Google's contemplated mega deal would prompt new fight with regulators
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[April 08, 2024] By
Milana Vinn and Anirban Sen
(Reuters) - Google parent Alphabet's contemplated acquisition of
marketing software company HubSpot would likely spark opposition from
regulators even as many experts agree it would not curb competition, and
would require the technology giant to open a new front in its battle
with antitrust watchdogs.
Reuters reported last week that Google was mulling an offer for HubSpot,
which has a market value of $34 billion. Google has been weighing the
antitrust risks of a potential deal and has yet to decide if it will
make an offer.
Nearly a dozen antitrust experts and industry analysts said in
interviews and analyst notes that it was unlikely that an acquisition by
Google would hamper competition.
They said this is because the so-called customer relationship management
(CRM) software sector in which HubSpot operates is already served by
several major players, including Salesforce, Adobe, Microsoft and
Oracle. Google does not compete in CRM, and the acquisition could make
HubSpot a more formidable player thanks to Google's cloud-computing
resources, improving offerings and prices for customers, they added.
According to technology researcher Gartner, HubSpot, which focuses on
smaller customers, had a 4.9% market share in 2022 in the CRM marketing
software industry, while Salesforce and Adobe each held a 15% share.
Yet these experts also said it is very likely that a Google deal for
HubSpot would trigger challenges from U.S. and European antitrust
regulators, given their growing aversion to technology giants getting
bigger through acquisitions.
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They added that Google would have to be willing to argue for the merits
of the deal in a long court battle, and would need to convince HubSpot
to do the same.
"My initial reaction is such a deal would face a pretty tough reception
from the antitrust regulators," said Seth Bloom, a former general
counsel of the U.S. Senate antitrust subcommittee who now runs his own
advisory firm.
Google and HubSpot did not respond to requests for comment.
Google already faces several antitrust challenges, including two
lawsuits from the United States Department of Justice. One accuses it of
abusing its position as online search leader, while the other alleges it
is monopolizing the market for digital advertising.
A Department of Justice spokesperson did not immediately respond to a
request for comment.
The regulatory terrain for Google is also hostile in Europe. It is among
technology firms probed by the European Union for potential breaches of
the new Digital Markets Act, a directive that makes it easier for people
to move between competing online services like social media platforms,
internet browsers and app stores.
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The Google logo is seen on the Google house at CES 2024, an annual
consumer electronics trade show, in Las Vegas, Nevada, U.S. January
10, 2024. REUTERS/Steve Marcus/File Photo
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A spokesperson for the European Commission, which serves as the
European Union's executive arm and has fined Google in the past for
anticompetitive practices in online search, did not immediately
respond to a request for comment.
CASH PILE
The intensity of the antitrust scrutiny has dissuaded most
technology giants from pursuing mega deals. The last major
acquisition completed was Microsoft's $69 billion deal to buy "Call
of Duty" maker Activision Blizzard, which the maker of the Xbox
console managed to get past Britain's regulators only after it
agreed to give up streaming rights for Activision's games.
In December, Adobe shelved its $20 billion deal for cloud-based
designer platform Figma, citing "no clear path" for antitrust
approvals in Europe and Britain. The regulators fretted about the
ability of Figma's smaller rivals to compete.
Prior to its HubSpot deliberations, Google had steered clear of
large acquisitions. Its biggest-ever deal, the purchase of Motorola
Mobility for $12.5 billion, came more than a decade ago. It has kept
its dealmaking small, showing an affinity toward acquisitions in
advertising with purchases such as DoubleClick and AdMob.
What has pushed Google toward a big deal is its swelling cash pile
of $110 billion and the need to better deploy capital to generate
returns. While it is investing heavily in artificial intelligence
like its peers, its shareholder returns have lagged those of other
players in this space such as Microsoft and Meta Platforms over the
last few months.
William Kovacic, an antitrust professor at George Washington
University Law School, said Google's dominance in online search
tainted it in the eyes of regulators even in areas where the company
does not compete, such as CRM software.
"If you slam the door shut on mergers that could permit a
nonparticipant or a weaker participant to get a bigger foothold in
the market, you've withdrawn an important potential source of
rivalry in the market," Kovacic said.
(Reporting by Milana Vinn and Anirban Sen in New York; Editing by
Greg Roumeliotis and Matthew Lewis)
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