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Musk’s Twitter Buy Is Outside Antitrust Agency ‘Strike Zone’

April 28, 2022, 9:00 AM

Elon Musk’s deal to buy Twitter Inc. is drawing political fire, but his path to antitrust regulators’ approval poses fewer obstacles.

The Tesla founder’s plans to take the company private will undergo regulatory review by one of the main U.S. antitrust regulatory agencies, the Justice Department’s antitrust division or the Federal Trade Commission. But the billionaire’s lack of holdings in other social media companies and existing competition in social media—albeit concentrated among a few giants—could mute concerns over market share or other antitrust issues, attorneys said.

“Elon Musk is not involved in a company that either competes with Twitter or is in a vertical relationship with Twitter,” said Jack Sidorov, who worked on premerger notification rules at the DOJ before becoming senior counsel at Lowenstein Sandler LLP. “So it’s hard to see a real antitrust hook that could generate an investigation.”

The Biden administration has vowed to be more aggressive on antitrust enforcement. But focusing on the deal would be a “distraction” for the reviewing agency and could draw away resources from tackling the robust agenda the administration has already laid out, said William Kovacic, a former Federal Trade Commission chairman who now teaches at George Washington University Law School.

“This is a pitch way outside of the strike zone, and if you swing at these pitches you may get out,” Kovacic said, adding the reviewing agency is not likely to find competition-related issues with the deal.

Other Holdings

Generally, regulators are concerned about horizontal mergers between rivals or vertical deals between companies and their suppliers.

But Musk’s existing business interests don’t directly overlap with Twitter, said Chris Sagers, a law professor at Cleveland State University.

“As far as I know, neither Elon Musk nor any of his companies has any kind of assets that compete with Twitter,” Sagers said. “So, I don’t see this being any kind of problem.”

But Musk’s ownership of Starlink—SpaceX’s satellite-based internet service provider (ISP)—raises communications industry antitrust issues, said Barry Lynn, executive director of the Open Markets Institute, an antitrust think tank.

He compared the deal to other ISPs, such as Comcast Corp. or Verizon Communications Inc., attempting to buy Twitter, and said the government should apply similar scrutiny.

“What we’re looking at here just at a technical level, is a guy who does own an important communications corporation,” Lynn said, referring to Starlink, “and is trying to buy another one.”

While Starlink and Twitter could be seen as a vertical integration, that logic would make every business that uses the internet vertically related to internet providers, said Daniel Crane, an antitrust law professor at the University of Michigan.

“Seems a stretch. And even if it’s vertical, hard to see how combining control over Starlink and Twitter will foreclose competition anywhere,” Crane said.

Republican FCC member Brendan Carr pushed back on the Open Markets Institute’s position, describing it as “an effort to suppress political speech dressed up in legal form.”

The deal drew Democratic scrutiny from Sen. Elizabeth Warren (D-Mass.), who called for tougher regulation of tech giants.

“Concentration of power means less competition, and ultimately means just one or a handful of people are deciding who talks, who gets heard and who gets shut down,” Warren said.

Filing Mandates

It’s not clear whether the FTC or the DOJ’s antitrust division will take up the case or if either agency is already reviewing the deal.

A DOJ spokeswoman declined to comment. An FTC spokeswoman said the agency doesn’t comment on proposed transactions.

Under the Hart-Scott-Rodino Act, Musk and Twitter would have to make a non-public premerger notification to regulators and wait for government review. A deal cannot close until the waiting period outlined in the law has passed or the government has granted early termination of the waiting period.

Musk’s planned purchase of Twitter comes after he disclosed a roughly 9% stake in the company on April 4 and discussed becoming a board member.

“It seems that Elon Musk owed the FTC a filing under the HSR since at least the moment he started talking to the board about a seat,” said Eleanor Tyler, principal legal analyst at Bloomberg Law.

—With assistance from Maria Curi

To contact the reporter on this story: James Nani in Washington at jnani@bloombergindustry.com; Andrea Vittorio in Washington at avittorio@bloombergindustry.com

To contact the editors responsible for this story: Roger Yu in Washington at ryu@bloombergindustry.com; Keith Perine at kperine@bloombergindustry.com

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