Assessing the Long Run Competitive Effects of Digital Ecosystem Mergers

41 Pages Posted: 29 Jan 2021

See all articles by Jasper van den Boom

Jasper van den Boom

Tilburg University; TILEC; LTMS

Peerawat Samranchit

affiliation not provided to SSRN

Date Written: December 10, 2020

Abstract

This paper focuses on the assessment of long run anti-competitive effects on direct entry following acquisitions by digital ecosystems. The paper develops a model to combine the effects of complementarity and economies of scope, which are the two main characteristics observed in digital ecosystems. We show that these two characteristics provide a sufficient condition for a higher entry barrier of competing ecosystem, since conglomerate mergers involving ecosystem can reduce entry by reducing the potential profitability of market entry. As such, some mergers that provide short run benefits for consumer have anti-competitive long run effects that ultimately hurt consumers. Then, we study five major cases before the European Commission involving one of the ecosystems of the Big Five (Apple, Amazon, Facebook, Google and Microsoft), to demonstrate how these long run effects was assessed in practice. The paper finds that the Commission should incorporate a novel test for long run effects of mergers to capture the ecosystem effect in mergers. The paper concludes by suggesting that the assessment of long run effects could happen under a reversed burden of proof, by tying it in with the undertakings claims for efficiency justifications.

Keywords: conglomerate merger, mergers, digital market, digital platform, digital ecosystem, competition law, European law, law and economics, scope economies, long run, long term, complementarity, merger policy, competition policy, Google/DoubleClick, Microsoft/Skype, Facebook/WhatsApp. Microsoft/LinkedIn, A

JEL Classification: K21, D21, D22, L49, L86

Suggested Citation

van den Boom, Jasper and Samranchit, Peerawat, Assessing the Long Run Competitive Effects of Digital Ecosystem Mergers (December 10, 2020). Available at SSRN: https://ssrn.com/abstract=3746343 or http://dx.doi.org/10.2139/ssrn.3746343

Jasper Van den Boom (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

LTMS ( email )

Tilburg
Netherlands

Peerawat Samranchit

affiliation not provided to SSRN

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