Author: Ted Bolema
Under the Biden Administration, the principle of “big is bad” has taken center stage, with federal agencies targeting large companies like Amazon and Illumina for their market dominance. While the Department of Justice (DOJ) and the Federal Trade Commission (FTC) may be well-intentioned in curbing monopolistic practices, the ripple effects of these policies have inadvertently hampered smaller innovators and startups that rely on acquisitions or partnerships to thrive.
A Case of Misfired Enforcement: Amazon and iRobot
Take the Amazon-iRobot acquisition as a prime example. Massachusetts-based iRobot, the creator of the Roomba vacuum, entered into a $1.7 billion agreement to be acquired by Amazon in 2022. While the British Competition and Markets Authority cleared the deal, the FTC and European Commission obstructed the merger. As a result, iRobot suffered devastating setbacks: its CEO resigned, and nearly a third of its workforce was laid off.
The repercussions of this blocked merger extended far beyond iRobot. Former FTC General Counsel Alden Abbott aptly summarized the broader consequences: “Amazon’s acquisition of iRobot would likely promote efficiencies, raise welfare, and enhance competition.” Instead, the FTC’s opposition sent a clear message that even struggling, innovative companies could not count on support when facing financial turmoil. This chilling effect discourages large companies from making welfare-enhancing acquisitions, leaving smaller firms without lifelines during tough times.
Illumina and Grail: Stifling Life-Saving Innovation
Another casualty of overzealous antitrust enforcement was the Illumina-Grail merger. Illumina sought to reacquire Grail, a company it had spun off to fund clinical trials for early cancer detection. This vertical merger promised to accelerate the rollout of potentially life-saving multi-cancer detection tests. Yet, the FTC and the European Commission blocked the deal, citing antitrust concerns.
Ironically, critics highlighted how this decision could cost lives. Illumina was uniquely positioned to provide Grail with the resources and scale to make its product widely available. Without the merger, Grail’s potential remains underutilized. Meanwhile, Illumina’s subsequent partnerships in China faced no comparable scrutiny, raising questions about the global competitiveness of U.S.-based firms.
A Heavy Burden on Small Firms
Small companies, often the intended beneficiaries of antitrust policies, bear the brunt of these regulatory decisions. Recent changes to the Hart-Scott-Rodino (HSR) filing requirements now impose excessive compliance burdens on merging firms, regardless of size. As Professor S.P. Kothari of MIT noted, these changes could cost small businesses billions in direct and indirect expenses, discouraging innovation and economic growth.
“The burdensome proposed filing requirements will ultimately discourage innovative activity that is undertaken by small firms,” Kothari explained. Small businesses often rely on acquisitions as an exit strategy or a means to scale their innovations. By complicating this process, the government undermines entrepreneurial motivation, stalling the very innovation it claims to protect.
It is easy to not feel sorry for the largest technology companies being targeted by the antitrust agencies. Companies like Amazon, Google, Meta, and Microsoft have the resources to fend for themselves, and they appear likely to mostly prevail in their current antitrust legal battles. The largest companies in the economy also can find work-arounds to avoid the impact of antitrust actions against them. But staying out of the antitrust crossfire is harder for smaller companies in the economy.
The Path Forward
To foster true competition and innovation, antitrust enforcement must focus on actual consumer harm rather than a blanket opposition to corporate size. Large companies can and often do bring immense benefits to smaller innovators by providing resources, market access, and economies of scale. As economist Brian Albrecht observed, “Firms that achieve significant scale can leverage resulting efficiencies to reduce costs and prices… By passing cost savings on to consumers, scaled firms often gain share at the expense of higher-cost producers.”
Policies that dismiss these dynamics not only harm large firms but also stifle the ecosystem of smaller players that depend on them. A more nuanced approach to antitrust enforcement—one that evaluates both the costs and benefits of corporate consolidation—can safeguard the interests of small innovators and consumers alike.
Conclusion
Antitrust enforcement is essential to preserving fair competition, but its indiscriminate application under the “big is bad” mantra has caused collateral damage to small innovators. Cases like Amazon-iRobot and Illumina-Grail illustrate how regulatory overreach can undermine entrepreneurial growth and delay technological progress. It’s time for policymakers to strike a balance, ensuring that their actions protect competition without stifling the creativity and dynamism of America’s small businesses.
By focusing on fostering innovation and efficiency rather than punishing scale for scale’s sake, the United States can maintain its competitive edge while empowering the entrepreneurs who drive its economy forward.
Ted Bolema is an Antitrust and Competition Law and Policy Fellow at the Innovators Network Foundation. He was previously founding director of the Institute for the Study of Economic Growth at Wichita State University and served in the Antitrust Division of the Department of Justice.
