Commission expert group warns against ‘killer acquisitions’ in platform economy

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The EU should consider imposing ‘new obligations’ on major platforms to report their merger and acquisition activities to the European Commission in order to avoid a culture of ‘killer acquisitions,’ a report produced for the EU executive has said.

The recommendations come as high-profile acquisitions involving dominant tech platforms continue to raise concern in Brussels, the latest being Google’s proposed $2.1 billion buyout of fitness tracker firm Fitbit.

Reports from Reuters indicated that EU antitrust enforcers are prepared to launch a full-scale investigation into the takeover should concessions not be made by the July 20 date for the executive’s initial findings.

Meanwhile, the three reports published on Friday (10 July) by the Commission’s expert group for the Observatory on the Online Platform Economy, seek to inform the executive’s policy work on the regulation of online platforms, with particular focus on the Digital Services Act package, due to be presented in December.

One such report, focused on ‘measurement & economic indicators’ of online platforms, raises the issue of ‘killer acquisitions’, which refers to cases when large firms acquire smaller players as a means of discontinuing the target’s innovation projects and eliminate future competition, according to an April 2020 study.

“Regarding acquisitions as competitive strategy, including ‘killer acquisitions’ designed to pre-empt future competition, we suggest automated market intelligence data feeds such as an additional way to add a puzzle piece to the jigsaw,” Friday’s report stated.

“However, such data is likely incomplete, and we recommend that the EU considers new obligations on major platforms to report M&A activity to the European Commission, for ex-post research and monitoring purposes, in particular when these M&A are not captured by thresholds in the applicable EU and national merger rules.”

Altmaier comments

Elsewhere, German Economy Minister Peter Altmaier said earlier this week that a “well-regulated” platform economy should allow for small and medium-sized enterprises to compete fairly and should not lead to the formation of “international monopolies.”

Speaking to members of the European Parliament’s Internal Market Committee about the German EU Presidency’s priorities over the next six months, Altmaier pitched competition law as the best solution to guarding against market monopolization.

“The platform economy for consumers, if it’s well regulated, has great potential value-added in terms of transparency in decision making…but it can only work if it doesn’t lead to international monopolies on the part of individual large companies,” Altmaier said.

Platform dependence and unfairness

Other recommendations highlighted across the reports published on Friday, touch upon the fact that “good data sources on business dependence on platforms are still lacking” and as a result, industry associations and statistical agencies should invest into “collecting suitable data, for example, turnover generated on online platforms” as a means of obtaining a wider picture of the dependence by smaller businesses on the large platforms.

In a second report, honing in on ‘unfairness’ in the relationship between platforms and their business users, the expert group notes that “more transparency and oversight are needed into the practices in which platforms engage,” despite the Platform-to-Business Regulation that becomes effective this Sunday, which is a good starting point in identifying unfair practices in the platform-to-businesses relationship.

Data Protectionism

In another report by the expert group, certain warnings on the pitfalls to data sharing could pour cold water on the Commission’s grand plans to liberalise the industrial data economy as part of its data strategy – highlighting how in certain cases, there are incentives for not sharing business data.

Limits to the willingness of sharing business data, the report finds, include “restricting access to protect trade secrets to competitors, or protecting the core of the business model and breaking the network effects the value proposition builds on.”

Moreover, data sharing can, in specific cases, facilitate collusion or dominants’ ability to leverage market power,” the report adds.

The Commission’s data strategy, proposed in February, includes the creation of nine common EU data spaces across sectors including healthcare, agriculture and energy, as well as the establishment of a Data Act in 2021, aimed to foster free-flowing business to business and business to government data sharing.

[Edited by Zoran Radosavljevic]

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