The Myth Buster has been looking at the general reluctance of the federal government to go after monopolies. Newer areas such as the Internet and high technology make government oversight more difficult. The products and services are harder to understand. Laws written in previous generations may not apply directly to these towering technology giants. In addition, from the Myth Buster series on “The Falcon Cannot Hear the Falconer” (May/June/July 2018), most people see giant technology companies as beneficial and do not clamor for government protection.
For example, Microsoft (
These giants are also acquiring tomorrow’s technology, especially artificial intelligence. This year alone, Microsoft acquired GitHub (private) for $7.5 billion. Salesforce (
Blockbuster Deals Everywhere
Mergers and acquisitions – a natural source of government intervention — are blowing the roof off! In the first half of 2018, according to DealBook, $2.5 trillion of mergers and acquisitions were announced. International acquisitions apparently see no boundaries either, creating a seamless series of invisible business borders that some politicians would love. Few organizations operate only inside their own home country. For example, Comcast owns Telemundo, a Spanish-language broadcasting station. CVS, the familiar local drug store across the US, owns Drogaria Onofre, which was Brazil’s eighth-largest drugstore chain when purchased. Clearly, size matters and boundaries are shrinking.
Massive size generates a yawn from those in power. A court’s OK for AT&T’s (T) $85.4 billion acquisition of Time Warner (private) spurred the pace of recent blockbuster deals. Shortly after this gargantuan monetary arrangement, Comcast (
The marriage ceremonies of giants have been well underway for the last two years. Consider these additional behemoth moves in the last year that might have kindled outrage. CVS (CVS) acquired insurance provider Aetna (
Size is clearly an advantage. A level down in technology one finds service providers: television stations, telephone and Internet service companies and other broadcasters. The law and the public tend not to view organizations such as Verizon (
An interesting pattern seen in the case of the Justice Department’s effort to stop AT&T from acquiring Time Warner is the minimal notice taken by the public. The government acts aggressively while the court concurs with the building of massive conglomerates. Consumers take little notice. Consequently, the well-known myth title, “The Bigger They Come, The Harder They Fall” does not fit the contemporary business scene!
Consider what else is going on in the fast-moving, rapidly changing entertainment/Internet industry – itself a new industry that is hard to define. Disney (
Acquire Two and Call Me in the Morning
In the health care field – a massive industry under pressure to rein in costs – all mergers claim to reduce expense. Some staff may be combined when two giants join in wedlock. But, monopolies also imply that competition falls through the wide scale creation of conglomerates. Where is the outrage? Where is the evidence to support the dangers of conglomerates?
It seems that the bigger they come, despite control of massive revenue, multiple industries and wide territory, these already giant corporations about to merge or acquire do not fall at all. In fact, the more gently they float. Next month in a year end review, the Myth Buster will take a look at how well he has done uncovering the rattlesnakes and iguanas that lurk in so many business decisions.
Michael McTague, Ph.D. is Executive Vice President at Able Global Partners in New York, a private equity firm.