Big Tech Acquisitions and the Potential Competition Doctrine: The Case of Facebook

Abstract

The Big Tech companies, including Google, Facebook, Amazon, Microsoft and Apple, have individually and collectively engaged in an unprecedented number of acquisitions. When a dominant firm purchases a start-up that could be a future entrant and thereby increase competitive rivalry, it raises a potential competition issue. Unfortunately, the antitrust law of potential competition mergers is ill-equipped to address tech mergers. We contend that the Chicago School’s assumptions and policy prescriptions hobbled antitrust law and policy on potential competition mergers. We illustrate this problem with the example of Facebook. Facebook has engaged in 90 completed acquisitions in its short history (documented in the Appendix to this paper). Many antitrust commentators have focused on the Instagram and WhatsApp acquisitions as cases of mergers that have reduced potential competition. We show the impotence of the potential competition doctrine applied to these two acquisitions. We suggest that the remedy for Chicago School damage to the potential competition doctrine is a return to an empirically tractable structural approach to potential competition mergers.

Facebook and the creation of the metaverse: radical business model innovation or incremental transformation?

“…While Facebook was the forerunner in social media and social networks, an increasing number of competitors entered the market and offered mobile services and solutions. One result of the successful IPO on the Nasdaq Stock Market was the great pressure investors put on Facebook to increase its financial performance (Glick and Ruetschlin, 2019). Hence, the increasing pressure of the investors and the changing user demands required a gradual shift from a web-based platform into a mobile application (Tsukayama, 2012).…”

“…Apparent expertise gaps are in technologies that the company does not currently focus on, though they are relevant for achieving the overall vision of the metaverse, such as blockchain development (Jeon et al, 2021). Even though potentially not fully available at the company at the moment, such technologies can be acquired rapidly, considering the high financial stability and resource integration power that Meta has already proved to exercise multiple times (Glick and Ruetschlin, 2019). In summary, Meta does not need to significantly revolutionize its capability base for the metaverse but can mostly rely on further revolutionary developments of its current competencies.…”

“…Creation & Experimentation Market was the great pressure investors put on Facebook to increase its financial performance (Glick and Ruetschlin, 2019). Hence, the increasing pressure of the investors and the changing user demands required a gradual shift from a web-based platform into a mobile application (Tsukayama, 2012).…”