After abandoning plans for an acquisition last year due to anticipated regulatory pushback, Alphabet, Google’s parent company, and Wiz have reached an agreement for Alphabet to purchase the cybersecurity startup for $32 billion. The deal is notable for its size and potential impact on the cloud computing market. It will also be the first significant test of President Donald Trump’s new leadership at either of the antitrust agencies, providing an opportunity to see how different the regulators are from their predecessors.
Owing to their populist ties, Federal Trade Commission Chair Andrew Ferguson and Assistant Attorney General for Antitrust Gail Slater are expected to lead their respective antitrust agencies in a more aggressive enforcement approach than has historically been common under a Republican president, according to Politico. However, their philosophy will likely not be as aggressive as that of former FTC Chair Lina Khan and AAG-AT Jonathan Kanter. This difference is likely attributable to how the two pairs of regulators decide what remedies are necessary in a given case. The early signals from Trump’s antitrust regulators have been that remedies will be more industry-friendly, and there will be a willingness to use behavioral remedies, which were seen as inadequate solutions during the previous administration.
While Ferguson and Slater have not detailed their priorities, they have said Big Tech will be their top focus. This attention will be slightly differentiated from their predecessors, with a greater emphasis on the companies’ alleged censorship of some individuals while also taking a more pro-innovation mindset toward these businesses’ deals with AI businesses. This latter point was apparent in the Department of Justice’s revised remedies proposal in its case against Google for its antitrust violations in the online search market, where restrictions around the company’s ability to pursue AI-related investments were reduced. However, the rest of the proposal remained essentially unchanged. This decision to largely maintain the original proposal, including pushing for a divestiture of Google Chrome, reflects the tough stance Trump’s regulators are expected to take on Big Tech.
Now, with Alphabet’s proposed purchase of Wiz, these new philosophies will be put to the test, with the FTC set to review the acquisition. The size of the deal alone will attract regulators’ attention, and Big Tech’s role will put an additional layer of scrutiny on the transaction. Under the Biden administration, a court challenge of the deal would have likely been a matter of time. That outcome, while not impossible, is now much less likely with the change in leadership.
Instead, the FTC may look for a behavioral remedy that addresses the potential competition concerns arising from the transaction but not seek to block the acquisition outright. In particular, such an agreement would likely focus on ensuring that Alphabet’s acquisition of Wiz does not prevent the company from still working with other cloud providers or unfairly benefit Google’s services in the cloud market. Google Cloud’s chief executive, Thomas Kurian, has already said that if Wiz were to join, it would continue working with other cloud providers, comments intended to acknowledge the potential concern and assuage regulators’ worries.
One of the factors working in the merging parties’ favor to avoid a lawsuit is that the deal has relatively few consumer-facing components and is primarily a business-to-business relationship. This distinction matters as, beyond Big Tech, Trump’s antitrust regulators have expressed an intent to focus on issues that will impact consumers. The lack of a clear consumer connection to this deal will mean that a challenge to the transaction will have less political upside, which will likely reduce any pressure from politicians for the regulators to intervene and stop the acquisition from closing.
Given its test case nature, how the FTC handles this deal will be subject to intense review. On paper, the transaction checks several boxes that suggest it should be among those acquisitions likely to receive the highest degree of scrutiny, given its size and Alphabet’s involvement. So, if the deal is allowed to close, even under certain regulator-imposed behavioral requirements, it may be seen as a sign that there is even more room for dealmaking than previously expected, despite the tough stances Ferguson and Slater have projected, particularly for transactions with minimal consumer-facing aspects.
Read the full article here
