Capturing killer acquisitions in the digital sector: Article 102, EU Merger Control and Commission’s approach
(2022) JAEM03 20221Department of Law
Faculty of Law
- Abstract
- The ‘killer acquisition’ -phenomenon has been a subject of heated discussion for past several years. It usually describes as a situation where the target company, commonly a start-up, is acquired by an incumbent and its innovation products are discontinued. This leads to a loss of both competition and innovation, causing a harm to consumer welfare. Their prevalence is still mostly unknown, but research has shown that as much as 6% acquisitions in the pharmaceutical sector was of this nature. This has led to a speculation about the extent of this phenomenon in the digital sector. This is because the problem may be even more pronounced there: business model of many start-ups is not initially focused on generating income but attracting... (More)
- The ‘killer acquisition’ -phenomenon has been a subject of heated discussion for past several years. It usually describes as a situation where the target company, commonly a start-up, is acquired by an incumbent and its innovation products are discontinued. This leads to a loss of both competition and innovation, causing a harm to consumer welfare. Their prevalence is still mostly unknown, but research has shown that as much as 6% acquisitions in the pharmaceutical sector was of this nature. This has led to a speculation about the extent of this phenomenon in the digital sector. This is because the problem may be even more pronounced there: business model of many start-ups is not initially focused on generating income but attracting userbase. For this reason, their competitive potential is not necessarily reflected by their turnover, which means that they are not caught by the EU merger control thresholds. Even when suspected killer acquisition is investigated by the Commission, it faces challenges with the review. The reason is that the technological and digital market is constantly evolving as a result of new innovations and radical shifts in business models. This paper tries to tackle this phenomenon by mapping its extent, the level of harm, and the merited response if any. Many latest studies in the area will be investigated along with the reports and studies compiled by the competition authorities. The sources narrow the suspect group in need of regulation down to GAFAM-companies. Some popular suggestions to deal with them, such as lowering the thresholds, transaction value-based thresholds, and ex post control, are discarded as disproportionate for the stated aim. New guidance on Article 22 Referral is similarly found to not suit this task. Instead, Article 102 TFEU is proposed as a preferable alternative. It is found that supplemented with the Digital Markets Act, it is possible to have an effective ex-ante and ex-post toolset, which would enable the Commission to tackle the killer acquisition in the digital sector. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9093182
- author
- Porkka, Markus Pentti Ilari LU
- supervisor
- organization
- course
- JAEM03 20221
- year
- 2022
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- Killer acquisitions, GAFAM, digital sector, digital markets, kill zone, Article 102, potential competitor
- language
- English
- id
- 9093182
- date added to LUP
- 2022-07-11 10:42:56
- date last changed
- 2022-07-11 10:42:56
@misc{9093182,
abstract = {{The ‘killer acquisition’ -phenomenon has been a subject of heated discussion for past several years. It usually describes as a situation where the target company, commonly a start-up, is acquired by an incumbent and its innovation products are discontinued. This leads to a loss of both competition and innovation, causing a harm to consumer welfare. Their prevalence is still mostly unknown, but research has shown that as much as 6% acquisitions in the pharmaceutical sector was of this nature. This has led to a speculation about the extent of this phenomenon in the digital sector. This is because the problem may be even more pronounced there: business model of many start-ups is not initially focused on generating income but attracting userbase. For this reason, their competitive potential is not necessarily reflected by their turnover, which means that they are not caught by the EU merger control thresholds. Even when suspected killer acquisition is investigated by the Commission, it faces challenges with the review. The reason is that the technological and digital market is constantly evolving as a result of new innovations and radical shifts in business models. This paper tries to tackle this phenomenon by mapping its extent, the level of harm, and the merited response if any. Many latest studies in the area will be investigated along with the reports and studies compiled by the competition authorities. The sources narrow the suspect group in need of regulation down to GAFAM-companies. Some popular suggestions to deal with them, such as lowering the thresholds, transaction value-based thresholds, and ex post control, are discarded as disproportionate for the stated aim. New guidance on Article 22 Referral is similarly found to not suit this task. Instead, Article 102 TFEU is proposed as a preferable alternative. It is found that supplemented with the Digital Markets Act, it is possible to have an effective ex-ante and ex-post toolset, which would enable the Commission to tackle the killer acquisition in the digital sector.}},
author = {{Porkka, Markus Pentti Ilari}},
language = {{eng}},
note = {{Student Paper}},
title = {{Capturing killer acquisitions in the digital sector: Article 102, EU Merger Control and Commission’s approach}},
year = {{2022}},
}