Big Tech Acquisitions — Towards Empirical Evidence

Big Tech, commonly associated with the firms Google, Apple, Facebook, Amazon, and Microsoft (GAFAM), makes up the most valuable companies worldwide in 2020. In the ten years leading up to 2020, these five companies alone acquired more than 400 firms, predominantly in the technological sector. However, most of these transactions were not scrutinised by competition authorities as they did not reach the traditional turnover thresholds, whereas those reviewed were not blocked following current merger control procedures. Prominent examples include the Google/YouTube, Facebook/Instagram, Facebook/WhatsApp, and Microsoft/GitHub mergers.

As a result, a number of policy reports voice their concerns about the competitive effects of such acquisitions that target potential competitors but fly under the radar because of the features and challenges of the digital economy. In particular, firms in the digital economy often start to monetise only once they have acquired a large user base, thus not meeting current turnover thresholds for merger investigation. Furthermore, digital industries are typically characterised by multi-sidedness, (indirect) network effects, access to data raising privacy issues, and often zero prices on one side of the market (typically the user side). Competition is then often about non-price outcomes, such as quality of service, data collection, and innovation. Consequently, some of these reports conclude that merger control enforcement needs to be updated to properly account for these particular features. Germany, as one example, already considers the transaction value of the acquisition and in 2021 gave the competition authority power to intervene and prohibit abusive practices when a company has a paramount significance for competition across markets. Other authorities, like the Federal Trade Commission in the United States, announced that they will review all acquisitions made by Big Tech in the past, irrespective of their size.

Affeldt, Pauline and Reinhold Kesler (2021), Big Tech Acquisitions — Towards Empirical Evidence, Journal of European Competition Law & Practice Volume 12, Issue 6 , 471-478