ACCC Chair Rod Sims has spoken of how competition regulators internationally are struggling to respond to the rise of ‘dominant’ digital platforms, calling the capacity of existing regulation into question.
Speaking at the 2019 Competition Law Conference in Sydney, Sims said that tech giants had strategic commercial incentives to acquire developing startups that had potential to evolve into competitors.
Sims said that Facebook acquired 66 companies for a total value of US$23 billion over the past 12 years, while Google acquired 145 companies for a value of US$23 billion in the decade between 2004 and 2014.
“Arguably, Facebook’s acquisition of Instagram eliminated the threat of a substantial potential competitor,” he said.
Sims said that there was a view among regulators that large platforms acquiring small startups interfered with the incentives to innovate in the first place, a perspective that seemed to be based on the greater capacity of such platforms to capitalise on the innovations of the smaller entities.
“In my view, 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,” he said.
“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.”
The ACCC chair put forward his view that while arguments for broadening existing anti-competition laws to account for issues such as consumer privacy, economic inequality and political influence are compelling, such an expansion of scope risks reducing their effectiveness.
The ACCC will provide its views on the importance of potential competition in the final report of its Digital Platforms Inquiry, to be provided to the Treasurer on 30 June.
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