Tech sector mergers could get more scrutiny

A wide-ranging review of merger laws could change the tech landscape, with Treasury citing the digital platforms market as one in which merger laws have lagged behind the times.

The government has today launched a consultation into what it calls “emerging concerns” about Australia’s merger rules.

The Treasury discussion paper [pdf] makes it clear mergers in the tech sector are among its considerations, with various kinds proving difficult to police.

The first is what the discussion paper terms “vertical” or “conglomerate” mergers, involving “firms at different, adjacent or unrelated levels of the production supply chain”.

Treasury says these mergers are contentious in the tech sector, particularly in the context of digital platforms’ growth; international examples include Booking.com’s acquisition of Etraveli and Meta’s acquisition of Giphy.

The activities of big tech firms are also of interest, because they can eliminate competition either by absorbing it (“creeping” or “serial” acquisitions), or by discontinuing the potential disruptor (“killer acquisitions”).

The Facebook/Instagram merger is given as an example of a creeping acquisition, with the ACCC’s 2019 Digital Platform Report noting that “Instagram had at least the potential to develop into an effective competitor”.

The paper noted that the ACCC wants the ability to assess the importance of assets such as data and technology in the context of creeping acquisitions.

Treasury noted OECD concerns about “killer acquisitions” in the tech, chemical, and pharmaceutical sectors, and added that the buyer’s intent can be “difficult to prove”.