Mergers and Acquisitions in Digital Markets

"Some Members of Congress have expressed concern about mergers and acquisitions in digital markets, specifically those involving “Big Tech”—Alphabet (Google), Amazon, Apple, Facebook, and Microsoft. Mergers can be separated into three categories: (1) a merger between competitors (i.e., horizontal merger), (2) a merger with a firm in the supply chain (i.e., vertical merger), and (3) a merger with a firm in an unrelated or adjacent market. Some Members have specifically raised concern about Big Tech companies’ acquisitions of nascent firms, which can occur across all three categories. A merger could potentially increase or decrease competition in digital markets, depending on the characteristics of the markets involved.

Section 7 of the Clayton Act prohibits mergers whose effect “may be substantially to lessen competition, or to tend to create a monopoly” (15 U.S.C. §18). Citing this law, the Antitrust Division of the Department of Justice (DOJ), the Federal Trade Commission (FTC), state attorneys general, and private parties can challenge mergers. Merging parties that meet certain conditions must file a premerger notification with the FTC and DOJ under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (HSR Act). After investigating a proposed merger, the agencies can (1) allow the transaction to proceed unchallenged, (2) allow the transaction to proceed after entering a consent decree with the merging parties with conditions to maintain competition in the market, or (3) seek to stop the transaction by filing suit in federal court. The FTC and DOJ have not sued to block a proposed merger involving Big Tech since 2000; during this time, the Big Tech companies acquired at least 710 companies..."
Mergers and acquisitions