In the seventh episode of our podcast series Competition Law in Digital Markets in Latin America “DMA & SPLA III – Merger Control Policy in Latin America”, we discuss the purpose of merger control from a public policy perspective and how this relates to innovation policies.
Geoffrey A. Manne gives an idea of the most important concerns when trying to define relevant markets in merger control cases such as platforms, digital ecosystems or interplatform/intraplatform markets.
It´s important not to rush to condemn mergers quickly, first we need to analyze the benefits that they can bring in efficiency, innovation, and corporate management.
Finally, he ends up this episode bringing a controversial concept: ´Killer Acquisitions´. Our guest illustrates relevant cases from a very skeptical point of view to debate about this idea to see if it is actually a real problem in Digital Markets or even in any other market.
“It´s important not to rush to condemn mergers quickly, they are and can be an important source of efficiencies, of innovation, of improved corporate management.”
“Unlike horizontal mergers, vertical mergers don’t automatically remove a direct competitor. In fact, vertical mergers have an opposite virtually automatic effect, they remove what´s called double marginalization.”
“What vertical mergers also do is that they help to reduce innovation and R&D inefficiencies and externalities.”
“Market definition in general, for online platforms is difficult because companies engage in lots of different kinds of activities, and they could engage in activities that compete with each other even if they don’t.”
“It´s pretty rare that consumers complain about a merger or activities these firms are undertaking, its competitors that complain. And enforcers seem to listen to the competitors and undertake this kind of narrow market definition analysis that favors those competitors, I think to the harm of consumers.”
“The DMA kind of takes this implicit assumption that the use of large amounts of data is harmful when to a first approximation what companies are really doing with is improving their products to the benefit of consumers.”
“There´s remarkably little evidence to suggest that Killer Acquisitions are a problem anywhere. There is no evidence that I know of, to suggest that Killer Acquisitions are a problem in Digital Markets.”
“What happens in Digital Markets is exactly the opposite. You see companies buying other companies, sort of potential competitors in the Digital Market, and then taking their innovations and technologies and incorporating them into their own products, sharing them with millions or billions of more people than the innovator would have been able to on its own.”
“Antitrust enforcers around the world have embraced this idea of Killer Acquisitions and used it as an excuse to beef up their enforcement regimes even when there´s no evidence that it´s something going on.”
Ex-ante regulation, and specifically merger control requires us to undertake a complicated task: predicting the future.
Horizontal mergers usually affect competition, as market concentration occurs.
Vertical mergers usually are not between head-to-head competitors. They do not automatically reduce competition. They increase productivity and efficiency, and now competition is fostered in the markets.
Accordingly, effects of mergers are mixed and sometimes not only promote competition but can also enhance innovation.
Given we are dealing with ecosystems, platforms, and two-sided markets the analysis becomes more complex, and even more considering the fact that many other companies use services in these markets, and also the fact that the frontier between brick and mortar and digital markets is yet to be fixed.
As podcaster tells us, the exceptionalism regarding digital markets is an assumption to be addressed. Killer acquisitions and reverse killer acquisitions are being analyzed in different jurisdiction to understand the phenomena occurring in digital markets, and how they affect other markets.
Therefore, the analysis and definition of relevant markets should consider input from competitors but also take into account consumers. Consumer welfare is paramount to accomplish the purpose of competition law, and therefore the market definition should try to understand and balance interest of competitors regarding narrow market definitions and actual competition occurring from the consumer side, to fully understand the market dynamics.
President and Founder of the International Center for Law and Economics ICLE
Subscribe to our newsletter! Get notified about updates and be the first to get early access to new episodes.
