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The Modern Monopolies: Killer Acquisitions in the Digital Industry

[Ishita Ayala is an undergraduate student at the National Law University Odisha.]



Killer Acquisitions” refers to the notion of large companies taking over nascent competitors to curb existing competition. These acquisitions are referred to as “conglomerate mergers” as the firms do not directly compete with each other (“horizontal mergers”) or produce inputs utilized by other firms (“vertical mergers”) but often result in the foreclosure of competition and reduced innovation. They defy Schumpeterian ideals about “creative destruction,” wherein old ideas and processes are constantly replaced by new ones, leading to economic dynamism in the market. 


Part I of the article analyzes the meaning of killer acquisitions and discusses various anti-competitive mergers. Part II analyzes the implications of killer acquisitions. Part III analyzes various potential solutions to curb killer acquisitions that are rooted in European and Indian competition law. Part IV concludes by stating that India needs an evolved merger control regime to tackle killer acquisitions.  




Killer acquisitions refer to situations when companies acquire other companies to eliminate a disruptive and potentially competitive innovation. It refers to the anti-competitive nature of the acquisition and the suppression of future competition, irrespective of whether the innovative product is “killed” by the acquiring company.


Examples of Killer Acquisitions


1) Facebook-WhatsApp Merger:  In 2014, Facebook acquired WhatsApp for a sum of 19 billion dollars. The deal was not deemed anti-competitive according to the European Commission (“EU”), which concluded that given the technical challenges in integrating the user networks of Facebook and WhatsApp and the state of the communications market that existed at the time of the acquisition. After Facebook began its integration of the data of WhatsApp users, the EU imposed a fine of $1.2 billion on Facebook for deception related to the integration of data, but it did not overturn the acquisition.


2) Facebook /Instagram Merger: Facebook acquired Instagram for $1 billion in 2012, when it was a photo-sharing application with no revenues. It was one of the few social media applications with the potential to challenge Facebook in the market, however, the turnover thresholds in the UK were not triggered, and hence the acquisition proceeded. Facebook acquired and shut down other social networking platforms such as Nextstop, Geluga, Gowalla, and Lightbox eliminating competition and entrenching its position in the market as a dominant social networking platform.

Mark Zuckerberg’s (Facebook CEO) philosophy of favouring acquisitions over competition ensured Facebook became a digital behemoth. It successfully capitalized on its various acquisitions to remain one of the most widely-used social media platforms globally by integrating innovative features in its products, which it derived from its acquired companies and its competitors.


3) Zomato-UberEats Merger: Zomato acquired UberEats for $350 million in 2020. This deal did not attract the attention of the Competition Commission of India (“CCI”) as it was below the threshold limits mentioned under Section 5 of the Competition Act 2002. This acquisition strengthened the position of Zomato in the food delivery space, as the ‘Market Study on E-Commerce in India’ report released by the CCI stated that there were only three dominant companies in the food delivery sector: Swiggy, Zomato, and UberEats in that order. It noted the various allegations of anti-competitive behaviour by the platforms and offered guidelines for self-regulation; however, as they were not binding, the platforms did not adhere to them.




Killer acquisitions are difficult to catch as they often fall below the threshold limits for notification of mergers, hence they are not scrutinized by the national competition authorities (“NCAs”). The effects of killer acquisitions may not be clear during the time of the acquisition, as witnessed by Facebook’s acquisitions of WhatsApp and Instagram, however the author has attempted to discuss some of the implications of killer acquisitions on digital markets.


1) Development of Kill Zones:  Killer Acquisitions lead to “kill zones”; a situation where startups are disinclined to create innovative products that could replace the products of the incumbents and investors are unwilling to invest in such startups owing to possible acquisition by the incumbents. Sai Kamepalli, Raghuram Rajan, and Luigi Zingales, in their essay, utilized Pitchbook data to conclude that venture capital funding for startups in this space fell by 46% three years after an acquisition.

2) Reduced IPOs: A study conducted by Florian Ederer and Bruno Pellegrino shows that in 2019, there were only 100 Initial Public Offerings (“IPOs”) for 900 acquisitions of startups that were backed by venture capitalists. The acquisitions in the digital sector were done primarily by GAFAM, with the innovative nature of the acquired product being reduced after the acquisition or the features of the innovative product being co-opted into the existing product.

3) Reduced Innovation: Startups in the digital sector often exhibit “disruptive innovation” that compels incumbents in the market to completely rehaul their business models. Acquisitions of startups allow incumbents to maintain their dominant position in the market. It allows incumbents to gain access to superior technology without innovation on their part.



The author has attempted to analyze various principles rooted in both European and Indian laws to detect killer acquisitions. The author argues for caution to be exercised while implementing policies to ensure there are no cases of either overenforcement leading to reduced innovation or underenforcement leading to highly concentrated markets.


1) Modification of Presumption: As per the European Union Merger Regulations (“EUMR”), it is incumbent on the EU to prove that a merger is anti-competitive. This leads to an unreasonably high burden of proof, especially in the digital sector, where companies may not have generated revenue but are still acquired because of their inherent potential.

The Report of the Digital Competition Expert Panel (“Furman Report”) argues that the onus of proof must be shifted to the acquiring company, which must prove that the acquisition is not anti-competitive. The acquiring companies must place the best information before the NCAs to refute the presumption. The author opines that the modification of the presumption of anti-competitiveness shall reduce the information asymmetry between the NCAs and the acquiring companies.


2) Dutch Clause: Article 22 of the EUMR, colloquially referred to as the “Dutch Clause” (“DC”) allows member states (“MS”) of the EU to invite the European Commission (“EC”) to investigate mergers that are outside their jurisdiction or if the transaction value is below the threshold limits. The DC was designed to assist MS that did not have legislation on mergers.

Illumina’s acquisition of Grail was cancelled by the EU in 2023 after an application under this Article was made by France, although the transaction did not meet the EUMR merger thresholds. Illumina is a biotechnology company, and Grail is a company focusing on early-stage cancer detection. The EU argued that Illumina had the incentive to threaten Grail’s innovation related to blood-based cancer detection tests and stated that their concerns related to competition were not sufficiently allayed by Illumina.


3) Share of Supply Test: The author argues that instead of solely focusing on the turnover value of the transaction, the “share of supply” (SoS) test applied in the UK can be utilized to catch killer acquisitions. The test is used to determine if an incumbent company’s share of goods and services in a market will exceed 25% after the merger.

The Competition Market Authority (“CMA”) in the UK prohibited the Sabre/Farelogix merger in 2020. Sabre and Farelogix are both companies that offer services to airlines. The CMA applied the SoS test to argue that the merger would lead to a “substantial lessening of competition” as Sabre already held a 25% market share before the merger.


4) Ex-Post Review: Google acquired DoubleClick in 2007, becoming an advertising behemoth. Mr. William Kovavic, who cast the vote in favour of the merger at the Federal Trade Commission, later stated, “If I knew in 2007 what I know now, I would have voted to challenge the DoubleClick acquisition.”

Section 102 of the Treaty for the Functioning of the European Union provides for ex-post reviews of mergers. This would help NCAs observe the effects of a merger, which may not always be evident at the review stage. The author opines that there must be a specific timeline for the completion of the review after the merger has taken effect, or else it may lead to uncertainties in the market and a reduction in acquisitions.


5) Designation of Gatekeepers: Gatekeepers are defined as undertakings that have a significant impact on the market under Article 3 of the Digital Markets Act (“DMA”). The EU designated 6 companies —Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft as gatekeepers.

A gatekeeper is required to inform the EC about any merger, irrespective of the monetary value of the threshold under Article 14 of the DMA.

The author argues that this mechanism allows NCAs in the EU to scrutinize a greater number of transactions, however, it cannot be denied that this designation targets specific companies. Hence, the “gatekeeper mechanism” must be expanded to cover companies that are working in areas of disruptive technologies such as artificial intelligence and blockchain.


6) Deal Value Threshold- The Competition Law Committee (“CLC”) constituted in India, in its 2019 Report, observed that the CCI did not have the power to scrutinize all the mergers in the digital space owing to the lack of ex-ante review powers or the SoS test that the European NCAs had. The report argued for the institution of a Deal Value Threshold (“DVT”) that would enhance competition in the digital markets.

DVT refers to the size of the transaction between the two parties or the consideration the acquirer is ready to pay as part of the transaction. The Competition (Amendment) Act 2023 (“Competition Act 2023”) introduced the DVT. Section 5(d) of the Competition Act 2023 states that when a deal is more than ₹2,000 crores and the entity being acquired or merged has “substantial business operations” in India, the DVT is triggered and the CCI shall be allowed to examine the transaction.





The author argues that killer acquisitions are a mainstay of corporate strategy for established incumbents, and the present competition law regime in India must evolve to deal with the complexity of mergers in the digital sector. Google, Amazon, Facebook (presently Meta), Apple, and Microsoft (“GAFAM”) have acquired over 1,000 firms since the year 2000. Anti-trust enforcers across multiple jurisdictions have expressed concerns about the acquisitions made by GAFAM, as 85% of the total acquisitions made between 2004 and 2018 were of startups as opposed to mature companies. Digital markets thrive on change and innovation, and killer acquisitions stifle future growth and dynamism in markets.


A robust regulatory framework is required to restrain killer acquisitions in India by adopting the best practices of its foreign counterparts, such as the modification of the presumption of anti-competitiveness, ex-post review, and share of supply test. The DVT introduced under the Competition Act 2023 is a step in the correct direction, however, there must be a concerted effort from policymakers and technology experts to ensure the guidelines are reasonable in nature to encourage commercial activities in markets while penalizing those companies that attempt to reduce competition unjustly.


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