Biden antitrust policies stifle startup innovation and investment

During Joe Biden's presidency, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) implemented a strict antitrust approach that significantly affected the technology sector. This neo-Brandeisian strategy, prioritizing the prevention of large firms from growing too large over traditional consumer welfare principles, led to a notable decrease in startup acquisitions and venture capital funding. The antitrust enforcement actions were characterized by a high volume of lawsuits against major technology companies, including Google, which faced allegations of monopolizing the search engine market. In this rigorous environment, regulators pursued large corporations even for mergers that occurred under laws not commonly invoked for decades, creating an atmosphere of increased compliance costs for potential acquisitions. As a result, many large firms became hesitant to pursue startup acquisitions, leading to a contraction in venture capital investment. Studies indicated a sharp decline in the number of startup acquisitions, with stats showing a drop from 3.4% to 0.9% of acquisitions by targeted firms. Furthermore, the report outlines that venture capital investments severely decreased from nearly $250 billion in 2021 to about $125 billion in 2023. This reduction is largely attributed to the belief that large technology firms would not acquire startups in a climate rife with antitrust scrutiny, ultimately signaling low returns for investors. The shift in enforcement practices discouraged many funds from investing in startups due to fears of limited exit options. Such new policies not only reduced the ability of startups to be absorbed by larger companies, which often provided a viable exit route but also harmed overall consumer welfare, as many innovative technologies remained underdeveloped or failed to launch due to lack of financial backing. As the Biden administration’s era of strict antitrust enforcement seems to wane, there are hopes for a revival in innovation and a healthier climate for growth in the American technology sector.