The beauty company Estée Lauder recently announced it will be acquiring the fashion and beauty brand Tom Ford for $2.8 billion. Tom Ford will be the latest addition to the existing catalog of 21 other brands that Estee Lauder owns. While mergers and acquisitions in the beauty industry and other sectors pass by with little scrutiny, the tech industry is facing much harsher skepticism. The difference in the treatment of mergers in the beauty and tech industries exposes lawmakers’ hypocrisy on antitrust. 

The accumulation of established and successful beauty brands is not unique to Estée Lauder. The company Coty previously made headlines for its majority stake purchase of Kylie Cosmetics – the company credited with making Kylie Jenner the first billionaire in her famous family. Coty also acquired a 20 percent stake in Kim Kardashian’s brand, SKKN. 

Both Estée Lauder and Coty have at least partially achieved their collection of companies through horizontal mergers and acquisitions. In this context, the term “horizontal” refers to mergers and acquisitions that involve purchasing competitors in the same market as the purchasing company. Despite existing under the same parent brand, Tom Ford Beauty will continue to compete against Estée Lauder products on the shelf. 

This beauty industry example echoes the findings of a paper from the Toulouse School of Economics that measured the effects of mergers on innovation. The authors found that the impact of mergers was not uniform and depended on the circumstances of each scenario. This finding is in direct contrast to existing legislative and agency actions that act under the presumption that concentration through mergers and acquisitions is anticompetitive. 

Despite research and examples to the contrary, Senator Amy Klobuchar (D-MN) has spearheaded legislative efforts to reform antitrust enforcement in the hope of addressing consolidation, which Klobuchar believes reduces competition and incentives for innovation. Among her efforts is the Platform Competition and Opportunity Act (PCOA). This bill, if enacted, would ban certain mergers and acquisitions for tech companies over a size threshold. Among the limits is the requirement that the deal is under $50 million in value and does not involve direct or nascent competitors.  

Federal agencies have also announced changes to how they plan to enforce antitrust concerns involving mergers and acquisitions. Almost a year ago, the Federal Trade Commission (FTC) and the Department of Justice (DoJ) announced a joint inquiry to update how the agencies plan on treating mergers and acquisitions moving forward.  While no official changes have been announced, the proposed areas of focus suggest that changes will likely involve a lowered threshold for the presumption of anticompetitive behavior, with a specific focus on the tech industry. 

The Estée Lauder merger, as well as Coty’s acquisition of Kylie Cosmetics, would be automatically illegal under the PCOA if they were completed by Big Tech. Even without the proposed legislation, a comparable merger in the tech industry would likely result in an antitrust complaint. 

Facebook is currently battling an FTC complaint that alleges the company engaged in a “systematic strategy” to maintain its monopoly, which included the purchase of competitive threats such as WhatsApp and Instagram. While WhatsApp was a massive acquisition of $19 billion, Instagram was only $1 billion, making it smaller than the recent acquisition of Tom Ford. Additionally, the FTC filed a lawsuit against Facebook’s acquisition of the virtual reality game company Within Unlimited Inc., on the basis that they were direct competitors and therefore Facebook was attempting to purchase market power rather than earn it through competition. Estée Lauder and Coty have historically acquired direct competitors that offer the same types of products; however, they are not subject to the same level of scrutiny. 

A key reason cited for the difference in the treatment of tech and beauty companies is concern over the influence that major tech platforms have on the spread of information, data privacy and free speech. While these concerns are understandable in principle, antitrust isn’t the proper tool to address them. The purpose of antitrust is to protect the competitive process — an agenda which should apply evenly across industries. If lawmakers are concerned with speech, privacy and information, they are better off pursuing other avenues of remedy. 

Concerns over the societal influence of Big Tech should not be used as an excuse to target the industry with regulations that exclude other companies. The beauty industry is a prime example of the fact that mergers and acquisitions with competitors do not necessarily limit the potential for competition and innovation. Lawmakers who wish to reform antitrust rules should make sure they apply evenly across industries.