Merger regulation in the digital economy and the forgotten goal of innovation(dagger)

Abstract

The pursuit of the consumer welfare goal has not achieved competitive markets but instead resulted in highly concentrated markets in the digital economy with one or two market leaders. Markets that should be dynamic and innovative are controlled by powerful online platforms that thwart innovation and eliminate potential rivals through killer acquisitions.
This paper argues that safeguarding innovation and in particular disruptive innovation should play a much more explicit part in the European Commission’s merger control especially in digital economy markets, where innovation is key to a healthy dynamic market. This could be achieved by adopting a stricter merger review process that places emphasis on whether innovation and potential competitors are negatively affected by the merger also in the long-run. The paper argues that to achieve this a move away from the traditional price-based focus in merger reviews in line with the consumer welfare framework is required towards a structural approach that considers the impact on the market in the long-run and the dynamic aspects of the mergers under review, but this will occasionally require the Commission to say ‘no’ to mergers. The result however, would be the safeguarding of innovation, the key to a healthy economy in the EU.

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ORCID for Hedvig Schmidt: orcid.org/0000-0002-0549-1377

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