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

Author

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  • Mark Glick

    (University of Utah)

  • Catherine Ruetschlin

    (University of Utah)

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.

Suggested Citation

  • Mark Glick & Catherine Ruetschlin, 2019. "Big Tech Acquisitions and the Potential Competition Doctrine: The Case of Facebook," Working Papers Series 104, Institute for New Economic Thinking.
    • Handle: RePEc:thk:wpaper:104
    DOI: 10.36687/inetwp104
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    Keywords

    Antitrust Law; Big Tech Companies; Digital Markets; Mergers; Potential Competition Big Tech Acquisitions and the Potential Competition Doctrine: The Case of Facebook;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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