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  • How Washington's Outdated Approach to Tech Acquisitions Threatens Jobs

    Silicon Valley is one of the few bright spots in the U.S. economy today, but a new report warns that Washington’s outdated regulation and antitrust policy threatens to stifle growth among innovative technology companies.

    The report, produced by the Progressive Policy Institute, analyzes the impact of acquisitions in the technology sector. It concludes that acquisitions lead to economic growth and job creation.

    There’s just one problem: Washington bureaucracy. The federal government’s process of approving acquisitions — a problem well-documented by Heritage’s James Gattuso — can slow down innovation, hamper growth and jeopardize jobs.

    “Antitrust policy, as applied to the technology sector in its current form, can impede the virtuous circle of nurturing innovation through startups and acquisitions,” authors Michael Mandel and Diana G Carew write in the report. “By slowing down or blocking acquisitions, antitrust policy can limit the exit routes for startups, potentially reducing their value and making it less attractive for investors to put their money into the next round of innovative new companies.”

    In many case, more than one federal agency is involved in the review of acquisitions. While the Department of Justice reviews the antitrust implications, agencies such as the Federal Trade Commission or Federal Communications Commission examine the impact on competition.

    Such is the case for AT&T’s proposed acquisition of wireless carrier T-Mobile, which erupted in a dispute between the company and FCC this week. Gattuso has criticized the regulatory process in the past:

    The job of regulators should not be to choose the best market strategy. It should be simply to make sure that the marketplace itself is working. In wireless, it’s working remarkably well, and there is every reason to believe it will continue to do so after the acquisition is completed.

    The analysis from the Progressive Policy Institute comes to a similar conclusion: Washington needs to rethink its outdated process for reviewing acquisitions. In the technology sector especially, these business decisions can spur competition, not suppress it.

    “Now more than ever, at a time when the domestic economy is struggling, it doesn’t make sense
    to pursue antitrust actions against innovative companies without clear evidence of abusive
    behavior,” the report concludes. “Acquisitions, when completed successfully, can lead to innovations that in turn stimulate sustainable economic growth and create valuable jobs.”

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