When could an acquisition become unlawful?

On Behalf of | Jan 8, 2021 | Business Litigation |

Mergers and acquisitions are common business transactions. Whether purchasing another company is a means to diversify product offerings or scale internationally – or both – some approaches to corporate growth may incite legal action.

An acquisition can provide financial benefits. However, is there a legal limit to business success?

Current lawsuits against the world’s largest social media platform

Accusations against Facebook assert acquisitions of WhatsApp and Instagram involve illegal business practices. Along with its founder and CEO, Mark Zuckerberg, the network faces twin lawsuits filed by the United States Federal Trade Commission (FTC) and 48 attorneys general.

Despite Facebook’s history of litigious defense, pending suits may pose the most serious threat in the site’s 16-year history. Reports suggest the platform:

  • Misused digital data
  • Prioritized profits over consumer rights
  • Leveraged data and financial backing to hinder competition

However, alleged anti-trust and anti-competitive practices didn’t thwart Facebook’s $20 billion cost of expansion. Since regulators did not prohibit the acquisitions, whether government entities are within their rights to challenge business deals years after their completion remains unclear.

Legal definitions may leave room for interpretation

Free enterprise requires fair competition. Antitrust objectives have served as incentives to uphold quality, regulate prices and maintain efficiency across changing markets throughout the past century. Yet, the laws that outline legal business practices may leave room for a court’s intervention.

Resolution in the case against Facebook could take years. It will be interesting to see whether, or how, potential competitors will vie for broader bandwidth in the meantime.

Guidance, representation and potential litigation

Businesses require sound legal counsel throughout their life cycle. A strategic plan and detailed documentation can mitigate risk. Still, every growing company requires legal defense when facing unanticipated accusations.

State and federal business laws specify how your entity can appropriately secure deals. Nevertheless, you would be wise to be prepared for transactions that come into question.

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