By: Tomasso Valletti (Pro Market)
As you read this, please remember two numbers: 1,000 and zero. The former number represents the 1,000 acquisitions made by GAFAM (Google, Amazon, Facebook, Apple, and Microsoft) in the past 20 years. The latter is the number of those acquisitions actually blocked by regulators worldwide.
Mergers and acquisitions have directly increased market concentration across Europe and the US, including in brewing, supermarkets, hospitals, car rentals, eyeglasses, crop seeds, industrial chemicals, meat packing, wireless carriers, and many others. Detailed studies document a rise in concentration and market power, a decline in the rate of new firms entering markets, and a fall in labor’s share of economic output.
When I was Chief Competition Economist at the European Commission from 2016-2019, I found myself in an unbalanced tug of war. My team of 30 (really excellent) economists, supervising the economic analysis of every major merger, antitrust, and state aid case in Europe, faced dominant companies that could hire any number of lawyers against us. They paid an army of consultancies to create doubt around an issue, while the burden of proof was on us to dismiss their claims. This burden was made worse by asymmetric information: the companies had all the incentives to hide vast amounts of information from us and use it selectively to create more obfuscating smoke.
As we tried to build our cases, the dominant companies bogged us down in endless, esoteric arguments about definitions of markets and other matters. This has a long history. When Facebook bought Instagram in 2012, for instance, the discussion between the enforcers and the parties ultimately revolved around the “supply of photo apps,” which would be of limited interest to advertisers because “eyeballs are not on the app for a significant period of time” and “limited user data is captured.” Of 8,000 cases analyzed by the European Commission since 1990, only 30 have been prohibited…