EE&MC are proven economic experts specialised in the digital economy. By applying new economic concepts, we facilitate a thorough review of acquisitions and mergers in the digital world.
Professor Hildebrand's special research interests are market definition and market power assessment in digital markets. This specialisation reinforces her 20+ years of successful merger work in Europe.
Digitalisation is profoundly changing many industries. New business models are developing: search engines, price comparison websites, social networks as well as business models in the "sharing economy" or disruptive innovations. The problem is that digitally successful business models can cause markets to topple. Any resulting market power can no longer be successfully controlled by market entry. As a result of this, in digital markets there are large players who want to transfer their market power from one market to a neighbouring market.
Digital business models are also often operated as platforms or networks. A key feature of a digital platform is that it enables direct interaction between two user groups (e.g. between buyers and sellers or between advertisers and recipients). Digital networks, in turn, enable direct interaction between members of one and the same user group, for example the users of a social network.
Some digital platforms have become the hub for all kinds of business transactions, from communication or advertising for brokering business deals to the direct distribution of goods. The volume of data transacted through these platforms is constantly increasing. The acquisition of start-ups with a rapidly growing user base by leading digital platforms requires new competitive economic valuation approaches.
Competition authorities in the EU have started to pay attention to such “killer acquisitions”. In 2021, the European Commission adapted its use of Article 22 of the EU Merger Regulation (EUMR), which allows national antitrust regulators to ask the Commission to review a merger. The Commission now encourages national authorities to refer mergers for an EU-level review even if they do not have to be notified in any member state. Germany and Austria have reacted to the killer acquisition phenomenon by introducing a transaction-value notification threshold, which means that instead of looking at a company’s turnover, some mergers have to be notified because the buyer is paying a lot for the takeover.
These developments mean that traditional economic approaches do not work in digital markets because, for example, services have very low marginal costs. In traditional markets, price is equal to marginal cost. In new digital markets, attributes other than marginal cost influence pricing. Moreover, traditional theories of harm are hardly suitable to adequately assess potential risks of acquiring start-ups in the digital economy.