6 Anti-Trust Laws That Smart Investors Should Be Watching

In this clip from “Wheeling & Dealing” on Motley Fool Live, recorded on Feb. 4, Motley Fool contributor Toby Bordelon discusses the antitrust legislation that should be on the radar of investors and why the focus is on the tech industry.

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Toby Bordelon: I want to give a very quick overview of some pending antitrust legislation or proposals for some of these. I’m not even sure pending is the word I’d use. Both of these deals we’ve talked about, Nvidia (NASDAQ: NVDA), Lockheed Martin (NYSE: LMT), regulatory issues seem to be at the heart of why they’re not happening or why they probably were not happening. Earlier last year, I said about six bills got proposed in Congress to update our antitrust laws. Here’s the thing. The current antitrust laws we have are about 100 years old, and they’ve been updated since then from time-to-time but we’re still stuck with this 100-year old regime that doesn’t necessarily capture the reality or acknowledge the reality of the modern business world in many cases. Every once in a while you always get some groups of senators or regulators to say, we need update some stuff. We really need to take a serious look at this. That might be happening right now but all of these bills, six of them, they’re not really a massive update. These are small little tweaks, mainly targeting the tech industry. Stuff like, that person you see, the name of that bill is the Ending Platform Monopolies Act. The idea here is an online platform can’t own a business that uses that platform to sell its own goods or services. You’re thinking about Amazon (NASDAQ: AMZN). The issue is, can Amazon operate its platform that allows third-party sellers to sell-through while selling first-party goods itself? That’s what this is trying to prohibit. Then, you look at the second one here, the American Innovation and Toys Online Act. The idea here is, if you have a platform, you can’t preference your own services over those of another business that might use the platform. Think Apple (NASDAQ: AAPL) and Alphabet (NASDAQ: GOOG) and their mobile app stores. That’s what is being targeted here. Apple, they can’t say, “Oh, we’re going to preference our browser in this app store over a third-party.” That idea. The other one, the Access Act. The idea here, the third one there on the left is that portability and switching. Consumers can take the data with them. It makes it harder for you to lock-in. If I want to go from Facebook (NASDAQ: FB) to another social network, I should get to take all of my data with me. Data protection issues in that as well. Over on the right-hand side, you’ve got merger restrictions that are out there. This, I think, will be the more significant tweak potentially. It’s called the Platform Combination Opportunity Act. It sets a threshold at which you wouldn’t get to acquire competitors. This would put a serious dance in M&A activity, if this got to be at least in the tech industry depending on what the restrictions will end up being. There’s a small little one dealing with venue. This is a technical, legal thing with the idea of being here. If a state attorney general wants to bring an antitrust suit under state law, they can pick the court they want to file in, which gives them a potential advantage there. Then, you’ve got this. The last one is a Merger Fee Filing Modernization Act. It increases filing fees. Every time you do a merger or just want to do a merger, you have to make a filing. You pay a fee for that. This is how they pay for some of this stuff by increasing those filing fees. Nothing major of these tweaks. But, the more recent news here is with that second one I talked about, the American Innovation and Choice Online Act. This was the one that says a platform can’t promote or preference its own services over those of another business that uses that platform. This just moved out of committee in the Senate, like January 20. Just a couple of weeks ago. They’ve moved this out of the committee and brought it to the floor. It would apply to companies with a $550 million market cap or more than that and over 50 million monthly active users. You look at those thresholds. These are big companies, big companies who they’re targeting, Apple, Amazon, Alphabet, Meta. Those companies are the ones who are going to be implicated by this. They amended it to pick up some foreign companies, like TikTok might be caught up in this. Some senators, some are saying that, “Hey, we’re going to need some tweaks to this before we’re going to support it on the floor if we do.” Citizens in California are upset at the legislation. Basically, they say it’s designed to target specific companies in California and they’re not wrong honestly. [laughs] Amazon, the host for California-based companies. So, in fairness, they have a solid point. They are pushing back on that. It hasn’t been yet brought up to vote in the House and recall. I don’t want to get too political here but the Speaker of the House is from California. That issue too. I don’t know how far this is going to go, but at the end of last year, I thought all of this was dead and then, now, one of these has made it out of committee. It looks like there might be some action on some of this at some point. If any or all of these bills or proposals like them actually become law this year, it will have an impact on M&A activity, I think. It’s definitely something to watch rather. Again, the focus here is on the tech industry, specifically big tech companies. Maybe a company like Nvidia, they’re not quite picked up by any of these except maybe some of the merger restrictions people are talking about. But you think about, historically, companies like Microsoft (NASDAQ: MSFT) and Alphabet and Amazon, Facebook and Apple doing all of these tuck-in acquisitions to these companies that might be at-risk. There’s good reason to not want to do that. You can also see some downsides to putting restrictions in place. Definitely something to watch to keep an eye on and we’ll keep updating you on this if any major news comes out of this.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Toby Bordelon owns Amazon, Apple, and Microsoft. The Motley Fool owns and recommends Alphabet (A shares), Amazon, Apple, Meta Platforms, Inc., Microsoft, and Nvidia. The Motley Fool recommends Alphabet (C shares) and Lockheed Martin and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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