Republican lawmaker readies bill mandating foreign subsidy disclosures for mergers

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4 years ago

September 5, 2021

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Rep. Scott Fitzgerald, R-Wis., is seen during a group photo with freshmen members of the House Republican Conference on the House steps of the Capitol on Monday, January 4, 2021.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

A Republican lawmaker is readying a bill that would require businesses subsidized by foreign governments to disclose that information when they pursue large mergers subject to U.S. regulatory review.

The bill, led by Rep. Scott Fitzgerald, R-Wisc., and tentatively named the “Stopping Foreign Government Subsidies for Mergers Act,” would require businesses backed by state-owned entities to notify regulators of that backing when they report a deal of more than $92 million in value.

That additional information can help regulators assess how a company might act once merged, Republican Federal Trade Commissioner Noah Joshua Phillips, who supports the legislation, told CNBC in an interview Wednesday.

Noah Phillips, commissioner, Federal Trade Commission, testifies during the Senate Commerce, Science and Transportation Committee hearing tilted The Invalidation of the EU-US Privacy Shield and the Future of Transatlantic Data Flows, in Russell Building on Wednesday, December 9, 2020.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

“Our presumptions in the law and the way we do our work are based on the notion fundamentally that firms profit maximize. They seek to make money,” Phillips said. “But state-owned entities don’t necessarily have the pursuit of profit as their ultimate motive, and as a result, they may not act in the same way as the companies that we normally look at do.”

A firm that values certain political objectives over profits might make a different calculation when it comes to the risk of pursuing anticompetitive conduct, like steeply undercutting rival prices only to raise them later on. While Phillips declined to speculate on the types of conduct in which a state-owned entity might engage, he said it would help to know their potential incentives in order to assess the facts of each individual case.

As it stands, regulators may become aware of a foreign government subsidy in a merger case, but Phillips said requiring that information up-front will allow them to “develop expertise and ask the right questions.”

The bill builds on a recommendation last year from the bipartisan U.S.-China Economic and Security Review Commission. In its annual report to Congress, the commission recommended the FTC have a system in place to determine how proposed transactions are influenced by such foreign government support.

The commission found that the Chinese government would back companies it saw becoming national champions and eventually push them to expand into the U.S. and other countries.

“This process assists Chinese national champions in surpassing and supplanting global market leaders,” the commission wrote in its annual report to Congress.

The commission said “China’s trade-distorting practices” mean that “U.S. workers and companies, no matter how innovative and efficient, struggle to compete when the Chinese government so decisively tilts the playing field in favor of Chinese companies through a variety of legal, regulatory, and financial mechanisms, and when U.S. companies are granted access to the Chinese market, it is at the cost of transferring valuable intellectual property to their Chinese counterparts.”

The group warned that the risk is particularly acute when it comes to emerging technologies, where China allegedly seeks to “surpass and displace the United States altogether.”

“Failure to appreciate the gravity of this challenge and defend U.S. competitiveness would be dire,” the commission wrote. “Because these emerging technologies are the drivers of future growth and the building blocks of future innovation, a loss of leadership today risks setting back U.S. economic and technological progress for decades.”

Though Fitzgerald said he’s in the early stages of engaging with colleagues about co-sponsoring the bill, he said he believes China’s apparent willingness to devote major resources toward corporate subsidies could rally lawmakers on both sides of the aisle behind the proposal.

The bill would not place any national security assessment requirements on the antitrust agencies, which Phillips said are best left to the existing agencies responsible for that type of review. The Committee on Foreign Investment in the U.S. (CFIUS) within the Treasury Department is already responsible for reviewing national security implications for mergers with foreign entities, for example.

But Phillips and Fitzgerald said there remains a need to assess foreign-subsidized businesses from a potential harm to competition perspective, which is squarely within the antitrust regulators’ purview.

Doug Melamed, a Stanford University law professor and former Acting Assistant Attorney General of the Antitrust Division at the Department of Justice, said one possible outcome of such legislation, if passed, would be a chilling of mergers with state-owned entities.

“The most important effect of that kind of requirement might be to deter the acquisition in the first place,” Melamed said. “Because if the Chinese have some interesting stake in company X that would not ordinarily surface … this might deter it if they don’t want their position to be known.”

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WATCH: Why China’s cracking down on tech — and what’s next

Technology

Cognition to buy AI startup Windsurf days after Google poached CEO in $2.4 billion licensing deal

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5 hours ago

July 14, 2025

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Cognition to buy AI startup Windsurf days after Google poached CEO in .4 billion licensing deal

In this photo illustration, a man seen holding a smartphone with the logo of US artificial intelligence company Cognition AI Inc. in front of website.

Timon Schneider | SOPA Images | Sipa USA | AP

Artificial intelligence startup Cognition announced it’s acquiring Windsurf, the AI coding company that lost its CEO and several other senior employees to Google just days earlier.

Cognition said on Monday that it will purchase Windsurf’s intellectual property, product, trademark, brand and talent, but didn’t disclose terms of the deal. It’s the latest development in an AI talent war, as companies like Meta, Google and OpenAI fiercely compete for top engineers and researchers.

OpenAI had been in talks to acquire Windsurf for about $3 billion in April, but the deal fell apart, and Google said on Friday that it hired Windsurf’s co-founder and CEO Varun Mohan. Google is paying $2.4 billion in licensing fees and for compensation, as CNBC previously reported.

“Every new employee of Cognition will be treated the same way as existing employees: with transparency, fairness, and deep respect for their abilities and value,” Cognition CEO Scott Wu wrote in a memo to employees on Monday. “After today, our efforts will be as a united and aligned team. There’s only one boat and we’re all in it together.”

Cognition didn’t immediately respond to CNBC’s request for comment. Windsurf directed CNBC to Cognition.

Cognition is best known for its AI coding agent named Devin, which is designed to help engineers build software faster. As of March, the startup had raised hundreds of millions of dollars at a valuation of close to $4 billion, according to a report from Bloomberg.

Both companies are backed by Peter Thiel’s Founders Fund. Other investors in Windsurf include Greenoaks, Kleiner Perkins and General Catalyst.

“I’m overwhelmed with excitement and optimism, but most of all, gratitude,” Jeff Wang, the interim CEO of Windsurf, wrote in a post on X on Monday. “Trying times reveal character, and I couldn’t be prouder of how every single person at Windsurf showed up these last three days for each other and for our users.”

Wu said that the acquisition ensures all Windsurf employees are “treated with respect and well taken care of in this transaction.” All employees will participate financially in the deal, have vesting cliffs waived for their work to date and receive fully accelerated vesting for their, according to the memo.

“There’s never been a more exciting time to build,” Wu wrote.

WATCH: Google snatches Windsurf CEO after OpenAI deal dissolves

Technology

Musk’s xAI faces European scrutiny over Grok’s ‘horrific’ antisemitic posts

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6 hours ago

July 14, 2025

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Musk's xAI faces European scrutiny over Grok's 'horrific' antisemitic posts

The Grok logo is being displayed on a smartphone with Xai visible in the background in this photo illustration on April 1, 2024.

Jonathan Raa | Nurphoto | Getty Images

The European Union on Monday called in representatives from Elon Musk‘s xAI after the company’s social network X, and chatbot Grok, generated and spread anti-semitic hate speech, including praise for Adolf Hitler, last week.

A spokesperson for the European Commission told CNBC via e-mail that a technical meeting will take place on Tuesday.

xAI did not immediately respond to a request for comment.

Sandro Gozi, a member of Italy’s parliament and member of the Renew Europe group, last week urged the Commission to hold a formal inquiry.

“The case raises serious concerns about compliance with the Digital Services Act (DSA) as well as the governance of generative AI in the Union’s digital space,” Gozi wrote.

X was already under a Commission probe for possible violations of the DSA.

Meta removes 10 million Facebook profiles in effort to combat spam

Published

6 hours ago

July 14, 2025

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Meta removes 10 million Facebook profiles in effort to combat spam

Meta CEO Mark Zuckerberg looks on before the luncheon on the inauguration day of U.S. President Donald Trump’s second presidential term in Washington on Jan. 20, 2025.

Evelyn Hockstein | Reuters

Meta on Monday said it has removed about 10 million profiles for impersonating large content producers through the first half of 2025 as part of an effort by the company to combat “spammy content.”

The crackdown is part of Meta’s broader effort to make the Facebook feed more relevant and authentic by taking action against and removing accounts that engage in “spammy” behavior, such as content created using artificial intelligence tools.

As part of that initiative, Meta is also rolling out stricter measures to promote original posts from creators, the company said in a blog post.

Facebook also took action against approximately 500,000 accounts that it identified to be engaged in inauthentic behavior and spam. These actions included demoting comments and reducing distribution of content, which are intended to make it harder for these accounts to monetize their posts.

Meta said unoriginal content is when images or videos are reused without crediting the original creator. Meta said it now has technology that will detect duplicate videos and reduce the distribution of that content.

The action against spam and inauthentic content comes as Meta increases its investment in AI, with CEO Mark Zuckerberg on Monday announcing plans to spend “hundreds of billions of dollars” on AI compute infrastructure to bring the company’s first supercluster online next year.

This mandate comes at a time when AI is making it easier to mass-produce content across social media platforms. Other platforms are also taking action to combat the increase of spammy, low-quality content on social media, also known as “AI slop.”

Google’s YouTube announced a change in policy this month that prevents content that is mass-produced or repetitive from being eligible for being awarded revenue.

This announcement sparked confusion on social media, with many users believing this was a reversal on YouTube’s stance on AI content. However, YouTube clarified that the policy change is aimed at curbing unoriginal, spammy and repetitive videos.

“We welcome creators using AI tools to enhance their storytelling, and channels that use AI in their content remain eligible to monetize,” said a spokesperson for YouTube in a blog post to clarify the new policy.

YouTube’s new policy change will take effect on Tuesday.