This is an updated version of the Working Paper: Platform mergers and antitrust published by Bruegel in January 2021.
Platform ecosystems rely on economies of scale, data-driven economies of scope, high quality algorithmic systems, and strong network effects that frequently promote winner-takes-most markets. Some platform firms have grown rapidly and their merger and acquisition strategies have been very important factors in their growth. Big platforms’ market dominance has generated competition concerns that are difficult to assess with current merger policy tools. We examine the acquisition strategies of the five major US firms—Google, Amazon, Facebook, Apple and Microsoft—since their inception. We discuss the main merger and acquisition theories of harm that can restrict market competition and reduce consumer welfare. To address competition concerns about acquisitions in big platform ecosystems we develop a four step proposal that incorporates: (1) a new ex-ante regulatory framework, (2) an update of the conditions under which the notification of mergers should be compulsory and the burden of proof should be reversed, (3) differential regulatory priorities in investigating horizontal versus vertical acquisitions, and (4) an update of competition enforcement tools to increase visibility into market data and trends.
We are very thankful to Aidai Kozubekova and Nicole Evans for their superb research assistance. The paper benefitted greatly from discussions with Erik Brynjolfsson, Luis Cabral, Avinash Collis, Maria Demertzis, Nestor Duch-Brown, Justus Haucap, Bertin Martens, Maciej Sobolewski, Tommaso Valletti and Guntram Wolff, as well as seminar participants at Bruegel. Georgios Petropoulos gratefully acknowledges financial support from the European Union’s Horizon 2020 research and innovation programme under the Marie Skłodowska-Curie grant agreement No. 799093. Finally, we gratefully acknowledge editorial assistance from Elizabeth Parker.
Parker, G., G. Petropoulos and M. Van Alstyne (2021) ‘Platform mergers and antitrust, Working Paper 01/2021, Bruegel