FTC Looking at Google/Waze Acquisition

A blog about business and economics.
June 25 2013 11:43 AM

FTC Not Going to Let Google Evade Antitrust Scrutiny During Acquisitions

This June 25, 2013, photo illustration shows the Internet search giant Google logo reflected in a woman's eye.
This June 25, 2013, photo illustration shows the Internet search giant Google logo reflected in a woman's eye.

Photo by Karen Bleier/AFP/Getty Images

I certainly hope rumors that the Federal Trade Commission is going to subject Google's purchase of social mapping application Waze to some anti-trust scrutiny are true.

The core issue here is that Google's rationale for why it was able to go ahead with this acquisition without jumping through the usual regulatory hoops is to cut by half. The rule Google wants to exploit is the principle that if a U.S.-based firm buys a foreign company with fewer than $70.9 million in assets located in the United States, then it gets the green light from American regulators. Google is buying Waze for $1 billion, but Waze is based in Israel and its value overwhelmingly consists of intellectual property. That intellectual property, according to Google, is located in Israel. Therefore it qualifies for the exemption.

That's totally solid lawyering qua lawyering, but it would be ridiculous public policy. If Google bought a chain of Israeli convenience stores, you'd say, well, these stores are in Israel so it has no impact on the American market. But the physical location of IP related to a maps service that Google plans to offer globally is irrelevant. The acquisition will clearly affect American consumers and needs to be examined just as if Waze were an American company.

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On the merits, I think the antitrust complaints we've seen against Google are pretty weak and I'm not eager to see regulators bring the hammer down. But the loophole Google is trying to exploit here has broad applications throughout the industry, and taking a good close look at the deal is an important precedent.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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