, and shelving it. He just didn't want the competition.

  7. Buy to reduce competition, and buy to bury are how monopolies dominate a market. It keeps new and better down and robs talent of rewards and the public of choice. It's good that there will be research but now that politicians court and serve donors instead of voters we need amendments to get rid of Citizens United and related Supreme Court rulings to deal with the corruption that will prevent problems the research reveals from being fixed.

  8. So you are saying that the decision to sell a small company with minimal revenue and no profits to a giant company for hundreds of millions of dollars should not be made by the owner of the small company, but should be made by the government, as advised by a journalist? Only someone who has never taken a business risk would even have that thought, much less suggest it.

  9. When big tech swallows a start up, it's usually to develop that company's "cool things". In fact, many startups are formed with the hope of being bought out. So I doubt many innovations have been lost.

  10. @Robert: Well established companies buy and suppress innovations that threaten profitability of their established products. As a rule, the longer something has been produced, the lower its cost to make more of it.

  11. Robert, you are exactly right. I worked as general counsel for a company years ago that went from a couple of founders to 2,000 people in a few years. We gobbled up about 50 companies or business units in the process. That was good for innovation and good for competition. We don't need more startups. There are plenty of them. We need more young companies that are not tiny but have quickly grown big enough to compete with the big boys. The only way to do that -- the only way -- is to grow by acquisition. We are stifling, not nurturing, those young companies. Proponents of merger reviews say that the government can tell the difference between beneficial and harmful acquisitions. I don't doubt their motives, but I doubt their evidence. I think that is impossible. In any event, this idea that the FTC or the Justice Department should be making policy changes based on laws made a century or more ago is misbegotten. Congress should say what is proper and what is not, not regulators.

  12. @Steve Bolger Really - you know that the conversation was mainly about software - right? Software gets 'cheaper' the longer it is produced?

  13. The whole concept of "intellectual property" needs rethinking for the 21st Century.

  14. Well, one of the "cool things" we have lost is the right of free expression.

  15. I own a small business. PLEASE, let one of those companies acquire me.

  16. Interesting development. In some ways, this is all about economic inefficiencies when certain entities have too much money and resources. For cash-flush high technology companies, they can simply buy a smaller company just so they can keep it from their competitors. But other examples abound. Here in Los Angeles, despite the housing shortage, I see a lot of homes empty as their owners view them simply as a form of financial investment. Why rent when you want the flexibility to sell and don't need the stream of income (or risk being caught up in rent control)? Even in non-high tech workplaces, my colleagues who are pulling down $200K or more per year typically aren't coming into the office on Fridays and even on Mondays: when you're pulling in that kind of money, every weekend is an opportunity for a fabulous mini-vacation. Indeed, I think too much money and too much economic inequality are making American economy inefficient.

  17. Well said. But the quid pro quos that can be brought to bear are just too many. The funny money created by the soaring stock market fueled by easy money from the central banks has destroyed value. The next new thing, victory gardens. Till some nut invents and app and takes that over too.

  18. Great article. In addition to investigations, we need LAWS that protect us from monopoly impact on more than just PRICES. Monopolies inhibit wages and innovation. They have outsized POLITICAL POWER that impacts nearly everything. They inhibit democracy itself, and are a major cause of the near extinction of the middle class. Check out what the candidates are stating about monopolies. Warren and Sanders have a deep understanding of their corrosive impact on our work and communities.

  19. @Kraig: Don't even think of advocating black pipe fiber, compulsory licensing of content, and public library index to it all, in today's tech industry.

  20. At this point breaking up big tech is a bit like breaking up AT&T was last century. We got a group of smaller companies, that then went and acquired each other, so that the monopoly was replaced by a few barely competing entities.

  21. @John Graybeard: Twisted-pair telephony was a natural monopoly where the monopolist suppressed innovation to extend product lifespan. So is fiber-optic communications, but content-owners want to control communications to charge a premium for their content now.

  22. Use Duckduckgo not google, no tracking. Use Firefox, not Google chrome. Ever since software was allowed to be patented, not copywritten, software innovation has been a mess... best to port your code overseas to protect from patent-troll lawsuits.

  23. Funny, most startups want to get bought out by a bigger fish. They figure either the big fish will give them market access or economy of scale that they can't get themselves, or the big fish will make their product vanish into the bureaucracy and the Tyranny of Twits, leaving them nothing but the big payout, which many are happy with. The bad scenario is when the small fish gets eaten, the top people are suckered with share options etc. into "joining the team", and then they are forced to watch their life's work wither and die. To which many would say, "more fool them".

  24. This practice by big tech preventing new products from the marketplace is a bit like "catch and kill" in the media business where The National Enquirer buys the rights to a big story only to prevent its publication.

  25. Surely you jest, Kara… https://www.vanityfair.com/news/2016/05/theranos-silicon-valley-media “…if you peel back all of the layers of this tale, at the center you will find one of the more insidious culprits: the Silicon Valley tech press. They embraced Holmes and her start-up with a surprising paucity of questions about the technology she had supposedly developed… https://pando.com/2016/05/03/nick-bilton-has-got-be-kidding-you/ “…Why does Re/Code get a pass? Perhaps it has something to do with the fact that… Fool you once, shame on Si Valley… Fool you twice… https://www.forbes.com/sites/christopherhelman/2020/02/13/the-forbes-investigation-how-bloom-energy-blew-through-billions-promising-cheap-green-tech-that-falls-short/... See, Kara – while the substantive tell at T’nos was a yawning divergence between patent filings and stated vision, actually far simpler with B’m… All anyone (WSJ, Forbes, NYT (?)…) would’ve had to do is ask any supplier of gas-fired cogenerators how the overall efficiency of one of their units compared to one of these cells… For clarity, most every bit of junk energy science that’s been foisted on us during the past decade has been foisted by the money side of SiVa, not the tech side… Because they allegedly foisted it on the gov’t, once they realized none of the stuff worked at scale… Don’t believe me – go read up on how they try to depict gas being used in fuel cells as somehow different from gas used in turbines…

  26. How is this unique to the tech industry? I suspect that the NY Times anti-tech agenda stems more from the name recognition tech companies have amongst the Times' readership rather than any unique wrongs the industry are committing. Why aren't there as many opinion columns railing against big oil? Against big pharma? These industries are arguable doing many worse things than tech.

  27. I've been battling in the trenches for decades as an M&A lawyer in Silicon Valley. This kind of effort is misguided and doomed. Companies grow here by acquisition. Organic growth is too slow. We should foster, not stifle, acquisitions to increase innovation and growth. Most acquisitions will promote competition. A few will harm it. But at the time the acquisition is made there is no way to tell which will do which. They look alike. We need an upfront standard if we are going to punish an acquiring company. There is, and can be, no such standard. So coming in after the fact and saying that an acquisition was improper won't work. The lure of socialism is that a perfect government can do better at controlling the economy than market forces. The trouble is that governments are far from perfect. That's why socialism sounds good in theory, but always, always, always turns out bad in practice. Sure, when companies engage in blatantly abusive conduct, the government should step in. When it comes to nuance and nudges, though, the government should tread very carefully indeed. In most cases, better to stay out of it completely. "First, do no harm" should be the watchword. Unless it is clear that you will do good rather than harm, don't do anything.

  28. @John Smithson: The sellers of these startups are typically the founders with most or all of the stock. Software acquisitions usually get folded into the buyer's existing coding operation.

  29. @John Smithson So you are saying the one with the most dough can't think of a better mouse trap. So swallow up the new mouse trap and keep selling us their crappy one. That seems to be the outcome. Microsoft has been producing a sub standard, overpriced product for decades now. How and why, by stifling competition and because the can. Just remember, when there was no left to come for, they came for us.

  30. @Paul I am not sure you know the modern Microsoft - two-thirds of its revenue come from business and cloud software - not personal software. Both of which are incredibly competitive and the way you win is via innovation and excellence. Which is why MS stock has been a top performer for the past few years.

  31. The government thankfully doesn't have the resources to police the M&A market in the tech area or any other. Freedom of contract in the area of combinations should have an extremely broad scope, with government scrutiny only coming in to play on the largest deals.

  32. The key word is antitrust – the laws are already on the books. In the 20th century, it was understood that a competitive marketplace was essential for an efficient economy with a minimum of corruption. That idea seems to have been lost, and we need to bring it back. I would suggest breaking up Apple, Amazon, Alphabet (Google), Facebook, and others, each into multiple competing companies. This will not happen under a Trump Administration. Maybe in the next Administration?

  33. The eight years of the Obama presidency were, by far, the most consequential of the Digital Revolution, and he quite deliberately allowed Silicon Valley to run amok. The damage caused to Democracy and Capitalism that resulted is staggering, and is an indelible stain on his reputation. And that stain is going to "blitzscale" in size in the coming decade as the negative consequences of his recklessness become impossible to ignore, and social upheaval on a scale and scope that most would consider inconceivable becomes "the new normal".

  34. there's a difference between a monopoly and a mature category, like search (three decades of development) or social media (three plus decades of development, including the WELL). none is a good investment for obvious reasons. and monopolies are no longer defined by market sprawl but by data control. what exactly are the "life-changing products" you have in mind? Snapchat? TikTok? FitBit? maybe Sparrow? really? changing whose lives, and how -- and why? "we'll never know"? -- that's not an insight but a handwave. all i see are game apps, wireless toasters, and mo' better robots. besides, acquisition comes after innovation, not before it. don't lose your focus. tech is singlemindedly building only one big thing: the corporate owned, for profit, globe spanning, consumer tracking, data selling, privacy crimping surveillance state. want to bust the tech game? for starters, give us the rights to our data and privacy. apple is now nagging me about "two factor identification" -- for my security? horse manure: for a better grip on my identity. i'm not having it -- and if apple insists, my ipad is going in the trash. p.s. when i was in tech back in the 90's, i recall interviewing the "new hires" from a recent acquisition and being stunned by the heated animus against their company's CEO and founder who had "sold them out": he got the stock, they got the wage check. those pitiable small fish are not guppies but often baby sharks -- and acquisition is their endgame.

  35. We've become a lot like Japan, where large corporations long have been in a position that they can swallow most start ups. The result has been decades of economic stagnation, while many workers feel that they're barely getting by. Which sounds a lot like how things have been on this side of the Pacific in recent years, because our reported growth rates are of such a nature that they have very limited economic effect.

  36. This has been the way of technology giants in the US forever. Ms. Swisher surely knows how David Sarnoff of RCA and in earlier times, Thomas Edison, worked tirelessly to suppress any innovation that they could not claim for themselves, ruining the prospects of geniuses such as Philo Farnsworth and Nikola Tesla, both of whom died unknown and penniless.

  37. @Tone: Edison got stuck on DC electricity because he never mastered calculus. Tesla was a calculus whiz who spent the money he made from Westinghouse for AC motor patents on exotic schemes of cosmic energy collection. Tesla had been raised an Orthodox Christian. In his maturity he stated ""To me, the universe is simply a great machine which never came into being and never will end" and "what we call 'soul' or 'spirit,' is nothing more than the sum of the functionings of the body. When this functioning ceases, the 'soul' or the 'spirit' ceases likewise". (This quote can be read in the wikipedia article on Nikolai Tesla.)

  38. This is the tech industry version of the Enquirer's "catch and kill" practice. The history is long here. The DOJ's botched multi-decade investigation of IBM opened the door for Microsoft, the worst antitrust criminal of them all (not "alleged" criminal; a convicted criminal) to torch innovation in the 80s and 90s and then be let off with a slap on the wrist fine by President-in-Fact Cheney. Bill Gates, the engineer of the strategy, now posing as a do-gooder. The FTC should just shut down its half-baked investigations and intervene on the side of the EU in its enforcement actions-the only governmental body in the world with the guts to take these guys on.

  39. I am an acqui-hire; I worked for a 25 person company that did malware detection. We punched above our weight; you would have heard the names of some of our clients. We were expanding from detecting malware in ad networks to detecting malware in apps when we were acquired. Our product was shut down. As the deal was closing, we did nothing but play ping pong and computer games. (I recall discussing with the executive team how we'd rebuild if the deal fell through.) Worse, though, was how the employees were treated. The acquiring company did interviews and only opted to retain about half our team; the others were terminated with the acquisition. (They all got severance, but is that compensation for being told you weren't good enough to come along?) . Eventually, those of us acqui-hired left the new employer for greener pastures. I went to a small startup in San Mateo that did data warehousing; others went on to found companies or other visible roles. And our project for the acquiring company did not last long.

  40. Big, rich, powerful companies do not create innovative and disruptive technologies. It could cut into their profits.The tech industries are no different from the auto industries or any other company in that respect (Kodak, anyone?). Pick up any book on the history of business and that is what you will learn. Historically, a new innovative company will arise and knock the old guy out. However, big tech may have reach a point where they can strangle any newcomer. Not good for America.