Jonathan Barnett is a Professor of Law at USC Gould School of Law. This post is based on his recent paper forthcoming in the University of Chicago Business Law Review. Related research from the Program on Corporate Governance includes Are M&A Contract Clauses Value Relevant to Target and Bidder Shareholders? (discussed on the Forum here) by John C. Coates, Darius Palia, and Ge Wu; The New Look of Deal Protection (discussed on the Forum here) by Fernan Restrepo and Guhan Subramanian; and Why Firms Adopt Antitakeover Arrangements by Lucian Bebchuk.
Antitrust and competition regulators in the United States, the European Union, the United Kingdom, and other prominent jurisdictions have recently emphasized the risk posed to competitive markets by so-called “killer acquisitions.” According to this assertion, which has been adopted by much of the policy and scholarly literature, leading technology platforms—commonly known as “Big Tech”—regularly engage in serial acquisitions of startups to suppress competitive threats posed by small innovators.
These claims have already had palpable effects on the merger review process.
Policymakers in the US and the EU have advocated lowering or shifting the burden of proof in merger review, or lowering or eliminating the reporting threshold, to challenge more easily acquisitions of startups by large technology platforms. In May 2023, the European Union’s Digital Markets Act went into force, which requires the largest technology platforms to report all acquisitions of firms in digital markets. In June 2023, the FTC (with the “concurrence” of the Department of Justice) released proposed revised pre-merger notification requirements, which require notifying firms to disclose all acquisitions during the preceding 10 years in markets where the merging parties had “horizontal overlaps” (regardless of firm size). In August 2023, the FTC and the DOJ released proposed revised merger guidelines, which raise concerns about the competitive risks posed by incumbent acquisitions of “nascent” competitors.
