Tech firms face more regulation after moves to stop ‘killer’ acquisitions – but innovation could also be under threat

(Renaud Foucart, Lancaster University) One way to eliminate the competition in business is simply to buy them out and shut them down. And that means less choice for consumers and sometimes the loss of innovative and, in the case of the pharmaceutical industry, even life-saving products. But such so-called killer acquisitions are likely to face greater scrutiny in the US and EU following a recent expansion of competition regulators’ powers.

Image description

A July 2022 decision by the European Court of Justice has expanded the European Commission’s ability to investigate a wider range of mergers and acquisitions (M&A). And last year, the US Federal Trade Commission (FTC) also changed its criteria for scrutinising certain deal types.

Historically, these regulators have only been empowered to examine business deals of a certain size, mostly between potential direct competitors. These recent rulings will empower them to examine almost any purchase.

When applying these new powers to fast-moving industries such as pharma or technology, however, regulators must navigate a world of costly and risky investments in research and development. It’s very difficult for regulators to spot a killer acquisition before it happens, and many M&A deals can actually benefit consumers. So calling it wrong could actually stifle innovation and stop new products from reaching the market.

US and EU regulators share the same fear: if dominant players are allowed to buy up start-ups, this could impact innovation and market concentration, depriving consumers of the benefit of new products and technology. In its announcement about its new approach, the FTC said “several decades” of consolidation across the economy has corresponded with a “lessening of competition reflected in growing mark-ups and shrinking wages”.

There is research to support this view. Similarly, EU regulators want to be able to investigate – and potentially prevent – any acquisitions they believe may hurt consumers.

Killer acquisitions

When competition regulators try to ensure that established firms buying small innovative players don’t hinder or even destroy innovation, killer acquisitions are one of their top concerns. As documented in an influential economic paper on the pharmaceutical industry, the goal of the dominant firm in such a deal is to destroy a potential competitor to its own business, even if it means patients never benefit from better treatments.

The recent changes to US and EU M&A scrutiny powers were triggered by a 2020 announcement by US biotech firm Illumina about its plans to acquire Grail, a developer of early-detection cancer tests. At the time, this sounded like the kind of acquisition that would not suffer much scrutiny by antitrust authorities.

Grail’s product is not yet operational and acquiring it does not affect the dominant market position of Illumina. The deal did not even breach the EU merger regulation threshold of €5 billion (£4.3 billion) combined worldwide turnover for the companies involved.

Almost immediately, however, regulators in the US and the EU challenged the merger. Both announced plans to scrutinise its potential impact on competition and innovation in the market for genome-based diagnosis.

In this kind of situation, regulators are often concerned about market concentration. If another start-up comes up with better diagnostic tests, for example, a dominant player like Illumina might make its life difficult in order to protect its recent acquisition.

But killer acquisitions are the most extreme case of this kind of acquisition deal. Research shows that only about 6% of pharma acquisitions involve a large company buying a smaller one with a promising new drug simply to discontinue the innovative project.

In digital markets, dominant firms are also often suspected of pursuing a similar strategy. Last year, the UK regulator ordered Facebook to sell Giphy, a database of GIF-like animations it had acquired in 2020 for US$315 million (£262 million), for fear that it was a killer acquisition aimed at destroying a potential rival in the advertising market. When Meta started its appeal of this decision in April 2022, Giphy had yet to sell a single ad in the UK.

blue puzzle pieces, aerial view of city skyscrapers

Similar to the pharma sector, however, few tech deals seem to correspond to the specific definition of a killer acquisition. And, in fact, dominant firms buying innovative start-ups before they generate any profit is a common business model in the digital economy.

In 2013, Waze was a potential disruptor to Google Maps as the dominant firm in the market for free online maps. But when Google acquired it for US$1.1 billion, it did not close Waze, as you would expect with a killer acquisition.

Instead, it added some of Waze’s innovative features into Google Maps and kept the former as a niche product. This allowed Google to stay dominant and to boost its profits from user data.

In this case, consumers benefited from a better Google Maps product, but Waze now has less incentive to innovate because it is not competing anymore. The FTC did not oppose the acquisition in 2013 but is now reportedly considering looking at it again.

Regulators’ big gamble

If regulators routinely block such acquisitions, start-ups will need to operate differently. Rather than relying on an acquisition by a dominant player to inject capital into the company, they will have to find other ways to earn money – possibly by charging consumers directly.

WhatsApp and Instagram, for example, had almost no revenue when Facebook bought them for US$19 billion and US$1 billion respectively. But they benefited from being acquired by a larger platform. Neither were killer acquisitions, but both increased market concentration.

By opening acquisitions of small and innovative firms to more scrutiny, regulators are taking a massive bet. To block an acquisition, they must demonstrate that it actually hurts innovation, often in very technical fields.

While researchers have been able to identify killer acquisitions after the fact, convincing a judge at the time of the purchase that a deal is bad for consumers is much more difficult. As such, the stakes are high for regulators: a wrong decision could affect the future of medicine and the future of our digital lives.

Renaud Foucart, Senior Lecturer in Economics, Lancaster University Management School, Lancaster University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The Conversation

Tu opinión enriquece este artículo:

F1: la película rompe récords de taquilla con US$ 144 millones el primer Weekend (otra muestra irrefutable del éxito de los mega eventos y experiencias phygitales y el crossing marketing)

(Por Taylor con Maqueda) Con un impresionante debut global de $144 millones, F1: The Movie no sólo marca un hito en la historia del cine, y le da una enorme relevancia a Apple Original Films, sino que también revela las tendencias emergentes que están transformando la industria del entretenimiento de lujo, el marketing deportivo y la narrativa audiovisual en 2025.

Tiempo de lectura de valor: 5 minutos

Dónde y a qué hora ver los fuegos artificiales en Miami hoy viernes 4 de julio de 2025

(Por Vera) ¿Quieres celebrar el Día de la Independencia en Miami con el mejor espectáculo de fuegos artificiales, música en vivo y actividades para toda la familia? ¡Comparte esta información! Hay mucho que celebrar toda la noche.  Miami se prepara para una noche llena de brillo, color y emoción, con múltiples eventos en diferentes zonas de la ciudad.

Tiempo de lectura: 5 minutos

Adidas lidera el Mundial de Clubes 2025: la marca domina el escenario (¿saldrá campeón como en Qatar y en las dos últimas copas américa?)

(Una creación colaborativa de MotorHome, Red InfoNegocios, XDXT) Mientras el Mundial de Clubes 2025 transita por su fase final de octavos, el escenario se enciende con una realidad palpable: la batalla por la hegemonía en patrocinio deportivo está en plena ebullición. En un torneo que reunió a 32 de los clubes más destacados del planeta, la presencia de las grandes marcas deportivas revela no sólo preferencias, sino estrategias de expansión global, alianzas de largo plazo y una competencia que trasciende el terreno de juego. 

Tiempo de lectura: 5 minutos

Apple: prepárate para tu próximo iPhone de alta gama (¿se mueve la manzanita?)

(Por Taylor desde Silicon Beach) ¿Podría Apple estar a punto de reinventar el diseño clásico de sus iPhones? Los rumores que circulan sobre el próximo iPhone 17, especialmente en su versión Pro y Pro Max, indican que la marca de Cupertino podría dar un giro inesperado en su estética, con cambios que sorprenderán a sus seguidores y al mercado global. Desde una reducción en el tamaño del logo hasta un rediseño completo en la disposición de las cámaras, la innovación parece estar en el centro de esta nueva estrategia. 

Tiempo de lectura: 5 minutos

La historia de la guerra de las marcas en el Fútbol: ¿cómo Adidas, Puma y Nike conquistaron camisetas y mercados? ¿cómo están hoy en el mundial de clubes 2025?

(Una creación colaborativa de MotorHome, Red InfoNegocios, XDXT con la participación de Taylor-Maurizio) Las marcas en Miami y en USA están jugando otro torneo apasionante. ¿Alguna vez te has preguntado cómo las marcas deportivas transforman los clubes y selecciones en verdaderas potencias de marketing? 

Tiempo de lectura: 4 minutos

Coca-Cola y Star Wars: la estrategia de Crossing Marketing que revoluciona las experiencias de marca (y potencia el engagement en Anglolatina)

(Por Juan Maqueda, en colaboración con Maurizio-Otero) ¿Sos coleccionista de latas o fanático de Star Wars, amás el Mkt?. Nosotros las tres cosas, por eso te contamos la reciente colaboración entre Coca-Cola y Star Wars, bajo la campaña "Refresh Your Galaxy", ejemplifica a la perfección cómo el crossing marketing —la integración de marcas, contenidos y comunidades— redefine la narrativa de impacto en mercados tan dinámicos como LATAM, Miami, EE.UU. y España. 

McLaren Racing y Hilton cocrearon una suite temática, lúdica, y hasta con museo en Londres (¿por qué las marcas exitosas cada vez invierten más en experiencias amplificadas e inmersivas?)

(Por Juan Maqueda, Marcelo Maurizio y Steve Taylor) ¿Alguna vez imaginaste alojarte en una suite inspirada en la velocidad y la adrenalina de la Fórmula 1? Hilton y McLaren Racing te ofrecen la oportunidad de vivir esa experiencia única, celebrando dos décadas de asociación con una propuesta exclusiva en Londres. Prepárate para una estancia llena de lujo, innovación y pasión por las carreras, del 8 al 20 de julio de 2025, justo en medio del emocionante Gran Premio de Gran Bretaña en Silverstone. 

Tiempo de lectura de alto valor: 5 minutos

 

¿Sabías que hay una gran película sobre Puma y Adidas (ambas muy presentes en el Mundial de Clubes) que cuentan cómo empezó el Mkt deportivo?

(Una creación colaborativa de MotorHome, Red InfoNegocios, XDXT) Muchas veces vemos películas que no prestamos ni la atención y ni la conciencia que se merecen, y son un verdadero MBA acelerado y dinámico, es el caso de Duelo de Hermanos. Desde Motorhome te sugerimos buscarla y verla, porque es super futbolera, y te enseña todo sobre  marketing y negocios..