Examining the Competitive Effects of Digital Ecosystem Mergers : An Analysis of Theories of Harm Applied in Assessments of Digital Ecosystem Mergers under EU Merger Control

Abstract: Digitalisation has fundamentally changed the way we communicate, conduct trade and consume goods and services. It has also enabled new business models to evolve. Some firms in the digital sector have developed and are now operating large conglomerate-like networks commonly referred to as ‘digital ecosystems’. Most digital ecosystems involve several autonomous, yet interdependent, firms. They offer diverse sets of different goods and services that often are technologically or economically interlinked and thus provide more value when bought or used together. Ecosystem business structures exist in many industries but a distinct feature of those in the digital sector is that the interdependencies within them are driven by digital technology and data connectivity. This affects how digital ecosystems function and how they need to be assessed under competition law. One of the ways in which digital ecosystems can expand and broaden their product portfolios is through mergers and acquisitions. The world’s five largest digital ecosystem operators – Alphabet (formerly Google), Apple, Meta (formerly Facebook), Amazon, and Microsoft – have together acquired over 800 firms during their relatively short lifetime. The intense merger and acquisition activity observed in the digital sector in the past years has raised concerns about the ability of European Union merger control to ensure that competition in this sector is not distorted by digital ecosystems’ expansion strategies. These concerns relate both to the adequacy of the current procedural system and to the precision of the analytical framework for assessing digital ecosystem mergers. This paper focuses mainly on the latter issue, and more specifically, on the theories of harm that have been applied in assessments of acquisitions by the five digital ecosystem operators mentioned above as well as on the need for alternative approaches or theories of harm for these mergers. It is shown that the assessments largely follow the traditional analytical framework of European Union merger control but that many of the special characteristics of digital markets and digital ecosystems are also taken into consideration. Yet, it is argued in this paper that there is a need for alternative approaches and theories of harm to better account for the competitive implications of digital ecosystem mergers.