Merger Policy in Digital Markets: An Ex Post Assessment

This paper presents a broad retrospective evaluation of mergers and merger decisions in markets dominated by multisided digital platforms. First, we document almost 300 acquisitions carried out by three major tech companies—Amazon, Facebook, and Google—between 2008 and 2018. We cluster target companies on their area of economic activity providing suggestive evidence on the strategies behind these mergers. Second, we discuss the features of digital markets that create new challenges for competition policy.

By using relevant case studies as illustrative examples, we discuss theories of harm that have been used or, alternatively, could have been formulated by authorities in these cases. Finally, we retrospectively examine two important merger cases, Facebook/Instagram and Google/Waze, providing a systematic assessment of the theories of harm considered by the UK competition authorities as well as evidence on the evolution of the market after the transactions were approved. We discuss whether the competition authority performed complete and careful analyses to foresee the competitive consequences of the investigated mergers and whether a more effective merger control regime can be achieved within the current legal framework.

Ex-post Assessment of Merger Control Decisions in Digital Markets

The Competition and Markets Authority appointed Lear to carry out a study aimed at looking at four past merger decisions in the digital sector taken by the Office of Fair Trading and the Competition Commission (jointly, the “Authorities”).
The objective of the study was threefold:
▪ review merger cases undertaken by Competition Authorities and the relevant economic literature to identify which Theories of Harm (ToHs) have been typically pursued in relation to these mergers, how such ToHs have been evaluated and which relevant economic features should be taken into account when evaluating mergers in the sector;
▪ assess the UK cases and evaluate whether the decision that the Authorities have come to was reasonable based on the evidence that was, or would reasonably have been, available at the time;
▪ evaluate market evolution following the mergers to ascertain whether the merger has led to a detrimental outcome.