The Australian Competition and Consumer Commission (ACCC) has hinted at tougher competition laws from its digital platforms inquiry looking at the market power of Facebook and Google.
Speaking at the 2019 Competition Law Conference in Sydney over the weekend, ACCC chair Rod Sims raised the issue of tech giants purchasing start-ups.
He says merger laws should take into greater consideration the potential competition of small businesses.
Over the past 12 years Facebook has acquired 66 companies for a value of $US23 billion, while Google purchased 145 companies with a combined value of $US23 billion between 2004 and 2014, according to Sims.
The most notable acquisitions include Instagram, which was purchased by Facebook, and YouTube, which was bought by Google.
“Arguably, Facebook’s acquisition of Instagram eliminated the threat of a substantial potential competitor,” Sims says.
Sims questioned whether the forward-looking test for proposed mergers, which questions if a transaction would substantially lessen competition, remains adequate.
“Some have argued that preventing large digital platforms acquiring small start-ups interferes with the incentives to innovate in the first instance.”
“This perspective appears to be based on a view that large digital platforms are uniquely placed to develop and monetise the innovations of small start-ups.”
Instead, Sims suggested merger law should focus on whether the acquisition interferes with the competitive process and recognise that the process of competition for the market is not the same as the process of competition within the market.
“If the prospect that the target will become an effective competitor is small, but the potential increase in competition and consumer welfare is large, greater weight should be put on the potential for competition,” Sims says.
The ACCC’s final report on the impact of digital platforms, which is due to be released on 30 June, will outline the watchdog’s view on the importance of potential competition.
However, Sims stopped short of advocating for competition law to be broadened to include issues such as consumer privacy, economic inequality and political influence.
“While the aims are admirable, indeed compelling, I do not believe that broadening the objectives of competition law is the best way to promote them,” Sims says.
“Widening the objectives of competition law is likely to reduce its effectiveness. If we try to get competition law to achieve everything it may end up achieving nothing.”
The stronghold Facebook and Google have over the internet has been an increasing concern globally, with US senator and presidential candidate Elizabeth Warren going so far as to call for a break-up of Google, Facebook and Amazon.
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