Amazon Completes $3.9bn One Medical Acquisition After FTC’s Antitrust Challenge Times Out

Key Takeaways

• Amazon’s acquisition of One Medical has completed after the FTC’s objection to the merger timed out
• The FTC is still continuing its investigation and alluded to a potential unwinding of the merger should it find reason to
• Stock prices for Amazon and One Medical jumped despite the FTC’s warning

Amazon has just completed its $3.9bn deal to acquire One Medical, it announced this week. Staying on top of technology moves like this can be a challenge, but not if you’re using Q.ai’s Emerging Tech Kit.

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Amazon’s purchase marks a major step forward for the e-commerce giant’s foothold into primary healthcare, which has become a major industry for Big Tech companies to move into.

The merger hasn’t been without controversy. After the Federal Trade Commission (FTC)’s investigation into the purchase timed out, it warned it could send further notices to Amazon even after closing the deal.

That hasn’t dampened investors’ spirits, though, as the share prices for One Medical jumped at the news. Here’s everything you need to know about the deal and what it means for investors.

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What’s Amazon’s plan for One Medical?

One Medical, a membership-based physical and virtual healthcare provider, is a valuable asset for Amazon’s ambitions thanks to its large reach across US primary healthcare. It has over 200 physical locations across 27 markets in the US, with 836,000 members and a $1bn net revenue to boot.

“Together, we believe we can make the health care experience easier, faster, more personal, and more convenient for everyone,” Amazon CEO Andy Jassy said.

US Amazon Prime members will get a discount on One Medical membership for the first year, paying $144 instead of $199.

Amazon’s journey into healthcare

It’s a big step forward for Amazon, which has been trying to break into the healthcare business for years. Jassy has previously called the conglomerate a “significant disruptor” of the healthcare field.

The online shopping giant purchased Pillpack for $750m in 2018, now branded as Amazon Pharmacy. The department recently expanded into online generic prescriptions for Prime members.

But it hasn’t always been plain sailing. It partnered with JPMorgan ChaseJPM
and Berkshire Hathaway to create Haven, a joint venture tackling rising employee healthcare costs. The project was disbanded in 2021.

Amazon also initially launched its Amazon Care program to its employees, rolling it out to other companies in 2021. It struggled to get buy-in from insurers and prospective clients, shutting Amazon Care down in August 2022.

It’s clear with this big-ticket merger that Amazon is changing tack with its approach to the healthcare industry – but the FTC isn’t backing down quietly.

Is Amazon out of the woods?

It’s fair to say that even though the merger has gone ahead, Amazon’s fraught relationship with the FTC could still throw a major spanner in the works.

The FTC had been investigating Amazon’s One Medical acquisition several months before the deadline and warned the company of its future intentions. “The FTC’s investigation of Amazon’s acquisition of One Medical continues,” said FTC spokesperson Douglas Farrer.

The FTC cited “possible harms to consumers that may result from Amazon’s control and use of sensitive consumer health information held by One Medical” as a core reason for continuing their investigation. The governing body has the power to unwind mergers, but it’s much more difficult to do it after a deal has closed.

Amazon is also undergoing two other FTC probes. After it announced its intentions to buy home-tech and robotics company iRobot for $1.65bn, the FTC said it would investigate how Amazon would access data on consumer homes that iRobot holds. It’s also looking into Amazon’s Prime program on how it allegedly manipulates users into signing up for Prime in the first place.

At the start of February, news emerged that the FTC was considering a sweeping antitrust suit against Amazon’s business practices. It allegedly plans to investigate several Amazon departments, though no further details have emerged.

How did the markets react?

But until all of that plays out, the markets have been happy to see the merger go ahead.

One Medical’s share price jumped 8.6% after hours; the company also issued its 2022 results shortly after the announcement, showing a 19% increase in year-on-year net revenue.

iRobot share prices were also boosted by the news, climbing 10% in after-hours trading this week.

The result could have been disastrous for One Medical if the deal had not gone ahead. Deutsche Bank analyst George Hill warned the healthcare provider would have “no valuation floor” had the FTC decided the merger should not proceed.

Amazon, healthcare and oversight

Technology companies are well placed to invest in healthcare. They have the resources, hiring power and deep pockets to revolutionize how we receive primary and acute care. The sticking point is access to what everyone assumes they really want: personal data.

Amazon is clearly fed up with the FTC’s repeated investigations into its business practices. It has accused the FTC of ‘harassing’ former CEO Jeff Bezos and Andy Jassey by asking them to testify in the case.

They likely used that word because the chair of the FTC, Lina Khan, published a paper in 2017 criticizing Amazon’s dominance in the market and advocating for a new way of enforcing antitrust laws with digital companies.

But it’s not just Amazon that the FTC has its sights on. It’s also gone toe-to-toe with Meta for its acquisition of VR company Within Limited, and GoogleGOOG
for its monopoly over digital advertising.

What does this all mean for investors?

The FTC is taking issue with Big Tech companies snapping up new businesses and expanding their reach, as the clue’s in the name – these companies are huge, and their sheer size without much oversight is ringing alarm bells.

With Supreme Court cases, a global tightening of rules and the FTC repeatedly challenging their every move to expand, 2023 could mark a turning point for Big Tech’s free rein.

Whether Big Tech is involved or not, the digital healthcare industry is booming and isn’t set to slow down anytime soon. Returns on digital health stocks have provided nearly 18% yearly since 2013, so it’s an attractive option for investors.

As larger companies circle around to get their slice of the pie, the industry is set to continue growing in size for the foreseeable future. The industry’s revenue is set to hit over $32bn this year, climbing to $42bn by 2027.

The bottom line

Amazon’s move into healthcare isn’t unexpected, but the FTC’s continued focus on the company’s acquisitions could be an interesting and long-term battle between the two.

But digital health presents a good opportunity for investors to take advantage of as the industry continues to boom.

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