Antitrust, UCL and Privacy

Competition: Fall 2020, Vol 30, No. 2

DIGITAL PLATFORM COMPETITION, MERGER CONTROL, AND THE INCENTIVE TO INNOVATE: DON’T KILL THE GOOSE THAT LAYS THE GOLDEN EGG

By John Ceccio and Christopher Mufarrige1

The purpose of the antitrust laws is to promote competition and innovation for the benefit of consumers.2 Recently, there has been a growing chorus of critics who subscribe to the idea that acquisitions by large digital platforms are detrimental to this purpose. The common belief among these critics is that current antitrust law is ill-equipped to address transactions in digital markets. Much of this sentiment focuses on transactions where large digital platform firms acquire technology-focused start-ups. These interventionists argue that past transactions of start-ups have harmed competition and innovation because, by purchasing nascent competitive threats, platform incumbents eliminated much needed competitive constraints. Taken together, they argue that this course of conduct impedes incentives to innovate and ultimately harms consumers.

In response to these perceived problems, critics assert that antitrust merger enforcement should be less forgiving when scrutinizing large firm acquisitions and that potential legislative action is needed. Importantly, these types of changes to the antitrust laws would make it harder for venture capital-backed companies to be acquired. This raises two important questions: (1) do the current proposals promote competition, innovation, and consumer welfare; and if not, (2) are extant antitrust principles capable of effectively addressing large technology firm’s purchasing alleged nascent competitive threats?

The short answers are no and yes. First, critics fail to fully appreciate the unintended negative consequences their proposals will have on the innovation ecosystem as a whole. Put simply, if the critics’ proposals were enacted, the incentives for innovation and growth would be severely curtailed and the capacity for future innovation and growth would be in doubt. Second, the fundamental principles of extant antitrust merger enforcement are sound, and the current legal and analytical frameworks are sufficient to combat potentially anticompetitive acquisitions of smaller, adjacently related start-ups. While there is certainly room for more empirical research to better understand digital markets,3 any change in the law must first aim to do no harm or, in other words, not kill the goose that lays the golden egg. The sections that follow describe: (1) the recent literature surrounding the debate; (2) the various regulatory proposals; (3) why those proposals are flawed; and (4) why existing merger enforcement principles are up to the task.

Join CLA to access this page

Join

Log in

Forgot Password

Enter the email associated with you account. You will then receive a link in your inbox to reset your password.

Personal Information

Select Section(s)

CLA Membership is $99 and includes one section. Additional sections are $99 each.

Payment