Competitors’ Reactions to Big Tech Acquisitions: Evidence from Mobile Apps

41 Pages Posted: 4 Jan 2022

See all articles by Pauline Affeldt

Pauline Affeldt

German Institute for Economic Research (DIW Berlin); Technische Universität Berlin (TU Berlin)

Reinhold Kesler

University of Zurich

Date Written: December 2021

Abstract

Since 2010, Google, Apple, Facebook, Amazon, and Microsoft (GAFAM) have acquired more than 400 companies. Competition authorities did not scrutinize most of these transactions and blocked none. This raised concerns that GAFAM acquisitions target potential competitors yet fly under the radar of current merger control due to the features of the digital economy. We empirically study the competitive effects of big tech acquisitions on competitors in a relevant online market. We identify acquisitions by GAFAM involving apps from 2015 to 2019, matching these to a comprehensive database covering apps available in the Google Play Store. We find that competing apps tend to innovate less following an acquisition by GAFAM, while there seems to be no impact on prices and privacy-sensitive permissions of competing apps. Additionally, we find evidence that affected developers reallocate innovation efforts to unaffected apps and that affected markets experience less entry post-acquisition.

Keywords: Mergers and acquisitions, digital markets, GAFAM, apps, innovation, privacy, event study

JEL Classification: K21,L41,L86,G34

Suggested Citation

Affeldt, Pauline and Kesler, Reinhold, Competitors’ Reactions to Big Tech Acquisitions: Evidence from Mobile Apps (December 2021). DIW Berlin Discussion Paper No. 1987, Available at SSRN: https://ssrn.com/abstract=3998875 or http://dx.doi.org/10.2139/ssrn.3998875

Pauline Affeldt (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Technische Universität Berlin (TU Berlin) ( email )

Straße des 17
Juni 135
Berlin, 10623
Germany

Reinhold Kesler

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

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