Big Tech Acquisitions and the Potential Competition Doctrine: The Case of Facebook Mark Glick and Catherine Ruetschlin Working Paper No. 104 October 2019 ABSTRACT The Big Tech companies, including Google, Facebook, Amazon, Microsoft and Apple, have individually and collectively engaged in an unprecedented number of acquisitions. When a dominant firm purchases a start-up that could be a future entrant and thereby increase competitive rivalry, it raises a potential competition issue. Unfortunately, the antitrust law of potential competition mergers is ill-equipped to address tech mergers. We contend that the Chicago School’s assumptions and policy prescriptions hobbled antitrust law and policy on potential competition mergers. We illustrate this problem with the example of Facebook. Facebook has engaged in 90 completed acquisitions in its short history (documented in the Appendix to this paper). Many antitrust commentators have focused on the Instagram and WhatsApp acquisitions as cases of mergers that have reduced potential competition. We show the impotence of the potential competition doctrine applied to these two acquisitions. We suggest that the remedy for Chicago Professor and Assistant Professor, Department of Economics, University of Utah. Email:
[email protected]. The authors would like to thank INET for its generous support for this research and Brandi Chase for her research contributions. https://doi.org/10.36687/inetwp104 School damage to the potential competition doctrine is a return to an empirically tractable structural approach to potential competition mergers. JEL Codes: K21, L40, L86. Keywords: Antitrust Law, Big Tech Companies, Digital Markets, Mergers, Potential Competition Big Tech Acquisitions and the Potential Competition Doctrine: The Case of Facebook 2 I.