Big Tech continues to be on an acquisition spree. On 28 March of this year, the European Commission unconditionally approved Google’s acquisition of Photomath, an online homework and study help app which allows consumers to scan and detect mathematical equations with their smartphone’s camera.1 Only shortly before that, in February, Meta officially closed its acquisition of virtual reality fitness app developer Within Unlimited after winning a court case against the Federal Trade Commission (FTC).
These two takeovers mark just some of the latest of hundreds of acquisitions the Big Tech incumbents GAFAM (Google, Amazon, Facebook (now Meta), Apple and Microsoft) have made over the recent years. In contrast to the acquisition of Photomath and Within Unlimited, most of these acquisitions did not have to be notified to the competition authorities and thus flew under the radar. In fact, focusing on transactions with a value above 1m USD an FTC report from 2021 identifies more than 600 unreported acquisitions by GAFAM in the period from 2010 to 2019.2 Almost 80% of these acquisitions had a transaction value of less than 50m USD and thus involve fairly small businesses.
Against the backdrop of GAFAM’s strong track record, there have been increasing concerns about the rationale behind such acquisitions. According to the now well-known killer acquisitions narrative,3 the main purpose of at least some of these acquisitions might be to eliminate innovative start-ups that could potentially turn into a serious competitive threat and challenge the incumbent’s market position in the future. After the takeover, the incumbent might then decide to not even use the start-up’s innovative ideas or products but instead to simply kill, i.e. discontinue, them.
While the empirical relevance of such killer acquisitions by Big Tech firms is far from established,4 competition authorities, academics and antitrust practitioners are increasingly considering the potential impact Big Tech acquisitions on innovation. The growing interest into this question is hardly surprising. After all, innovation, may it be in form of the next big thing or the incremental improvement of existing products and services, takes the center stage in the digital markets in which GAFAM operate.
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