Nascent Competition and Killer Acquisitions in

Digital Markets: a Decade of Acquisitions by Big

Tech
Thales de Melo e Lemos
Cescon, Barrieu, Flesch & Barreto Advogados
Guilherme Mendes Resende (  [email protected] )
Instituto Brasileiro de Ensino, Desenvolvimento e Pesquisa

Research Article

Keywords: Antitrust Policy, Killer Acquisitions, Merger Control, GAFAM, Digital markets

Posted Date: December 28th, 2023

DOI: https://doi.org/10.21203/rs.3.rs-3793931/v1

License:   This work is licensed under a Creative Commons Attribution 4.0 International License.
Read Full License

Additional Declarations: No competing interests reported.

 NASCENT COMPETITION AND KILLER ACQUISITIONS IN DIGITAL MARKETS: A DECADE OF
ACQUISITIONS BY BIG TECH

Thales de Melo e Lemos1 & Guilherme Mendes Resende2

ABSTRACT

Acquisitions in digital markets by dominant companies such as Google, Apple, Facebook, Amazon and
Microsoft (GAFAM) raise concerns related to the elimination of potential and nascent competition. While
demands for merger control reforms in this segment are proliferating, there are still important controversies
and insufficient systemic studies on the matter. Therefore, this study evaluates, based on theoretical and
empirical research, the hypothesis that acquisitions of nascent competitors and killer acquisitions are not
common enough in digital markets to justify drastic changes in merger control rules. To this end, we more
rigorously define important terms, such as killer acquisitions and nascent competitors. Then we investigate
and classify all acquisitions made by the GAFAM firms between 2009 and 2018, considering the targets’
ages, their main activities and whether they were shut down after acquisition. The results indicate that most
acquisitions did not have a clear horizontal effect, meaning that GAFAM companies often purchase inputs,
talents, or complementary products. However, the study identifies and examines in detail possible nascent
competitors’ and killer acquisitions. The results indicate that antitrust authorities should be aware of the issue
and undertake cautious reforms of merger control rules, balancing competition protection against the risks of
unnecessarily harming innovation.
Keywords: Antitrust Policy; Killer Acquisitions; Merger Control; GAFAM; Digital markets
JEL: [K21 – Antitrust Law] [L41 – Monopolization • Horizontal Anticompetitive Practices]

1. INTRODUCTION

Digital markets pose practical and theoretical challenges to antitrust regulations, such as the need to balance
consumer protection with the impacts of interference in complex, fast changing and not yet fully understood business
models (Evans, 2008).
One of the main concerns is that the platform business model, common in these markets, generates strong and
complex network effects (OECD, 2018), an expression commonly used to describe contexts in which a good or service
becomes more valuable as it attracts more users (Tucker, 2018). While network effects benefit consumers to some
extent, and are often efficient from an economic standpoint, positive feedback can also cause users to converge to a
few dominant firms. Over time, markets reach important levels of concentration, in a “winner takes all” scenario (Sato,
2021).
Not surprisingly, some of the largest companies in these markets, especially Google, Apple, Facebook, Amazon,
and Microsoft (collectively "GAFAM"),3 have reached longstanding dominance in their respective segments and are
drawing increased attention from scholars and antitrust authorities.
There is also a widespread belief that digital markets trend towards concentration where competition is “for” the
market, rather than “in” the market (Valleti & Zenger, 2019). That is, firms compete through disruptive or radical
innovation, aiming to obtain temporary dominance (Katz, 2021). In this context, nascent and potential competition is

1
Antitrust lawyer with Cescon, Barrieu, Flesch & Barreto Advogados. Email: [email protected]
2
Special Advisor to the Presidency of the Brazilian Supreme Federal Court (STF). Professor at the Brazilian Institute of Education, Development
and Research (Instituto Brasileiro de Ensino, Desenvolvimento e Pesquisa - IDP). Email: [email protected]:
https://orcid.org/0000-0002-7138-5492
3
For pragmatism and to keep using the widespread term “GAFAM”, we adopt the names Google and Facebook instead of their current conglomerate
names, respectively Alphabet Inc. and Meta Platforms, Inc.

1
gaining attention as possible constraints on market power, in opposition to the traditional scrutiny of static market
shares and short-term effects on prices (Holmström et. al, 2019).
A logical consequence is that incumbents have incentives to actively monitor the development of companies that
may threaten their dominance and to use acquisitions with the objective of reducing future competition (Shapiro,
2018). In fact, internal documents from Facebook demonstrate that it used extensive data to monitor potential threats,
such as WhatsApp and Instagram, and decide whether to acquire, copy or eliminate them (U.S. House, 2020). This
potentially reduced rivalry in digital markets, harming consumers and stifling innovation (Bryan & Hovenkamp,
2020).
The emergence of the expression “killer acquisition”, used to describe acquisitions by dominant companies of
innovative companies, aiming to end their development and avoid losing market share, further fueled the discussion.
A widely cited study showed that 5.3%–7.4% of purchases made in pharmaceutical markets between 1989 and 2010
would fit this concept (Cunningham et. al, 2021). Since then, and despite of particularities related to the pharmaceutical
industry, the term has spread "like wildfire" in discussions on antitrust policy in general (Yun, 2020), especially when
dealing with digital markets.
Recent studies have demonstrated that GAFAM companies constantly purchase young and innovative startups
(Gautier & Lamesch, 2021) and that the “astronomical” amounts paid in relation to the targets’ goodwill could indicate
expected profits from the elimination of competitive pressure (McLean, 2021). Surprisingly, however, systematic
studies of the occurrence of killer acquisitions in digital markets are scarce (Argentesi et. al, 2021).
It is relevant to highlight that acquisitions may have legitimate and even pro-competitive motives, such as
promoting the creation of startups and inspiring innovation (Letina et. al, 2020). In addition, startups with prospects
of being sold in the future, generating profits for investors, can more easily obtain financing.
Incumbents may also have more financial, technological, and marketing resources to effectively bring new
technologies to market (Motta & Peitz, 2021). Some authors even argue that acquisitions in the digital sector are not
typically “killer”, but rather “life stimulant” (Levy et. al, 2020). Thus, in the absence of enough evidence of
anticompetitive effects resulting from such acquisitions, preventing or hindering some companies from carrying out
new transactions could reduce innovation, instead of promoting it (Fayne & Foreman, 2020).
On the other hand, there are growing concerns that acquisitions in digital markets often do not undergo mandatory
or detailed scrutiny by antitrust authorities (Penfield & Pallman, 2020), and that merger control, in general, is too
permissive in this sector (Motta & Peitz, 2019), either because the targets’ revenue does not meet the mandatory
submission criteria or due to the authorities’ failure to capture particularities of digital markets (U. S. House, 2020).
Aware of the issue, the German Bundeskartellamt and the Austrian Bundes Wettbewerbs Behörde (2018)
introduced new notification criteria, based on transaction value, given the innovative and competitive potential of
young companies with low revenues. Recently, the U.S. Federal Trade Commission (2021)4 and the Brazilian
Administrative Council for Economic Defense ordered the GAFAM companies, among others in digital markets, to
provide information on hundreds of acquisitions they have made.
Yet there is still significant controversy and lack of systematic studies on the subject. Some concepts, such as
nascent and potential competition, are being used imprecisely (Yun, 2020), and in many cases the number of
acquisitions and the figures involved are highlighted without further investigation.
Since there are plausible and potentially pro-competitive economic justifications for the frequent acquisitions in
digital markets, the question we investigate here is whether nascent competitors’ acquisitions and killer acquisitions
are not so significant in digital markets to the point of justifying drastic reforms to merger control in this segment. To
accomplish this, we initially review the literature on the subject and define the concepts of potential competition,
nascent competition, and killer acquisition. We then undertake a descriptive and systematic analysis of all acquisitions
made by the GAFAM companies between 2009 and 2018, aiming to identify, among other elements, any consistent
discontinuation of young companies, particularly those operating in markets where buyers were already dominant.

4
A report has since then been published on the subject, which we understand to be similar in objective to this work but more quantitative than
qualitative. Available at: https://www.ftc.gov/system/files/documents/reports/non-hsr-reported-acquisitions-select-technology-platforms-
2010-2019-ftc-study/p201201technologyplatformstudy2021.pdf

2
 We do not delve deeply into the acquisition of potential competitors, vertical acquisitions, or ecosystem
acquisitions, given the higher level of uncertainty, in terms of anticompetitive effects, normally associated with them.
Additionally, investigating such acquisitions may demand powers only available to authorities, such as subpoenaing
internal transaction documents.
While we acknowledge data limitations and inherent subjectivity associated with analyzing such acquisitions, we
aim to provide more consistent concepts, guidance for investigating killer acquisitions, and empirical evidence to
inform future investigations and antitrust policies.
Section II of this paper addresses the theoretical framework for the analysis, including literature on pressure for
reforms in merger control and on the concepts of nascent competition, potential competition, and killer acquisitions.
Section III covers the data and methodology for the empirical work, including the definition of the concepts used and
the collection and classification of data. Section IV presents the results, starting with an overview and then analyzing
each relevant transaction, while section V further discusses such results and compares them with similar and
contemporary studies. Finally, section VI provides our conclusions and recommendations.

2. THEORETICAL FRAMEWORK

2.1. Pressure for reforms in merger control

Several factors can justify acquisitions in digital markets, including lower barriers to entry via acquisition,
incorporation of strategic intellectual, efficiency and synergies, better risk allocation, and others. Thus, the limitation
of this exit strategy for startups, combined with the lack of clear guidelines on nascent competition, could harm
innovation and entrepreneurship (Sokol, 2018).
One economic study suggests that acquiring an innovative entrant would be less harmful to competition than
incumbents deliberately duplicating the same projects (Letina et. al, 2020). Also, given the lack of strong evidence
that antitrust control has been failing, some researchers urge caution in reforms, since merger control entails
transaction costs (Levy et. al, 2020) and per se prohibitions can increase these costs without relevant welfare gains
(Madl, 2020). Furthermore, in a recent working paper analyzing some cases of technology mergers in the EU, the
authors suggest that killer acquisitions in digital markets may be more “hype than reality”, since acquired products
are often not killed but scaled back and the relevant markets remain dynamic post-transaction (Ivaldi & Petit &
Unekbas, 2023).
In another direction, empirical research has documented structural increases in margins, across several
industries and countries, followed by lower productivity, higher concentration, and less dynamism. This trend may be
related to the growth of so-called “superstar companies” – highly profitable companies that have taken advantage of
permissive merger control. Recent research also claims there is little evidence that market power is temporary and
subject to the imminent threat of disruptive entrants (Valleti & Zenger, 2019).
Another study indicated that anticompetitive transactions that are individually small can escape antitrust control,
but generate a cumulative impact on market structures, leading to “stealth consolidation” (Wollmann, 2019). In this
direction, hundreds of acquisitions carried out by the GAFAMs were not captured or deeply analyzed by antitrust
authorities, in many cases because the targets’ revenues were below the mandatory notification thresholds (Argentesi
et. al, 2021).
Constant acquisitions could indicate a systematic strategy that threatens innovation and potential competition
(Holmström et. al, 2019). Thus, some argue that merger control should be strengthened to deal with particularities of
digital markets (Katz, 2021). For instance, a game theory study concluded that limited antitrust intervention, especially
when the buyer is already close to monopoly, would be socially beneficial, by increasing static competition and
generating stronger incentives for innovation (Bryan & Hovenkamp, 2020). Another study concluded that startup
acquisitions will only be pro-competitive when the target lacks resources or data to pursue its project alone, and the
incumbent will have incentives to develop rather than discontinue the project. This would not happen, for instance,
when the product would cannibalize part of the incumbent's current revenues (Motta & Peitz, 2021).

3
 There are also studies that indicate potential damage to innovation resulting from an apparent “Kill Zone” in the
core areas of activity of digital incumbents. In other words, investors would be less likely to finance startups that
compete head-on with the leaders. The result is that radical innovation, linked to competition “for” the market, has
become less common, while incremental innovation, often aimed at improving the products of the incumbents, have
become more frequent (Kamepalli et. al, 2021; Rizzo, 2021). In short, the negative effects of systematic acquisitions
of startups in digital markets can spread far beyond the acquisition itself and extend over time.
This growing body of studies on acquisitions of tech startups, and the perceived laxity of merger control in several
jurisdictions, has fueled requests for reforms. These include the implementation of submission criteria related to
transaction values, mandatory notification of all acquisitions carried out by “Big Tech” and reversal of the burden of
proof, so that purchasers must demonstrate the lack of anticompetitive effects of the transactions.5
Other proposals include blocking all new acquisitions by some companies and the compulsory licensing of
technology already acquired (Bryan & Hovenkamp, 2020); new submission criteria based on combined market shares;
requiring buyers to present efficiencies for all acquisitions (Motta & Peitz, 2020); and greater focus on innovation
instead of mere verification of market shares (Pires-Alves et. al, 2019).
Some authors claim that even in cases where there is some uncertainty about the target’s potential, taking
action would be preferable given the costs of insufficient enforcement (Hemphill & Wu, 2020). In the opposite
direction, there are those who argue that increased antitrust scrutiny may not be the optimal solution, since most small
and young startups aim to be acquired, and pre-merger control generates relevant costs for the companies involved
(Fayne & Foreman, 2020).

2.2. Nascent Competition and Killer Acquisitions

The literature on acquisitions in digital markets is expanding quickly, but there is still inconsistency regarding
important terms, which makes empirical work difficult and can result in misguided policies. More specifically, recent
debates use the terms “nascent competition”, “potential competition” and “killer acquisitions” as substitutes, despite
significant differences between them (Yun, 2020).
For instance, some claim that a nascent competitor is an innovative company that represents a serious future
threat to an incumbent, even if not fully developed. In this direction, a fast growing and evolving online platform
would be a nascent competitor to a dominant firm, regardless of operating in the same markets. The authors, however,
recognize that such definition is subject to uncertainty (Hemphill & Wu, 2020).
Others distinguish nascent competitors from potential competitors. The first would be young companies that
already act in the buyer’s market, albeit exerting limited competitive pressure. In turn, a potential competitor would
be one that operates in adjacent markets, but which could become an effective competitor in the future under certain
conditions (Penfield & Pallman, 2020).
In both cases, competition is not fully developed. However, the definition of nascent competition is associated
with a technological and innovative product, even though not mature, with some substitutability or that currently
competes with the incumbents’ product, while the idea of potential competition is commonly based on an “entry
perspective” (Yun, 2020). The critical distinction lies in the existence or not of current competition (Penfield &
Pallman, 2020).
The concept of “killer acquisition”, as a third and more specific category, has additional implications and should
be used carefully. This term gained fame in a study related to the pharmaceutical industry and referred to the situation
in which incumbent companies acquire innovative companies only to discontinue projects and avoid future
competition. That seminal study analyzed over 16,000 projects spanning 25 years and demonstrated that new drugs
are less likely to be developed when they overlap with drugs from the buyer’s portfolio, especially when it holds
market power, whether due to low rivalry or durable patent protection. The study indicated that 5.3%–7.4%of
acquisitions in the sample were killer acquisitions and that these occurred disproportionately just below the mandatory

5
See, for instance, European Commission (2019); Argentesi et al. (2021); Holmström et.al. (2019); and Conselho Administrativo de Defesa
Econômica (2020).

4
notification criteria of the U.S. antitrust authorities. Therefore, the authors suggested that such killer acquisitions were
both strategic and intentional (Cunningham et. al, 2021).
The OECD (2020) also highlights two key features of killer acquisitions: they are horizontal in nature and not
only eliminate competition, but the product itself. Another report echoes this perspective and states that if incentives
are strong enough, startup acquisitions can become killer acquisitions, in which products are discontinued or never
introduced to avoid future competition (Argentesi et. al, 2021).
However, a study focused specifically on acquisitions by the GAFAM companies exemplified the controversy
surrounding these concepts. The authors established the following criteria for identifying killer acquisitions: (i) the
target operates in the main segment of the buyer; (ii) the product was continued – not shut – under its original brand
after acquisition; and (iii) the target had a substantial user base. Notably, the proposed definition goes against others
that precisely highlight the need of the target or product to be discontinued. The authors argued that the discontinuation
of brands would be an indication that the intention was only to acquire assets, and not the product or its user base. On
the other hand, when the brand is maintained and remains active, the intention to eliminate an independent source of
rivalry would be evident. Despite the controversy, such study also reinforces the argument that killer acquisitions
occur, rationally, only in specific segments, in which there are greater incentives to eliminate future competition
(Gautier & Lamesch, 2021).
Finally, a recent study suggests the use of filters to help regulators identify potential killer acquisitions among the
extensive number of acquisitions in digital markets. Those include focusing on cases where the target was operating
in the purchaser’s core market, in which it held significant market power, screening the deals to identify “plausible
economic mechanisms” through which the target could evolve into a threat, such as possessing large user bases and
relevant assets, and assessing deal valuation, since unexplained excess payment could be seen as a premium for market
power (Latham et. al, 2020).

3. DATA AND METHODOLOGY

We seek to verify the hypothesis that acquisitions of nascent competitors and killer acquisitions are not
sufficiently frequent in digital markets to justify drastic and potentially harmful reforms in merger control, such as
completely blocking new acquisitions. We expect that the proportion of likely anticompetitive transactions, compared
to all acquisitions, would warrant, at most, minor and targeted changes.
A major challenge for such investigation lies in obtaining detailed and up-to-date information on all acquisitions
made in digital markets. It is particularly challenging to assess clear horizontal effects arising from each transaction,
as opposed to acquisitions of mere services or technologies that will be used to improve the quality or complement
the buyer's products. Determining the target’s status several years after the acquisition may also be difficult.

3.1. Concept definition

Based on the literature review, we establish some specific, albeit simplified, characteristics for each of the
investigated categories of acquisitions. The goal is to be practical without losing consistency. Therefore, it is crucial
to distinguish between nascent and potential competitors, as well as to define killer acquisitions.
In the case of nascent competition, rivalry has already materialized at the time of acquisition, that is, the target
already operates in one of the buyer's markets, even if to a limited extent. This means that the transaction generates
clearer horizontal effects. On the other hand, potential competitors only operate in adjacent markets, but given the
dynamics of digital markets, they may exert competitive pressure and could leverage their position to start competing
with the buyer directly. It is hence a more uncertain situation, but one that can also raise specific competition concerns.
In killer acquisitions there is also a clear horizontal effect, since the main driver of this strategy is that the
purchaser has less incentives to develop the product than the entrant, as the product’s success could cannibalize part
of the buyer’s revenues (Motta & Peitz, 2021). In fact, while the discontinuation of a product or the closure of a
company can be credited to various reasons, including integration into the buyer's current products, what defines an
acquisition as “killer”, in accordance with the theoretical framework already mentioned, is the intentional elimination

5
of a threat to the buyer’s market share.6 Therefore, a killer acquisition can be understood as a specific type of nascent
competitor acquisition in which, in addition to eliminating the independent source of rivalry, the buyer seeks to shutter
the company and/or abandon the project.
For such strategy to be economically justifiable, killer acquisitions should naturally occur only in segments in
which the buyers have greater incentives to preserve their significant dominant positions (Bryan & Hovenkamp, 2020).
Otherwise, other competitors established in the market would continue to exert competitive pressure and the expense
of valuable resources by the buyer would have been in vain. In other words, we argue, in accordance with the literature,
that killer acquisitions happen when there is a premium for protecting relevant market power (Latham et. al, 2020).
As an example, in the mentioned study related to the pharmaceutical industry, the drugs acquired were more likely
to be discontinued when the buyer had market power in the same segment, either due to low rivalry or patent protection
(Cunningham et. al, 2021). This means that killer acquisitions are different from mere acquisitions of nascent
competitors, not only because a product or company is eliminated, but also because they presuppose active monitoring
of developing competitors in segments in which buyers are already significantly dominant.
A logical conclusion is that, since the GAFAM companies have diversified their businesses, they likely acquired
nascent competitors in the past. However, killer acquisitions took place only in certain segments, and at least in the
context of current antitrust concerns, were intentional. Evidently, proving intent is a limitation of academic studies,
but this can be inferred when there is relevant market power, the target was developing quickly but was shut down
soon after acquisition.
In addition, considering the focus of calls for antitrust reforms regarding digital markets, the target should still be
in the initial stages of development for the three categories of acquisitions. Otherwise, it would be a classic transaction,
in which the incumbent acquires another consolidated player, even if with small market share.
This initial stage can be understood as involving a company that is young, with few products, customers,
employees, or that is still looking to establish itself. While there is no rigid framework to define for how long a
company is a startup, transformations happen quickly in digital markets, and most acquisitions take place before the
targets complete 6 years. In fact, based on evidence from our dataset (see Figure 3), we included target companies that
were less than 6 years old because there is a relevant peak of companies acquired which are near this age, an insight
also demonstrated by the mean and median analysis (see Table 3). This allows marking the line at this point, at least
for the purposes of this investigation. Indeed, economic studies on startups usually consider companies to be “young”
when they are 0-5 years old (Calvino et. al, 2015).
It is also necessary to address the “serious threat” requirement, along with the “innovation” or “fast expansion”
requirements mentioned in previous studies. Those elements are hard to define theoretically, especially in segments
that are diverse and disruptive, and a strict definition would hardly fit all situations. However, at least the plausibility
of threat is a requirement to classify a transaction as an acquisition of a nascent competitor or as a killer acquisition.
We verified such plausibility on a case-by-case basis, looking at information about the innovative character or
the rapid growth of the acquired company. It should be noted that "plausible" threat does not necessarily mean that
the startup in question would be able to replace the buyer in its leadership position, but only that it creates a non-
negligible risk of future market share loss to the incumbent, often because of its differentiation.
Also, when considering broader market definitions, overlaps in a broad sense are likely. However, given that the
businesses of GAFAM companies have spread across several areas - in what has come to be called the "digital
ecosystem" (Borreau, 2020), the antitrust analysis might be lost if it considered such nonspecific overlaps - for
example, involving just one of the many tools used for creating applications in the complete set of tools for developers,
as in acquisition of a nascent competitor.
Therefore, at least for the purposes of this study, it is more rational to consider, as nascent competitors, those
companies that were effectively offering a complete alternative to the product or service offered by the buyer -
understood as a package of applications, a social network, or a set of tools for companies – rather than a single input
of those businesses. This approach is aligned with a previous study on the matter, which disregarded from being
considered killer acquisitions those that were aimed at obtaining incremental technological improvements, and in

6
In this direction, see Cunningham et. al (2021).

6
which the target only offered specific technologies, but did not possess the scope to compete with the acquirer (Latham
et. al, 2020).
Other previous studies reinforce this view by demonstrating that the GAFAM companies often acquire inputs or
services in general - such as components, middleware, artificial intelligence tools, storage services or even talented
staff, which will be used to enhance their products or will be integrated into their other assets before being offered to
consumers (Gautier & Lamesch, 2021). This type of transaction, in addition to potentially generating efficiencies and
raising fewer competitive concerns (Sokol, 2018), can also be part of a broader strategy of construction or
improvement of digital ecosystems. In this sense, it is common for the largest companies in these markets to attract
consumers to their platforms through "access points", offering various products and services that are not exactly
competitors, but complementary, and that work in harmony to add value to users (European Commission, 2019).
Therefore, without evidence of a clear anticompetitive rationale behind this type of acquisition – such as internal
documents indicating that the buyer identified the startup as a threat – acquisitions with only partial overlaps are better
classified as transactions for the formation or improvement of ecosystems. That said, acquisitions of potential
competitors or for creation or improvement of ecosystems will be outside the scope of this work, even though they
may be the focus of further investigation, especially regarding anticompetitive behavior, such as market foreclosure,
discrimination against competitors or creation of entry barriers.
Finally, the table below summarizes the definitions used in the empirical work:

Table 1. Concept Definitiona

Source: Elaborated by the authors.

Concept Target company or Threat Development stage Status after

project acquisition

Acquisition of Is in adjacent market(s) Plausible due to its Not applicable

potential but exerts competitive innovative character or
competitors pressure and could use quick expansion
its position to compete
with the buyer directly
Initial
Acquisition of Is in the buyer’s Plausible due to its Not applicable
(Young, still
nascent market(s) innovative character or
developing)
competitors quick expansion and
Killer Is in the market(s) in due to offering a Discontinued or
Acquisitions which the buyer holds a complete alternative to abandoned
relevant dominant consumers
position
a
The “not applicable” term is used to indicate that the characteristic is not necessary for defining the concept under
analysis. For instance, the acquisition of a potential or nascent competitor may or may not result in the discontinuation
of the company or project. However, if the acquisition of a nascent competitor is further qualified for: (i) taking place
in one of the segments in which the buyer is clearly dominant; and (ii) subsequent discontinuation of activities, it will
be defined as a killer acquisition. There are cases in which the buyer discontinues its own projects, understanding that
the acquired product is more promising. In this case, the transaction would not be a killer acquisition since the
purchaser did not acquire the product or company to discontinue it.

3.2. GAFAMs acquisitions

We gathered, classified, and analyzed information on the acquisitions conducted by the GAFAMs over a period
of 10 years, between January 1, 2009, and December 31, 2018. The sample considers that the GAFAM companies,

7
which are among the largest and best-known companies in digital markets, are particularly active in acquisitions and
are currently subject to specific scrutiny by policymakers and regulators.
Furthermore, investigating a decade allows analyzing a relevant volume of transactions, while expanding
databases collected in other studies, such as those that only considered acquisitions by three (Argentesi et. al, 2021)
or four (Latham et. al, 2020) of the GAFAM companies, or which analyzed acquisitions between 2015 and 2017
(Gautier & Lamesch, 2021). It was possible to analyze the status of the targets for at least two years until the
completion of the investigation, in March 2021.
We obtained the list of acquisitions and additional information about the targets, such as a general description of
their activities and segments, headquarters, and founding date from Crunchbase and the related news website
TechCrunch7. Information also came from several other public and specialized sources, such as the Financial Times,
Wall Street Journal, Bloomberg, Business Insider, Venture Beat, and others. Unfortunately, information on the
amounts involved in acquisitions was not consistently available.
Following the example of a previous study by Argentesi et. al (2021), we classified the activities of the targets
into clusters. However, due to our focus on transactions with clearer horizontal effects, and seeking more precision,
clusters used in the mentioned study were segmented and complemented, in view of crucial differences between
activities that were initially grouped. The inclusion of target companies in each cluster took place after a thorough
analysis of the data since the initial description on Crunchbase did not always correspond precisely to the company's
activities.
The table below provides the result of this construction:

Table 2. Clusters
Source: based on Argentesi et. al (2021) and complemented by the authors.

Code Cluster Description

1 Operational Systems Development and supply of the main software, that is, the
software that controls memory, processes and serves as a
platform for other software and applications – both on
computers and smart devices
2 Electronic devices Development and supply of computers, smart devices and
other electronic devices of any kind (hardware)
3 E-commerce Services that allow and/or facilitate the sale and distribution
of physical goods of any nature, either directly by the
company or through the intermediation of sellers and
buyers
4 Software and applications for productivity Software and applications designed to increase productivity
or daily needs (such as word processing, spreadsheets, calendars) and/or
improve the experience with different aspects of daily life,
such as mobility, health and well-being, learning etc.
5 Search Includes General Search and Vertical Search, such as price
comparison websites
6 Social networks Platforms that create or facilitate the interaction between
individuals and/or between organizations, with a focus on
sharing content and personal information

7
Available at https://www.crunchbase.com/; According to information available at the website, data are obtained through collaboration with several
companies and investors around the world, which update the information monthly, as well as through the use of artificial intelligence and
algorithms for updating and validating the data.

8
 7 Communication Applications that facilitate communication between
individuals and/or companies, focusing on the exchange of
messages, such as email and text messages, without
necessarily having an aggregated personal page
8 Infrastructure as a Service, Tools for Intermediate tools and solutions, to be used by companies
Developers and Data Science/Analytics and developers to create and optimize their respective
products. May include the distribution of software with
artificial intelligence, text recognition, sound and image,
analytics and machine learning, among other related
services
9 Digital content Providing, creating or facilitating the enjoyment of digital
content, such as movies, music, games, e-books and others
10 Remote storage and data transfer Cloud storage, document sharing and related services, as a
ready-made product delivered directly to end consumers
11 Tools for advertisers Ad industry, including content, platforms or intermediation
between advertisers and consumers or suppliers
12 Virtual assistants and voice, text and image Software with artificial intelligence and/or voice, text and
recognition services image recognition aimed at productivity and/or
individual/family routine
13 Others

Current status information provided by Crunchbase (i.e., active or inactive) was supplemented with direct
verification on the companies' websites or social media, in app stores, news or press releases. In some of the cases,
even with the company indicated as “active” in Crunchbase, the information obtained through independent research
did not corroborate this status, further demonstrating difficulties involved in this assessment.
That said, and with inspiration from previous works on the matter (Gautier & Lamesch, 2021), we considered a
company to have been discontinued when: (i) termination of activities, products, support or updates was announced
by itself or by the buyer; (ii) the original website8 is offline and no new website or specific area has been created
within the buyer's website(s) for this company, product or project; (iii) applications are no longer offered; or (iv) there
is news about the ending of activities.
In relation to GAFAM companies, the main source of information was their annual reports (“10-k”) from 2009
to 2018, supplemented with press releases, publications in blogs, websites, and similar disclosure sources. Therefore,
we sought to extend and complement previous studies to cover the changes in these companies' businesses over the
course of the decade.
A major challenge lies in precisely delineating the segments in which such companies operate. Previous studies
tried to simplify the task by classifying the activities of GAFAM companies based on the broad groups of users that
“orbit” around the platforms.9 Here we sought, however, to delimit the main segments in which these companies
operate based on the main products they offer. For example, Apple, in its 2018 report, indicated that it provides
electronic devices (iPhones, Apple Watches), digital content (Apple Music), operating systems (iOS, MacOS), among
other products and services.
With this information in hand, we sought to place the buyers in the same clusters constructed for the targets and,
thus, make the preliminary verification of overlaps more precise. The intention was to eliminate, as much as possible,
transactions that clearly did not involve horizontal effects, allowing the investigation to focus on acquisitions of
nascent competitors and killer acquisitions.
Evidently, the definition is vaguer and broader than a classic definition of relevant market and did not capture the
products and/or services which were not reported by the GAFAMs. We acknowledge this weakness, but this study is

8
According to information available in Crunchbase.
9
See Gautier & Lamesch (2021). The authors identified the following groups: advertisers, businesses, editors, merchants, and consumers.

9
a starting point, to be complemented or developed in future studies or investigations. The figure below shows the
result of this task.

Fig. 1 Expansion of GAFAM activities (2009-2018)

Source: Elaborated by the authors with Excel based on 10-k reports, press releases, blog posts, websites, and similar
disclosure channels.

Note. The years presented in each graph are the years in which each company added new activities to its respective
portfolio. Therefore, the covered area in the graph is larger at such years.

10
 Finally, we followed the steps identified below to classify each of the identified acquisitions: (i) verification of
the targets’ ages; (ii) verification of overlaps between the clusters, in the respective year of acquisition; (iii) verification
of the plausible threat; and (iv) finally, in cases where the acquisition of a nascent competitor was found, that is, with
a match in the cluster and fulfillment of the age and plausible threat requirements, we determined whether the target
was active in a segment in which the buyer held a relevant dominant position and whether the company, product or
project was discontinued. If so, we classified the transaction as a killer acquisition.
To check whether a plausible threat existed, we analyzed available information and news about the transaction
and the companies involved and considered two main criteria: (i) whether the company, in fact, provided a complete
and alternative product, i.e., one that could be used immediately by users and/or consumers in substation of the buyer’s
product, with largely the same functionalities, or if there was no similarity between the products and/or the news and
announcements about the transaction indicate that it was a mere acquisition of intermediary services, components,
middleware, or talents; and (ii) whether the company was attracting attention, expanding rapidly, or was recognized
for distinctive or innovative product or functionalities. In cases where one or more of these elements was not present,
we disregarded the transaction. While the first criterion is more objective and allowed us to disregard the majority of
transactions, we acknowledge the inherent subjectivity of the second criterion, arising from the database itself.
Regarding the last step, it was necessary to analyze in more detail the involved segments, on a case-by-case basis,
as detailed in the following section.

4. RESULTS

4.1. Overview

We identified 476 acquisitions by GAFAM companies during the investigated period. The main buyer was Google
(182), followed by Microsoft (90), Apple (80), Facebook (75) and finally Amazon (49). Figure 2 shows the evolution
of such acquisitions during the decade.

Fig. 2 Evolution of acquisitions by GAFAMs, 2009-2018b

Source: Elaborated by the authors, based on Crunchbase data.

11
Note. No distinction is made between traditional acquisitions and the so-called “acquihiring”, that is, hiring of
relevant qualified personnel that, in practice, functions as acquisition of the company or product itself.

In turn, Figure 3 and Table 3 show the age, in approximate years, of the targets.

Fig. 3 Age of companies acquired by GAFAMs, 2009-2018

Source: Elaborated by the authors, based on Crunchbase data.

Note. We excluded five transactions from the sample because the date of announcement of the acquisition and/or
founding of the targets was not available on Crunchbase. We also excluded two transactions in which the
announcement date in the database was wrongly given as prior to the targets’ founding date, distorting the data. In
many cases Crunchbase only informed the year of founding, and therefore the age is an approximation.

Table 3. Age of companies acquired by GAFAMs, 2009-2018, statisticsb

Source: Elaborated by the authors, based on Crunchbase data.

12
 With outliers Excluding outliers
456
470
Acquisitions
Age (mean) 5.8 5.0
Age (median) 4.47 4.30
Standard deviation 6.37 3.94
b
We considered as outliers all companies whose ages, at the time of acquisition, were more than three standard
deviations away from the mean. Considering there were occasional occurrences of acquisitions of traditional
companies, not always linked to digital markets, and with ages that exceeded 20 years (notable examples being Whole
Foods Market, a traditional supermarket chain in the United States, which was already 40 years old when it was
acquired; and Avalon Books, a small traditional book publisher, based in New York, which was already over 60 years
old), the calculations without outliers allowed excluding from the sample acquisitions that, according to this study,
were not the focus of a GAFAM.

Figure 4 shows the distribution of companies acquired in the identified clusters – noting that this study only
classified companies under 6 years of age at the time of acquisition.

Fig. 4 Clusters of the acquired companies

Source: Elaborated by the authors, based on Crunchbase data.

In the opposite direction to what the "status" on Crunchbase initially indicated and considering the cancelation of
websites or support, or even direct announcements, it was possible to verify that a relevant portion of the companies

13
were discontinued after the acquisition, as shown in Figure 5. We only verified the status of activities of companies
less than 6 years old on the acquisition date. The discontinuation of companies was well distributed considering the
target companies’ ages (Figure 6).

Fig. 5 Discontinued companies

Source: Elaborated by the authors, based on Crunchbase data.

Fig. 6 Discontinued companies by age

Source: Elaborated by the authors, based on Crunchbase data.

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 Finally, we disregarded 184 acquisitions involving companies older than 6 years, and another transaction for lack
of data about the target or the acquisition. Of the remaining 291 acquisitions, 65 were excluded from the analysis
because they lacked clear horizontal elements – based on the cluster, and another 199 because the plausible threat
requirement was not met, either because the product was not considered a complete alternative to the buyer's product
and/or service (174 cases) or since information available did not indicate any kind of differentiation, innovation or
fast growth (25 cases).
As a key result, only 12 acquisitions of nascent competitors were identified (2.52% of the sample), and another
14 acquisitions that could be considered killer acquisitions (2.94% of the sample), for a total 26 relevant acquisitions
(5.46%) out of the initial 476.10 The next sections detail such transactions.11

5. Acquisitions of Nascent Competitors and Killer Acquisitions

The table below presents initial details on the 12 acquisitions identified as possible acquisitions of nascent
competitors – except for those that were later defined as killer acquisitions.

Table 4. Acquisitions of nascent competitors

Source: Elaborated by the authors based on Crunchbase.

Buyer Target Brief description of the target’s

activities

Apple Embark Maps and navigation

Facebook Instagram Social network
Facebook WhatsApp Messaging and content sharing
Google Admob Tools for advertisers
Google Cronologics Corporation Operating system
Google Firebase Tools for developers
Google Fridge Social network
Google Odysee Photo storage
Google Oyster E-books sales and subscriptions
Google Pixate Tools for developers
Google Sparrow E-mail client
Microsoft StorSimple Data storage and protection for
companies

The table below, in turn, lists the 14 acquisitions further identified as potential killer acquisitions, that is, which
involved the acquisition of a nascent competitor, which was later discontinued, in a segment in which the buyer held
relevant dominance at the time of the acquisition.

10
One of the biggest shortcomings of the paper, along with all the other empirical work in this area, is the lack of a “control” group (for instance,
the acquisitions of Spotify, Samsung, Netflix, PayPal, etc.). A good exercise would be to examine the statistics on potential, nascent, and killer
acquisitions for these groups (as a percentage of all acquisitions). We acknowledge that this is beyond the scope of the current data set. However,
if one could collect the data and do the analysis, it would be an important contribution to the literature.
11
Likely because of the small sample of nascent competitor acquisitions and killer acquisitions, as well as limited data available, we did not observe
relevant differences between these two types of acquisitions, such as in age, size, funding, nationality, etc.

15
Table 5. Killer Acquisitions
Source: Elaborated by the authors, based on Crunchbase.

Buyer Target Brief description of the target’s

activities

Amazon Lexcycle E-book reader

Apple Concept.io Music streaming
Apple Lala Music streaming
Facebook Beluga Messaging and content sharing
Facebook Eyegroove Social network
Facebook FriendFeed Social network
Facebook Glancee Social network
Facebook Gowalla Social network
Facebook Lightbox Social network
Facebook Tbh Social network
Google Admeld Tools for advertisers
Google Episodic Video streaming
Google Invite media Tools for advertisers
Google Sparkbuy Price comparison

While the acquisitions mentioned above meet the objective criteria established in this work for the preliminary
identification of nascent competitors and killer acquisitions, the next section provides relevant consideration about
them.

6. DISCUSSION

A. Overview

The total number of acquisitions by the GAFAM companies over the ten years investigated in this study is
striking: with 476 transactions, it is hard to imagine another group of companies equally active in mergers and
acquisitions.
There is also a strong concentration of companies that were not even 6 years old when acquired: 303 or
approximately 61% of the targets. Most companies were between 2 and 5 years old (Figure 3), which hints at the
existence of a critical phase, in which companies had already distinguished themselves enough to be potential targets
but were still not fully consolidated. The average and median calculations (Table 3) reinforce that GAFAM companies
focused on young companies.
In addition, the proportion of products discontinued, or companies shut, stands out (Figure 5). Such findings
create fertile ground for accusations that GAFAM companies are acting with the intention of eliminating nascent
competition, including through killer acquisitions, and are thus further entrenching their dominance.
However, in a second stage of analysis, it was possible to identify that the proportion of relevant transactions in
this study (Tables 4 and 5) is comparably low. That is, considering only the acquisitions of targets that were less than
6 years old, and that met the requirements of being active in the same segments as the buyers, in addition to
representing a plausible threat, the remaining number is much smaller: only 26 transactions stand out, representing
5.5% of the total. Even among acquisitions of startups with less than 6 years, the proportion of relevant acquisitions
was only 8.6%.
Therefore, the first conclusion of this investigation is that superficial analyses, which only consider the gross
number of acquisitions, or even companies shuttered after the acquisition, can lead to mistaken policies, at least
regarding the elimination of nascent competitors and killer acquisitions in digital markets.

16
 In fact, the results of this study indicate that most acquisitions of young companies were aimed at the acquisition
of technologies, talents or complementation of the buyers' own products – possibly vertical acquisitions or
“ecosystem” acquisitions– a conclusion that is in line with past work on the matter (Gautier & Lamesch, 2021). This
means that very restrictive measures could end up harming an important element for the development of innovative
and more complete products in these markets, as also argued before (Fayne & Foreman, 2020).

B. Acquisitions for expansion of activities

By analyzing the evolution of acquisitions over the years (Figure 2), it is possible to see peaks at times when some
of the GAFAM companies were expanding their activities to other segments or launching new products (Figure 1)
and strengthening their ecosystems.
This is the case of Google, which acquired several companies related, directly or indirectly, to the sector of social
networks and mobile games, before launching its own social network (Google Buzz) in 2010; and startups developing
artificial intelligence and voice, text, and image recognition software, shortly before making its virtual assistant
(Google Assistant) available in the market in 2016.
It is also worth highlighting the peak of acquisitions by Microsoft, between 2010 and 2015, especially of startups
focused on artificial intelligence, machine learning and big data, which took place before the launch of its virtual
assistant (Cortana).
In the same direction, Apple focused its acquisitions between 2011 and 2013 on data, location, and maps, to later
enter the segment of maps and navigation applications and begin to compete with Google Maps.
The fact that most targets were categorized in the Infrastructure as a Service and Tools for Developers cluster
(Figure 4) corroborates the point of view that most acquisitions were aimed at integration in the buyers’ activities and
products, or in the acquisition of inputs and talents.12 In other words, it is possible that such companies were acquired
precisely to help buyers in the development of their own products, which means that they were not seen as threats, but
as providers of inputs or services, and that discontinuation would be expected not as an anticompetitive strategy, but
as a natural process of integration and efficiency (Sokol, 2018).
The other cluster with most overlaps was the Software and Applications for Productivity or Daily needs (Figure
4). Here it is worth noticing that even with a match in the first phase of the analysis, and given the range of the
category, further investigation – verification of a plausible threat – concluded that in many cases, the products offered
were not, in fact, close substitutes, and would likely be integrated into the buyer's app bundle. In accordance with
previous work, the targets did not possess the necessary scope to compete with the acquirers (Latham et. al, 2020).
It is important to emphasize that even though most companies were considered discontinued, this is due to their
original websites being shut down, and apparently no longer offering products or services directly in the market.
However, the startup "structure" may still exist, in the form of a subsidiary, or the original developer team may still
work on independent projects under a new guise. This is an important limitation of the data available.
Also in relation to the discontinuation of acquired companies, there is no evidence of more frequent shutdowns
when there was a coincidence of clusters – on the contrary, the proportion was slightly lower (Figure 5), which may
indicate that most of the discontinuations were part of a natural process of integration of products and staff, as occurs
in other industries, and not an anticompetitive rationale specific to digital markets.
Although many acquisitions likely had low competitive impacts, or even were favorable to innovation, we also
found evidence that acquisitions of nascent competitors and killer acquisitions were taking place in digital markets,
even if the frequency was not enough to justify drastic merger control reforms – a conclusion which is line with
previous similar studies. Those will be discussed in the next topic.
In fact, acquisitions of young startups carried out by Facebook did not indicate a clear strategy of entering other
segments or acquiring inputs. On the contrary, the peak of acquisitions between 2009 and 2012 was focused on social

12
It is true, however, that the IaaS and Developer Tools cluster is also the most technical and complex, especially when involving innovative
segments such as machine learning. Therefore, "input" or "complementary" acquisitions may deserve more attention, in a work focused on this
matter.

17
networks and texting, segments in which Facebook was already dominant. Amazon also maintained its focus on
Developer Tools, a segment in which it was already established, and it did not significantly expand to other sectors.

C. Acquisitions of nascent competitors

Regarding acquisitions of nascent competitors, perhaps the most cited examples in previous studies are the
acquisitions of Instagram and WhatsApp by Facebook. An important report by Argentesi et. al (2021) indicated that
Facebook Messenger and WhatsApp competed directly at the time of acquisition, and that WhatsApp already had an
extensive network of users – approximately 600 million in 2014. In addition, overlaps between Instagram and
Facebook in the markets of “photo apps” and “social networks” were investigated by antitrust authorities. Even if it
was not the platform it is today, Instagram already had a relevant and rapidly growing user base and its reach went far
beyond other photo editing and sharing apps. An investigation of internal Facebook documents also showed that
WhatsApp and Instagram were considered nascent competitors and important threats to Facebook’s dominance (U.S.
House, 2020).
This indicates that the methodology of this study adequately defined that both involved acquisitions of nascent
competitors. However, the two transactions were approved without restrictions by antitrust authorities at the time,
generating criticism that the analyses were not sufficiently detailed and disregarded important evidence that the two
apps were positioning themselves as effective rivals, and likely threats, to Facebook’s market power. The OECD, for
example, currently recognizes these two acquisitions as among the “most controversial” approvals of acquisitions of
nascent competitors, whose impacts continue many years after they took place (OECD, 2020). In any case, here we
do not delve deeply into the merits of such acquisitions, as they have already been extensively investigated in previous
works and are still being examined by authorities.
In fact, given the scope of this study, it can contribute more by evaluating whether other important acquisitions
are or were, until recently, off the radar.
This may be the case of Embark’s acquisition by Apple in 2013. The target was developing maps and navigation
applications for several cities and was experiencing rapid growth (Etherington, 2013). It was discontinued after the
acquisition. However, since the segment was dominated by Google (U.S. House, 2020), the transaction was not
classified as a killer acquisition in this study. Nevertheless, it can be an example of how acquisitions of young
competitors that are still taking their first steps tend to consolidate certain markets among a few players – in this case,
Google and Apple – instead of allowing users to find new alternatives.
Google, in turn, acquired a considerable number of nascent competitors during the analyzed period: an acquisition
frequently commented on, and which the authorities indeed analyzed, was Admob, in 2009, for 750 million dollars.
The company, which was just four years old when acquired, was one of the most relevant in the still “incipient” and
“fast growing” segment of mobile advertising tools (Kincaid, 2009). The acquisition helped Google, historically
dominant in the web advertiser tools segment (U.S. House, 2020), to establish itself in the mobile segment. Admob is
still operating, so this was not a killer acquisition. Therefore, Google's financial and technological strength may have
helped to develop the startup, while further consolidating its own position.
Other less prominent acquisitions of nascent competitors by Google were the acquisition of Fridge, a social
networking startup, focused on smaller and private groups, which competed with Google+ at the time; and Sparrow,
a popular email client for the iOS operating system (Shontell, 2011; Lunden, 2015). Both were only two years old
when acquired. Again, Google was not dominant in these segments, but the acquisitions kept the segments dominated
by a few large companies, especially the GAFAMs.
Google also acquired Pixate and Firebase, which rose to prominence in the field of native mobile application
development and had numerous relevant customers before being incorporated into Google Cloud. Other possible
acquisitions of nascent competitors were Oyster – an innovative company that was in 2011 called “Netflix” for e-
books, and which competed with Google's own e-book service; and Odysee, which provided an app for iOS and
Android that allowed users to automatically back up photos and videos on their cameras and tablets to their computers,
in addition to sharing such files with other people and apps (Olanoff, 2015; Lardinois, 2014; Bergen & Kafka, 2015).

18
 Finally, in relation to Google, we identified the acquisition of an operating system developer for smartwatches,
Cronologics Corporation. According to available information, the one-year-old team involved in the startup hoped to
launch the most widespread operating system across platforms. However, they were integrated into Google's Android
Wear team (Yeung, 2016). There is not much additional evidence about the real importance of the acquired company,
likely due to its age when the acquisition took place.
To complete the analysis of the acquisitions of nascent competitors, Microsoft acquired StorSimple in 2012. At
the time, that startup was one of the leaders in integrated cloud storage solutions, providing data storage and protection
for companies.13 Therefore, given that Microsoft already had a relevant presence in the segment, the acquisition may
have eliminated a nascent competitor in the Infrastructure as a Service segment, which ended up consolidated among
Amazon, Google, and Microsoft.

D. Killer acquisitions

As already mentioned, we identified 14 killer acquisitions in the database, mainly by Facebook and Google, but
also by Amazon and Apple.
Facebook, which leads the social networking segment - where it has market power close to monopoly, with much
more reach, time of use and users than any rival (U.S. House, 2020), and with market share that has remained virtually
unchanged for nearly a decade,14 frequently acquired and closed other applications in the same segments.
In this sense, Beluga stood out for allowing instant group messaging and content sharing. At the time of
acquisition, Facebook was one of the pioneers in this type of service, through Facebook Chat. News about the
transaction indicates that, unlike other acquisitions where Facebook was just looking for talent, there was also interest
in the technology itself. In the same year the acquisition took place, Beluga was terminated, while Facebook launched
Facebook Messenger, based in part on the discontinued product (Siegler, 2011).
Similar acquisitions, by Facebook, took place with several newly created social networks of some prominence,
such as Lightbox, a photo sharing network that automatically created personal blogs based on photos uploaded by
users, and which was approximately two years old when the acquisition was announced. The product was discontinued
soon afterward. According to specialized news, the application had an advantage over Instagram, which had been
acquired by Facebook a month before, by allowing interaction with the photos even by users without any social
network profile. The app was also a “community where people browsed each other’s mini masterpieces” (Constine,
2012).
Other examples were Facebook’s acquisitions of EyeGroove, which was defined as “an Instagram for interactive
music”, in which users posted “musical selfies”; Gowalla, which allowed the creation of “Stories” about places users
had visited and focused on check-ins, in an allegedly similar way to Facebook's “Timeline” feature at the time; and
tbh, an app that was considered a “bigger deal” when acquired and which consisted of an anonymous social network,
focused on sending compliments by students to each other. Despite its prominence, only 11 months after the
acquisition, the service was terminated, allegedly due to low usage rates (Perez, 2016; Kincaid, 2011; Kastrenakes,
2018).
Another relevant acquisition by Facebook was Glancee, a prominent app in the “ambient location” category, in
which users could discover others with similar interests close to their surroundings. One report about the acquisition
made the following statement when commenting on the approximately three thousand daily users of Glancee: “Moral
of the story: Don't let an Instagram grow under your nose again” (Tsotsis, 2012).
In common, all these products, which were differentiated and potential threats to Facebook's market share on
social networks, even if targeted to specific niches or which, at first glance, would not be able to assume the leadership
of the segment, were discontinued. Therefore, Facebook may have acquired such companies just to eliminate them
more quickly and effectively. As a result, products that could have developed, albeit timidly, are no longer available
to consumers. Although the data available is limited regarding, for instance, the precise definition of relevant markets

13
As disclosed by Microsoft (2012) itself.
14
For additional data, see https://gs.statcounter.com/social-media-stats#monthly-202002-202102.

19
and potential efficiencies generated by such transactions, it should be questioned why the antitrust authorities did not
even analyze such transactions. This can serve as a guide for future policies and reforms.
Among Facebook's acquisitions, that of FriendFeed was also identified as a possible killer acquisition. However,
given that the service remained active for almost six years after the acquisition, and that the discontinuation was
announced by the relevant team itself, due to the constant reduction in the number of users of the social network over
time, the shutdown does not seem to be related to a “killer” acquisition (FriendFeed Blog, 2015).
Concerning Google, it is worth highlighting the acquisition of Episodic, in 2010, when the target company was
only two years old. Episodic was a video hosting platform, like YouTube, and allowed live and video-on-demand
streams over the web, mobile phones, and other devices. The platform also made available a series of interesting
features to its users, such as real-time metrics and reports on the reach of publications, and the possibility of exporting
videos to other channels such as Hulu, iTunes and Amazon. Therefore, Google may have eliminated a threat to its
own platform, at a time when the online video industry was still developing – as recognized by Episodic’s team of
developers (Rao, 2010).
In 2011, Google also bought and closed the startup Sparkbuy, which had been announced to the public just a
month before, and which initially provided a service for comparing the pries and functions of gadgets, according to
the startup's creators. However, the intention was to expand the technology to other segments (Rao, 2011). Google
likewise bought two nascent competitors in the Tools for Advertisers segment: Invite Media and Admeld, in 2010 and
2011, respectively. Invite Media had developed a “real-time auction” tool for selling ad spaces, as well as technology
for optimizing marketing campaigns in a single interface. Admeld was a platform providing technology and expertise
for optimizing advertising campaigns. Google discontinued both companies after acquisition (Schonfeld, 2010;
Arrington, 2011), consolidating its dominance in the field, where it gets most of its revenue and holds more than 50%
market share (U.S. House, 2020).
Other GAFAM companies may also have carried out killer acquisitions. Apple, for example, which maintained a
certain dominance in the field of music streaming and podcasts, especially with the iTunes service – before the
existence of rivals like Spotify – acquired and closed two startups in the same segments: Concept.io and Lala. The
first had developed the Swell streaming app, which was highly praised for its unique capabilities to discover and
stream podcasts and news, as well as adapting to user behavior. The acquisition led to the termination of the
application. Lala, on the other hand, was recognized for its potentially disruptive business, allowing users to acquire
unlimited music streaming rights for relatively low fees. The company was also terminated, six months after
acquisition (Chapman, 2014; TechCrunch, 2010).
Also in this direction, in 2009 Amazon, the market leader in e-reader and e-book sales, acquired its competitor
Lexcycle, which was just one year old and had launched an application for reading e-books on iPhones and other
electronic devices. The application stood out for its large number of supported formats and extensive library of books
and periodicals. In less than six months, the app had been downloaded over 1 million times (ABC News, 2009).
However, a few years after the acquisition, the application was discontinued, and the company shut down.
Among the potential killer acquisitions indicated in this study, the antitrust authorities only analyzed the
acquisition of Admeld, by Google. The Federal Trade Commission unconditionally approved the deal in 2011.
However, several acquisitions mentioned here seem to have come into focus of recent investigations against GAFAM
companies, with authorities and scholars questioning whether they should have been analyzed in more detail.

E. Comparison with previous work

We conducted a comparative analysis between the outcomes of this study and the findings of contemporary
research. Overall, the results reveal similar trends.
In the first place, a study by the Federal Trade Commission (2021), obtained information directly from the
companies and identified 819 total non-HSR reportable transactions by the GAFAM companies between 2010 and

20
2019.15 It should be noted that the study leaned towards quantitative assessment, rather than a qualitative analysis, and
did not focus on the competitive nature of each acquisition. Notably, however, the authority classified almost half of
the deals (342) as acquisitions of assets, hiring initiatives or patent acquisitions. This reinforces the view that
acquisitions of products or services to be further integrated in the purchaser’s own products or services are prevalent
in digital markets.
The FTC also highlighted that most transactions involved companies under five years old, a finding in line with
the results presented here. It should also be noted that the FTC identified Mobility (mobile devices and device-based
software and content), Application Software (front-end applications such as CRM, ERP, SCM, etc.), Internet Content
& Commerce and Infrastructure Management (software to control and manage IT infrastructure) as the sectors with
the highest transaction volumes. This segmentation resembles the main sectors identified in Figure 4 of this study, and
accordingly could also imply that GAFAM companies focus their acquisitions on complementing their own products.
Another study, published in 2020, concluded that killer acquisitions in the technology sector were “likely rare”
(Latham et. al, 2020). In fact, after scrutinizing 408 transactions carried out by Google, Amazon, Facebook, and Apple
(GAFA) between 2009 and 2020, the authors found that only 4% of the deals (16 transactions) met the proposed filters
for identifying killer acquisitions in this segment: taking place in the purchaser’s “core business” and having “material
value" (i.e., worth more than USD 100 million). According to the authors, their analysis showed that the vast majority
of deals were related to GAFAs acquiring new capabilities and positioning themselves to enter new markets or
acquiring incremental technological improvements to their core products, while the targets themselves did not have
the necessary scope to compete with the acquirers. Essentially, they argued that such transactions were conglomerate
transactions. This conclusion also closely mirrors our own observations.
A study commissioned for the UK Competition and Markets Authority (CMA) investigated 299 transactions
executed by Amazon, Facebook, and Google between 2008 and 2018. The main finding of the study was that the
products and services of the acquired companies were often complementary to those supplied by the acquirers, and
that transactions that “can be characterized as more horizontal in nature would seem to be the minority.” To reach this
conclusion, the authors classified the targets and the acquirers’ activities in clusters and found that “communication
apps and tools”, “tools for developers” and “artificial intelligence, data science and analytics” were prominent. Finally,
they found that targets were four years old or younger in nearly 60% of the cases (Argentesi et. al, 2021). All of those
findings are similar to the results obtained in this study.
Finally, we analyzed Gautier & Lamesch’s study (2021) which reviewed 175 acquisitions by the GAFAM
companies between 2015 and 2017. Notably, the authors of that study adopted a substantially different concept for
killer acquisitions, arguing they happen in digital markets when the products are continued (not terminated). They also
used broader segment (or cluster) definitions, revolving around the “user groups” the GAFAM companies serve –
namely advertisers, businesses, editors, merchants and consumers. This different lens yielded the conclusion that the
majority of acquisitions by GAFAMs take place within their core markets, as opposed to potential expansion of
activities.
While the approach is very different, as are the results in the identification of distinct potential killer acquisitions,
several other conclusions of that study are aligned with our findings. For instance, the authors agreed that several
GAFAM acquisitions seemed “driven by the desire to purchase valuable R&D inputs, such as the technology, IP rights
and/or people of the target firms,” and were likely motivated by the desire to add “new functionalities to their already
successful products.” The authors also reinforced that such firms were mostly buying “small and young” technology
companies (with a median age of four years). Furthermore, while they focused on acquisitions of companies which
were continued after acquisition, they applied similar filters to those we applied, such as the existence of segment (or
cluster) overlap and the fact that the targets could represent a competitive threat to the acquirers because of their large
user bases. This resulted in the identification of only a few relevant transactions (12) in the whole database. In the

15
We suppose that the highest number of transactions identified may be justified by the fact that the companies themselves had to provide
information and that the FTC collected data from several databases (i.e., PitchBook, S&P Global Market Intelligence 451 Research and Refinitiv,
in addition to Crunchbase).

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same direction, after further investigation, the authors recognized that such transactions were likely vertical mergers,
focused on improving the acquirers’ products.

7. CONCLUSION

Digital markets have recently become one of the main focuses of antitrust scrutiny, particularly regarding the
potential anticompetitive effects of startup acquisitions by dominant companies and the alleged passivity of merger
control in several jurisdictions.
In this context, lobbying for reforms is proliferating, despite controversy about the real impacts of such
transactions, divergence on basic concepts and lack of empirical data.
Therefore, this study sought to initially define the concepts of nascent and potential competitors, which mainly
differ by the existence of current competition, that is, in the same market, in the first case. Killer acquisitions, as a
separate category, occur when already dominant buyers acquire nascent competitors only to discontinue their products
so as to avert the risk of future market loss. In all cases, targets are in their initial stages of development but represent
a plausible threat to incumbents, due to their innovative character and rapid expansion.
Although all categories of acquisitions may be relevant from the antitrust point of view, this work was focused
on acquisitions of nascent competitors and killer acquisitions, considering the higher level of uncertainty, in terms of
anticompetitive effects, normally associated with potential competition, vertical acquisitions and digital ecosystems,
as well as difficulties related to their investigation, which may demand powers only available to authorities.
We collected and analyzed information on acquisitions conducted by the GAFAM companies between January
1, 2009, and December 31, 2018. These companies, which are among the largest and best known in the digital markets,
are particularly active in mergers and acquisitions and are subject to differentiated scrutiny by authorities.
Investigating a complete decade allowed the analysis of a relevant volume of transactions and expanded the empirical
background of previous studies.
The characterization of each acquisition involved extensive work to classify the activities of the acquired
companies into clusters, as well as to identify the products offered by the buyers during the investigated period. The
analysis then considered transactions in which the acquired companies were less than six years old, were active in the
same cluster of activities and represented plausible threats to the buyers' products/services.
While the GAFAM companies made 476 acquisitions all told, including several young startups that were later
closed, only 12 transactions were classified as acquisitions of nascent competitors, and another 14 as killer
acquisitions. In fact, most acquisitions did not involve clear horizontal elements, and instead apparently took place for
the acquisition of technology, talent, and complementation of the buyers' products.
The results of the investigation should be considered with caution regarding demands for greater previous scrutiny
by antitrust authorities. In fact, more than 90% of the acquisitions in the sample did not represent, according with the
proposed methodology, the elimination of nascent competitors or killer acquisitions, so the imposition of very costly
measures on companies, such as the total ban on new acquisitions or the creation of broad notification criteria, could
be unjustified. The main findings of this study were also compared with analogous and contemporary research,
revealing similar trends.
It is essential to understand that higher transaction costs would not only be imposed on dominant companies, such
as the GAFAMs, but mainly on small startups that are constantly developing accessories and innovative products,
often with the expectation of being acquired. Therefore, in the absence of clear signs that merger control is recurrently
failing to capture potentially anticompetitive acquisitions, overly rigorous interventions could do more harm than
good.
On the other hand, the investigation clearly found that acquisitions of nascent competitors and killer acquisitions
may indeed be happening in digital markets, and are often off the radar of competition authorities.
Such type acquisitions are not as frequent as more superficial analyses might assume, but antitrust authorities
should not at the outset disregard 5% of the total acquisitions as irrelevant. The present investigation had important
limitations, such as the lack of access to internal company data, which may have identified the existence of “killer
intent”. Thus, we may have underestimated this number. Nevertheless, considering the levels of concentration in

22
several digital markets, as well as their impact on many areas of the economy and the lives of consumers, we believe
that more studies are needed, and some specific changes may be important.
For these reasons, we conclude by suggesting of a more balanced line between rigor and caution, for example
proposing that antitrust authorities closely monitor GAFAM acquisitions and potentially block them when necessary.
Such companies could be required to present an annual list of acquisitions carried out, with brief descriptions of their
economic rationale, affected markets and plans for the acquired business or asset, as well as updating the operational
status of previously acquired companies.
By doing so, antitrust authorities would have the opportunity to gain experience about the acquisitions carried out
by GAFAMs, and whether a transaction that deserves more attention was identified. Where warranted, they could
request more information or demand notification in cases where they have the power to do so. In fact, considering the
few cases identified, repressive and a posteriori control may still be the best alternative to curb anticompetitive
behavior in digital markets. Nonetheless, effective measures could include the enactment of soft laws and checklists
for the analysis of such acquisitions.
With this, transaction costs and public administration costs would be lower, and important developments and
transformations would not be hindered. At the same time, authorities would gain further expertise and inside
knowledge about the rationale and dynamics of acquisitions in such markets, enabling better decision making.
Finally, with greater transparency about the acquisitions, the GAFAM companies will be encouraged to pursue
transactions with clearer and more justifiable economic justifications, while being discouraged from acquiring
companies only to limit independent sources of competition. In the latter case, they would be subject to increased
scrutiny and potential sanctions.

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