EU Merger Review of “Killer Acquisitions” in Digital Markets - Threshold Issues Governing Jurisdictional and Substantive Standards of Review
Peter Alexiadis and Zuzanna Bobowiec
A growing discontent has spread over the past few years that large digital platforms are putting themselves in a position of unassailable market power through their many acquisitions of fledgling companies that offer niche digital products or services.
There has been widespread concern that so many of these so-called â€˜killer acquisitionsâ€™ fall outside merger control scrutiny because the size of the target in terms of existing revenues is so low that traditional merger thresholds are not satisfied. Critics therefore argue that it is bad public policy to systematically allow mergers capable of generating serious anti-competitive effects on digital markets to be realised, without at least some level of effective scrutiny. To this end, consideration needs to be given to creating new legal thresholds which would allow for the more widespread review of killer acquisitions in the digital space.
There has also been a significant level of debate as to whether, even where merger thresholds have been triggered, existing legal standards of review for those mergers are not appropriate for changes in market structure in the digital sector, given the uneven nature of market developments driven by technological innovation and radical shifts in business models. Accordingly, some critics have argued that existing legal standards of review should be diluted or modified in order to facilitate the task of the merger review body, either in general terms to cover all mergers or more specifically with respect to digital sector mergers. The central idea underpinning such changes is that merger regulators should be more concerned about letting potentially anti-competitive mergers escape a prohibition sanction than about engaging in excessive intervention.
Judged primarily from the perspective of the merger regime prevailing in the EU, we consider below the various pros and cons in the proposals for change in relation to jurisdictional thresholds and substantive tests of review that might be adopted for digital sector mergers.
Peter Alexiadis is a Partner at Gibson, Dunn & Crutcher LLP – Brussels and a Visiting Professor at Kings College, London. Zuzanna Bobowiec is a Trainee at Gibson, Dunn & Crutcher LLP – Brussels