By Geoffrey Parker (Dartmouth College), Georgios Petropoulos (Massachusetts Institute of Technology) & Marshall W. Van Alstyne (Boston University)
Platform ecosystems rely on economies of scale, data-driven economies of scope, high quality algorithmic systems, and strong network effects that typically promote winner-take-most markets. Some platform firms have grown rapidly and their merger and acquisition strategies have been very important factors in their growth. Big platforms’ market dominance has generated competition concerns that are difficult to assess with current merger policy tools. In this paper, we examine the acquisition strategies of the five major US firms—Google, Amazon, Facebook, Apple, and Microsoft—since their inception. We discuss the main merger and acquisition theories of harm that can restrict market competition and reduce consumer welfare. To address competition concerns of acquisitions in big platform ecosystems we develop a four step proposal that incorporates (1) a new ex-ante regulatory framework, (2) an update of the conditions under which the notification of mergers should be compulsory and the burden of proof should be reversed, (3) differential regulatory priorities in investigating horizontal versus vertical M&A, and (4) an update of competition enforcement tools to increase visibility into market data and trends.
