As the Antitrust Debate Heats Up, It Could Have a Chilling Effect

(Bloomberg) -- Here’s one piece of antitrust news you might have missed last week, amid revelations that the U.S. government is scrutinizing four of the largest tech companies: Mexico said it objected to Walmart Inc.’s $225 million acquisition of a grocery delivery startup called Cornershop.

Walmart’s Mexico business, nicknamed Walmex, is the country's biggest supermarket chain, and the bid to expand its online shopping business there fits with the parent company’s larger strategy. Cornershop was founded in San Francisco and raised money from Accel and other venture capitalists before turning its full attention to Latin America. The move by Mexico’s competition agency to scuttle the deal is a warning shot to the technology industry that antitrust anxiety isn’t exclusively an American phenomenon.

It can be hard to sort through which tie-ups are safe. Corporate lawyers might offer a complicated analysis of local laws, but the decisions can often end up being as much political as they are legal. In the U.S., the process to review acquisitions by foreign companies suddenly amped up as the Trump administration expressed concerns about China’s growing economic influence. Is it a coincidence that the Justice Department is diving into antitrust cases just as politicians like Josh Hawley on the right and Elizabeth Warren on the left are raising awareness of the issue?

The threat of a corporate breakup can be just as powerful as actual government intervention. There’s already talk within the industry about a possible chilling of deals from big tech. With Senator Warren and others calling for the unwinding of Facebook Inc.’s acquisitions of WhatsApp and Instagram, companies in the cross hairs might think twice about making a huge purchase. It’s hard to say whether, or to what extent, that is happening because we rarely hear about deals that aren’t signed.

As Walmart was “analyzing the scope” of Mexico’s reproach over the last week, Silicon Valley was still opening its wallet. Google said it would purchase Looker Data Sciences Inc. for $2.6 billion to help its third-place cloud business, and Salesforce.com Inc. said it would spend $15 billion to buy Tableau Software Inc. Neither is expected to draw anti-competitive charges.

In her policy proposal, Warren positioned trustbusting as friendly to startups. That wasn’t the vibe I got in a meeting with a group of venture capitalists this week. They argued that big tech companies create opportunities for startups, whether it’s through app stores or new computing platforms. That allows startups to focus on targeted business opportunities that large companies overlook.

That dynamic allowed a little company called Slack Technologies Inc. to develop a chat app that became popular among business professionals. Now Facebook, Google and Microsoft Corp. are trying to build their own versions. Slack has drawn interest from potential buyers including Amazon.com Inc. over the years.

Next week Slack is set to list on a public stock exchange, which, if history is any guide, would be an opportune time for a big company to swoop in with an offer. In this current environment, is the potential hassle of a government review worth it if you’re Facebook or Amazon? Given the enormous price tag a deal would likely carry, it might just be easier to sit on the sidelines.

And here’s what you need to know in global technology news

Amazon's online market share has been downgraded to 38%.The e-commerce giant is coy about the statistic—which can be wielded against it in the antitrust debate. But EMarketer dropped the percentage after reading between the lines of Amazon's shareholder letter. 

Facebook signs up Visa, Mastercard and Uber for its cryptocurrency project, according to the Wall Street Journal. Facebook is expected to roll out the program next week.

Dan Loeb wants to break up Sony. No it's not because Sony skipped out on E3. He wants the Japanese company to spin off its semiconductor business. 

To contact the editor responsible for this story: Mark Milian at mmilian@bloomberg.net

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