Federal agencies—especially independent agencies like the Federal Trade Commission (FTC)—have a tough job. They must walk a tightrope between maximizing their authority to appease their loudest constituencies while staying faithful to the boundaries Congress sets in statute. Under these conditions, implementing an agenda that statute and economic realities forbid is not recommended, but where pursued, takes extraordinary skill and patience. In this case, the FTC has somewhat successfully charted such a course. Specifically, it has embarked on an effort to generally prohibit mergers, manifesting one of the only mortal fears for typically intrepid entrepreneurs like many of ACT | The App Association’s members.

Beginning in earnest three years ago, the FTC’s campaign has incrementally added impediments for companies to be acquired. If the FTC were to publish a how-to guide on killing the market for mergers, here’s how it might look:

  • Leave them in limbo: In February 2021, the FTC “temporarily” suspended early termination (ET) notices closing FTC review of proposed mergers subject to Hart-Scott-Rodino (HSR), with narrow exceptions. Merging parties rely heavily on ETs as a signal that they are clear to complete a transaction and that it is no longer under premerger review. Without an ET, parties to a transaction may not know for sure if they can move forward. The FTC has never returned to its normal practice of issuing ETs. This helps ensure merging parties know they may never be allowed to merge even if the law does not support a challenge.
  • While they’re in limbo, threaten them: Not long after its ET suspension, the FTC also began a practice of sending “warning letters” that a merger is still under review, issuing them in some cases after the expiration of the initial 30-day review period. This helps ensure that merging parties know the FTC can pull the plug on a merger even after it seems to have received the green light.
  • Since you can’t change the statute, interpret it to illegalize more mergers: The FTC adopted new final merger guidelines in December 2023, which draw on older cases to suggest that currently legal mergers are now presumptively illegal. Even if most courts don’t buy this, some might, and this may therefore help kill more acquisitions even before they start.
  • Increase the administrative burdens: The FTC proposed new HSR rules in June of 2023, which would add a great deal of additional paperwork for all mergers subject to HSR premerger notification. If the extreme levels of uncertainty introduced by ET suspension, warning letters, and presuming mergers illegal doesn’t convince merging parties not to bother, surely a precipitous increase in red tape and hassle will do the trick.
  • If you can’t challenge a merger, have a foreign government do it: European law is far more permissive of government action against mergers, freeing European enforcers to challenge a much wider range of transactions. European enforcers can be readily convinced to challenge mergers, especially if they involve companies already in their legal and regulatory crosshairs.

Unfortunately, the case study accompanying this how-to is drawn from real-world experience. The iRobot acquisition is a perfect example of a merger the FTC artfully killed despite having no grounds to allege that it is anticompetitive. The agency began to investigate the proposed purchase in September 2022 and issued a second request shortly afterward. The FTC made full use of its merger-killing faculties, extending its review indefinitely and recruiting the European Commission to help kill the deal. iRobot did struggle to survive throughout the ordeal, taking out a loan for $200 million to stay afloat, offset by a reduction in the purchase price of the company. The FTC won in the end, leaning on many, if not all, of the elements described above to deprive iRobot of oxygen and Amazon of its will to continue.

App Association members are not easily threatened, even by federal agencies with a brilliant plan to eliminate their exit paths. And yet, even though they don’t worry so much about failure at the hands of formidable competitors, they do worry about external factors that could stop the cycle of creation. The FTC’s concerted effort to prevent acquisitions is such an external factor. It should be understood for what it is and reversed before there is irreparable damage to the app economy.