Killing acquisitions in the digital age?

Every year, the German Bundeskartellamt invites its “Working Group on Competition Law” to gather and discuss a certain topic. It was that time of the year again last week, when the group came together to debate “Merger control in the digital age – Challenges and development perspectives.” Here is an attempt at reading the tea leaves for what is to be expected following the meeting.

The Working Group consists of law and economics professors, representatives of competition regulators and ministries, and judges. Guess why I was not invited? But never mind, as usual, the Bundeskartellamt published a press release, slide decks for presentations held during the event and – most importantly – a 47-page working paper.

Out of the last ten yearly events, at least four dealt with topics related to tech and innovation. The group’s main focus this year was on two issues: “killer acquisitions” and large digital players using transactions to expand/strengthen their ecosystem.

Killer Acquisitions

The killer acquisition “theory of harm” has been much discussed in recent years. It basically refers to situations in which an acquirer takes over a target in order to shut (parts of) it down, or in order to reduce the acquirer’s own R&D efforts (reverse killer acquisition). So far, antitrust regulators have struggled to identify or define general characteristics of killer acquisitions.

The Bundeskartellamt’s working paper limits itself to describing the concept of killer acquisitions and the underlying theory of harm. It is noticeable, though, that the paper also mentions a theory of harm called “nascent potential competitor”. While the theory itself is not new, it seems to be the first time that the German regulator brings it up publicly, at least in writing. So, one might have to expect it to be mentioned more often going forward.

The theory relates to situations in which an acquirer does not intend to shut down a target (i.e., no killer acquisition), but wants to control it in order to avoid the target growing into a serious competitor. And that brings us directly to the second topic:

Transactions and Ecosystem Expansion

The Bundeskartellamt refers to concerns that acquisitions can also have negative effects where the target is not a competitor, but where the target’s products/services can add to a digital player’s ecosystem.

The theory is that such deals help digital players expand their position and scale on one market to other markets. And regulators as well as scholars are raising the question how to best deal with and address such concerns in merger control, where the concerns seem difficult to put into the classic and distinct categories of horizontal, vertical and conglomerate effects.


“Demands” might be too strong a word and yet it would almost be surprising these days if discussions on a topic related to antitrust and digital would not also involve suggestions on what the legislator should do. The working paper refers to an “impression” of significant underenforcement (inter alia due to transactions not being caught by merger control), and notes that waiting for the case law of the courts to develop does not seem to be appropriate to address the “challenges” of the digital economy.

This transpires into proposals to amend German merger control rules:

  • Merger control could apply to all transactions (irrespective of turnover thresholds etc.) of companies that have been designated to be of “paramount significance across markets” under the still relatively new German digital rules – which would go beyond the gatekeeper obligations under the DMA
  • In merger control proceedings involving such companies, the burden of proof could be “adapted” and the standard for the burden to show likely negative effects of a transaction could be lowered
  • And similarly, new rules could be introduced to allow the Bundeskartellamt to prohibit deals that would lead to the significant strengthening of a “paramount significance across markets”

Such suggestions emphasize that the German regulator still seems very much set on regulating big tech. With the German government already working on the next amendment to German competition law and the amendment after that (more on that here), it is not impossible that the proposals will gain traction.

[Photo by Shahadat Rahman on Unsplash]