Would feds block a Google-Twitter merger? Probably not
Will Google buy Twitter? My colleague Mathew Ingram wrote a persuasive piece this week explaining why a merger is likely. The reason, loosely, is as follows: after the demise of Google+, a tie-up would help the search giant overcome its long-standing weakness in social media, while Twitter would get some grown-up leadership that could fix its clown-car management problem.
But this is all just speculation, and not everyone is buying it. Re/Code is among the skeptics, and cites 3 reasons a combined company (Twoogle?) will never get hatched. You can make up your own mind about two of these reasons – Google (GOOG) has got want it wants from Twitter already, and the project is too small-time for CEO Larry Page – but the third one, antitrust, seems an unlikely objection.
“Regulators would be hard pressed not to press hard on a deal like this, especially after rivals chime in. The threat of government bodies spiking such a deal is likely a key inhibitor,” says Re/Code.
Antitrust lawyers I spoke with didn’t buy this, in part because regulators can’t just “spike” something because they feel like it. There are laws, specifically the Clayton Act, that the FTC or Justice Department must invoke in order to stop a merger in court.
Under the law, regulators look at whether a merger will reduce competition in a given market and hurt consumers, especially in the form of higher prices. That’s why the FTC this year sued to stop a merger between the country’s two largest food distributors, citing the prospect of a 75 percent market share that would “harm customers in numerous local markets.”
Would these rules, including the application of the Justice Department’s favored competition metric, affect a proposed Google-Twitter tie-up? It’s hard to see why they would. The companies don’t really operate in the same market (unless you count the market as the big sea of online advertising), and Google’s swallowing Twitter would not wipe out a competitor.
“They’re selling different things. It’s not clear at all why this would be about antitrust. My big picture instinct is that it would go through,” a partner at a major New York law firm, who is not involved with either company but did not want to be named, told me by phone.
Another antitrust authority, Professor Maurice Stucke of the University of Tennessee College of Law, echoed this sentiment in part. He said a problem for U.S. regulators, when it comes to analyzing tech mergers, is that their analytical models are based on prices and marketshare, not more subtle metrics like control over data – which might (or should) be the basis for antitrust analyses in the future, but are not part of the regulators’ toolkit right now.
All of this isn’t to say Google has nothing to worry about when it comes to antitrust law and a Twitter acquisition (the regulatory horror-show it is facing in Europe should certainly give it pause), but it would be a surprise indeed if any proposed Twitter (TWTR) merger foundered on the rocks of U.S. antitrust law.