Nascent Competition and Killer Acquisitions in Digital Markets: a Decade of Acquisitions by Big Tech

Abstract

Abstract Acquisitions in digital markets by dominant companies such as Google, Apple, Facebook, Amazon and Microsoft (GAFAM) raise concerns related to the elimination of potential and nascent competition. While demands for merger control reforms in this segment are proliferating, there are still important controversies and insufficient systemic studies on the matter. Therefore, this study evaluates, based on theoretical and empirical research, the hypothesis that acquisitions of nascent competitors and killer acquisitions are not common enough in digital markets to justify drastic changes in merger control rules. To this end, we more rigorously define important terms, such as killer acquisitions and nascent competitors. Then we investigate and classify all acquisitions made by the GAFAM firms between 2009 and 2018, considering the targets’ ages, their main activities and whether they were shut down after acquisition. The results indicate that most acquisitions did not have a clear horizontal effect, meaning that GAFAM companies often purchase inputs, talents, or complementary products. However, the study identifies and examines in detail possible nascent competitors’ and killer acquisitions. The results indicate that antitrust authorities should be aware of the issue and undertake cautious reforms of merger control rules, balancing competition protection against the risks of unnecessarily harming innovation. JEL: [K21 – Antitrust Law] [L41 – Monopolization • Horizontal Anticompetitive Practices]