Dec 11, 2022 · 38m · another-podcast
No Soup for You! Regulating tech M&A
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this podcast episode, Benedict Evans and Tony Cowan-Brown examine the intensifying regulatory scrutiny of Big Tech mergers and acquisitions. They analyze major antitrust challenges like Microsoft-Activision and Meta-Within alongside shifts in antitrust theory, market definition challenges, and startup economics.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The hosts hold 88.8% of the talking time here. How this is scored →
The hosts as informed peer 8.1 Guest teaching 0.4 Guest disagreement 0.1 The hosts pushing back 0.4
speaking balance: gold is the hosts, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 19:44 Questioning public and political scrutiny of Twitch
Tony actively pushes Benedict to consider whether Amazon acquiring Twitch today would trigger fierce regulatory opposition compared to when it occurred in 2014.
Hardest push from the hosts ▶ 23:34 Dismantling the narrative of predatory startup buyoutsBenedict firmly rejects the political narrative that big tech aggressively crushes competitors through sub-$10M buyouts, emphasizing founder volition and failed product economics.
Biggest teaching moment ▶ 20:14 AOC streaming Among Us on TwitchTony reminds Benedict that politicians like AOC are indeed aware of gaming platforms, citing her prominent Among Us streaming session on Twitch.
The host holds their own ▶ 27:20 Apple's PA Semi acquisition breaking the chip duopolyBenedict demonstrates authoritative industry knowledge by proving how blocking Apple's PA Semi deal would have entrenched Intel and Qualcomm's dominance rather than preserving competition.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The hosts as informed peer | Guest teaching | Guest disagreement | The hosts pushing back | Why |
|---|---|---|---|---|---|---|
| Lina Khan and the Rise of New Brandeisian Antitrust | 8 | 0 | 0 | 0 | Benedict establishes deep familiarity with modern antitrust doctrine, explaining Lina Khan's Yale Law Journal thesis on Amazon, the New Brandeisian school, and the transatlantic divide in antitrust philosophies. | |
| The Speculative Regulatory Challenge of Nascent Tech Markets | 8 | 0 | 0 | 1 | Benedict contrasts historical retroactive reviews like Instagram with speculative forward-looking merger interventions such as Meta/Within and Meta/Giphy. Tony readily agrees that regulators face an inherent guessing game. | |
| Defining Dynamic Tech Markets and External Competitive Threats | 8 | 1 | 0 | 1 | Benedict dissects market definition dynamics using sports car analogies and tech platform history, highlighting that major competitive threats typically arise from outside conventional product categories. | |
| Microsoft's Strategic Evolution and the Activision Blizzard Deal | 9 | 1 | 0 | 1 | Benedict delivers an extensive, detailed strategic analysis of Microsoft's historical transition from PC operating systems to enterprise cloud (Azure) and the rationale behind expanding into Xbox and Activision Blizzard. | |
| The Gaming Ecosystem: Core Consoles versus Casual Mobile | 8 | 0 | 0 | 0 | Benedict critiques generic industry figures by distinguishing 300-400 million hardcore console and PC gamers from billions of casual smartphone players, drawing an analogy to the historical prestige shift between movies and TV. | |
| Political Scrutiny and Amazon's Expanding Acquisition Portfolio | 7 | 2 | 1 | 1 | Tony points out Amazon's 2014 acquisition of Twitch and reminds Benedict of AOC streaming Among Us to highlight growing political awareness, while Benedict mocks conspiratorial public reactions to the iRobot purchase. | |
| Startup Economics, Founder Incentives, and Acqui-hire Realities | 8 | 0 | 0 | 0 | Benedict contextualizes FTC small-deal data, explaining that the vast majority of sub-$10M acquisitions are non-coercive acqui-hires of failed startups rather than anti-competitive rollups. | |
| Pro-Competitive Acquisitions: The Cases of PA Semi and Android | 9 | 0 | 0 | 0 | Benedict outlines counterexamples where acquisitions promoted competition, citing Apple's purchase of PA Semi which broke the Intel/Qualcomm duopoly, and Google's early acquisition of Android. | |
| Product Bundling, Market S-Curves, and Emerging Tech Threats | 8 | 0 | 0 | 0 | Benedict elaborates on market S-curves, bundling complaints like Slack against Microsoft Teams, and the difficulty of defining markets when new platforms like TikTok or generative AI disrupt incumbent business models. |
Statements from this episode (24)
Evans: FTC has an active case seeking to unwind Meta's Instagram and WhatsApp deals
“Meanwhile, the FTC also has a case trying to unwind the acquisition of Instagram and WhatsApp from now almost a decade ago, which is kind of hilarious.”
Evans: Amazon accounts for 40% of US e-commerce, 5% of retail
“It's got sort of 40% of U.S. E-commerce, which is about five percent of U.S. Retail and yet has low prices and it uses market power such as it has to push prices down rather than push prices up.”
Evans: EU and UK competition law always looked beyond consumer prices
“Which, frankly, the rest of the world has always thought like that. It was in kind of the US that got narrowly focused on price in the EU and the UK have always kind of looked at the broader kind of context of what outcomes we want.”
Evans: UK regulator's initial assessment of Instagram was very myopic
“Sort of famously the UK regulator looked at Instagram and said, well, they don't have ads, so that's not part of Facebook's Market, market, which was clearly like a very, very myopic way of thinking about how the market worked.”
Evans: UK CMA forcing Meta to unwind Giphy was an over-rotation
“And so that gets you to, for example, the UK CMA making Meta unwind its acquisition of Giphy, which I don't think anybody thinks is like a market in its own right, but they thought, and I think I would argue that was sort of over-rotation the other way.”
Evans: Fundamental competitive threats in tech originate outside market definitions
“The fundamental competitive threat comes from something that sits outside the market definition.”
Evans: 20M VR headsets sold, only 5M-10M active users
“There's like 5,000,010 million people actually using a device, so it's twenty million people, they've sold twenty million headsets, there's five or ten million people using them.”
Evans: FTC Meta-Within case is very aggressive; Activision case is much less aggressive
“I think within is kind of a test case to try and push the you know, really kind of move the flag post, move the goal much further over. You know, it's a very aggressive case. I think the Activision case is actually much less aggressive.”
Evans: Azure beat Google Cloud due to superior enterprise sales
“AWS is mostly lower level building blocks. Azure is mostly high level building blocks. Totally beat Google Cloud, mainly because of like knowing how to sell to enterprise and knowing how to build what enterprises have.”
Evans: Satya Nadella previously called Xbox non-core and non-strategic
“And there was a moment like five or six years ago when Satya Nadella was saying that Xbox was sort of non-core and non-strategic.”
Evans: Microsoft's Activision acquisition is a straightforward, non-speculative antitrust case
“This is actually a much more straightforward, obvious kind of antitrust case because you're not trying to guess the future.”
Evans: Hardcore gaming is limited to 300-400 million players globally
“Games market is small. Sort of a counterintuitive thing to say. Lots of money but it is sort of something with, say, three or four hundred million people at most are playing something that a gamer would consider a game, like a real game.”
Evans: Fortnite seems to have mostly faded away
“Fortnite, although that seems to have disappeared now, or mostly faded away.”
Evans: Fears that Amazon's iRobot deal supercharges advertising are delusionally paranoid
“They bought iRobot, which prompted some absolutely hilariously, kind of delusionally paranoid things about, oh my god, Now Amazon is going to have a millimeter scale accurate model of your house, and just think what they could do with that. Now their advertisi…”
Evans: Big Tech will keep pursuing acquisitions despite Lina Khan's FTC
“I think part of what's going on here is tech companies saying, we're going to carry on doing these deals. And you try, you just try and stop us. You're going to have, you know, we're not just going to stop doing these deals because you're appointed a head of t…”
Evans: Most Big Tech sub-threshold acquisitions were under $10M and 10 employees
“And the vast majority of them were less than 10 people, and less than ten million dollars.”
Evans: 3,000 to 3,500 tech companies are founded in the US each year
“The US tech industry in total, there's like three, maybe three and a half thousand companies founded every year.”
Evans: Blocking Apple's PA Semi deal would have preserved Intel-Qualcomm duopoly
“Apple is making basically better chips than Intel or Qualcomm today, and it's doing that based on the acquisition of PA Semi, which was now a decade ago, also ago, 15 years ago, and what would, if the FTC had blocked that, Then basically they'd have gifted the…”
Evans: Tech acquisitions often increase industry competition rather than reduce it
“Very often what's happening is the acquisitions are being used in order to make yourself more competitive and to gain a competitive lever and to allow you to, you know, and to make the industry more competitive, not less competitive.”
Evans: Tech markets consolidate via S-curves where incremental improvements cannot win
“The competitive threat in tech is generally not someone doing the same thing as you, but better. Or let me kind of qualify that. Each market sort of goes for an S-curve, and there's like an early period where everyone's fighting it out to win. So this is like …”
Evans: Tech paradigm shifts occur every 5 to 10 years
“The point is, the new thing that looks completely different happens every five or 10 years, not every 50 years, the way it does in other industries.”
Evans: TikTok competes with YouTube rather than Instagram
“Is TikTok competing with YouTube or Instagram? And it still puzzles me, like everyone always puts it on the chart with Instagram, and I'm like, no, no, no, I think this is YouTube.”
Evans: DOJ blocked Penguin Random House deal on the wrong argument
“The case was based just on the market for advances for best-selling authors. And it seemed like actually that was a terrible argument, and the proper argument was consolidation across the whole publishing industry, but they didn't think they could make that ca…”
Evans: DOJ e-books lawsuit effectively protected Amazon's monopoly
“The DOJ basically goes to court in order to protect the position of a monopolist. Now that was actually what happened. What they said they were, or thought they were doing, was protecting low consumer prices, which was also what was happening. But the low cons…”