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What Biden’s New Executive Order on Competition Means for Startups:

The Background:

President Joe Biden signed a new executive order to promote competition throughout the economy and to remedy consumer fears about abusive practices. The order also looks to crack down on anti-competitive practices that Biden claims have been on the rise. The Tech and Healthcare industries have attracted the ire and distrust of consumers over recent years for data collection and inflated drug prices. These practices have damaged wallets and breached privacy, and the order should remedy this going forward. The increased competition the order promises will also shake up industries that have become increasingly consolidated, opening up room in the market for start-ups to thrive. Stricter regulation may, however, also bring some difficulties for new businesses.

Biden’s order takes aim at what he called the 40-year experiment of corporate power accumulation with a new executive order promoting competition. Big tech in particular has found itself squarely in the order’s crosshairs. According to the accompanying fact sheet, the Government is looking to handle the regulation of big business at the Federal level.

Here’s what the order includes and what it will mean for the tech space in the coming years:

The Order:

The order calls for stricter scrutiny of mergers, in particular those involving large digital platforms and those aimed at incorporating emerging competitors into existing firms. The directive also looks to bring added scrutiny to deals that involve privacy and data accumulation  and makes particular note of seeking to prevent established firms from acquiring new players to quash competition.

Biden is also tasking the Federal Trade Commission (FTC) with creating rules on surveillance and data collection. These new rules have a twofold purpose. First, they will protect consumers from services like Facebook and YouTube, which have built their business models around data collection. Second, they will protect small businesses from being established platforms that can surveil and thereby out-compete small firms. 

The FTC will also be creating rules to combat unfair competition in internet marketplaces. This follows reports that ecommerce companies like Amazon use the data of sellers on their sites to launch products. 

Lastly, Biden calls on the Federal Communications Commission (FCC) to restore Obama-era net-neutrality rules. These rules were reversed during the Trump administration. Biden, however, does not have direct control over the FCC.

The Takeaway: 

The order’s guidance on mergers means that acquisitions in the Tech space will become more difficult. These deals will likely face more thorough examination from antitrust authorities than under the previous administration. This might make established tech companies wary of acquiring their startup competitors, and antitrust regulators may stop certain deals.

If the FTC follows through, start-ups should have a more level playing field when competing against large firms. Furthermore, small businesses should be at less of a disadvantage when competing in ecommerce spaces.

Finally, the directive on net neutrality is a win for most of the tech industry, which campaigned hard against the repeal of net neutrality in 2017.

In sum, Biden’s new executive order should make the economic environment more favorable for startups and small businesses. But the new merger regulation may make it more difficult for founders to sell their start-ups later down the line.

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