Big Tech Acquisitions and the Potential Competition Doctrine: The Case of Facebook

60 Pages Posted: 8 Nov 2019

See all articles by Mark Glick

Mark Glick

University of Utah - College of Social & Behavioral Sciences

Catherine Ruetschlin

University of Utah

Date Written: October 1, 2019

Abstract

The Big Tech companies, including Google, Facebook, Amazon, Microsoft and Apple, have individually and collectively engaged in an unprecedented number of acquisitions. When a dominant firm purchases a start-up that could be a future entrant and thereby increase competitive rivalry, it raises a potential competition issue. Unfortunately, the antitrust law of potential competition mergers is ill-equipped to address tech mergers. We contend that the Chicago School’s assumptions and policy prescriptions hobbled antitrust law and policy on potential competition mergers. We illustrate this problem with the example of Facebook. Facebook has engaged in 90 completed acquisitions in its short history (documented in the Appendix to this paper). Many antitrust commentators have focused on the Instagram and WhatsApp acquisitions as cases of mergers that have reduced potential competition. We show the impotence of the potential competition doctrine applied to these two acquisitions. We suggest that the remedy for Chicago School damage to the potential competition doctrine is a return to an empirically tractable structural approach to potential competition mergers.

Keywords: Antitrust Law, Big Tech Companies, Digital Markets, Mergers, Potential Competition Big Tech Acquisitions and the Potential Competition Doctrine: The Case of Facebook

JEL Classification: K21, L40, L86

Suggested Citation

Glick, Mark and Ruetschlin, Catherine, Big Tech Acquisitions and the Potential Competition Doctrine: The Case of Facebook (October 1, 2019). Institute for New Economic Thinking Working Paper Series No. 104, October 2019 https://doi.org/10.36687/inetwp104, Available at SSRN: https://ssrn.com/abstract=3482213 or http://dx.doi.org/10.2139/ssrn.3482213

Mark Glick (Contact Author)

University of Utah - College of Social & Behavioral Sciences ( email )

United States

Catherine Ruetschlin

University of Utah ( email )

1645 Central Campus Dr.
Salt Lake City, UT 84112
United States

HOME PAGE: http://https://economics.utah.edu/

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