The Merger Control On Killer Acquisitions In Digital Markets

Over the years,many incumbent pharmaceutical companies have made mass acquisitions of startups but only to shut down the production and development of the startup’s products after the acquisition,leading to the impediment of competition in the marketplace,which has come to be known in academia as ‘killing’.In the digital market,where startup acquisitions are more common,the number of such killer acquisitions is also numerous.Yet most startup acquisitions are not notified to antitrust agencies,generally causing neglect of such acquisitions by antitrust enforcement.Indeed,postacquisition ‘killing’ can have a number of anticompetitive effects,such as releasing competitive pressure on incumbents,harming innovation,and excluding potential competitors.These exclusionary and restrictive effects may have be more negative on competition and consumer welfare in digital markets due to the low cost of product replication,the strong dynamic nature of competition,and the strong network effects.However,if startups are acquired without the killing behavior,such acquisitions may also have positive effects on competition such as reducing transaction costs and providing market exit opportunities for startup undertakings.Therefore,authorities need to include startup acquisitions,potentially with significant impact on competition,in their review and carefully assess whether the killing behavior will occur and the anticompetitive effects of the acquisition.However,the merger review framework does not properly address the challenges posed by killer acquisitions.Firstly,from the notional perspective of the merger review,the long-standing Chicago School antitrust theory and the current antitrust regulatory policy for digital markets are inappropriate.Secondly,in terms of the specific review system,there is a lack of flexibility in the notification standards.There is also a lack of clear criteria for assessing competition damages caused by the killer acquisitions.The remedy system of merger control is still not deterrent and effective.Additionally,it is difficult for the ex-ante review system alone to play an adequate preventive role.Finally,in the review practice,the authorities are too lenient towards mergers and acquisitions in digital markets.there is also a lack of analytical tools to deal with future market competition;and the existing evidentiary model and assessment focus cannot fully meet the needs for the difficulty of demonstrating the killer acquisitions and the long-term nature of competitive impact.These shortcomings or problems indicate that the general framework of the current merger review is unable to timely and accurately identify and respond to the antitrust challenges posed by killer acquisitions in the digital market.Given the above,the notion,norms and practices of the merger review in China need to be improved simultaneously to establish a control mechanism to fit the properties of killer acquisitions in the digital market.As for the notion of merger review,it should incorporate the Neo-Brandesian approach and adopt a more interventionist as well as the ex-ante regulation strategy for the giant platforms acting as market gatekeepers.In addition,specific policies are needed to be prioritized or subordinated in light of the characteristics of digital markets.In terms of the review system,the notification standards need to become more flexible and diverse;the assessment needs to be adapted in order to identify the killing behavior and accurate potential competition;the remedy criteria should be more abundant to show the deterrence of the antitrust law and the accuracy of enforcement;and the post-review system should be established in a timely manner so that the network of merger review can be fully extended.As for the practices,the agencies need to take a proactive approach to review start-up acquisitions,making reasonable use of ‘counterfactual’ as an analysis tool to anticipate the future market competition.In the reviewing process,monopoly presumptions should be imposed on the acquirer under certain circumstances and close attention should be paid to the killing conduct and potential competition in practice.This makes available to reduce the difficulty of proof for the authorities and precisely exercise antitrust control over such acquisitions.