Who’s Afraid of Conglomerate Mergers?

• DOI: 10.1177/0003603X221082748
• Published date: 01 June 2022
• Date: 01 June 2022
• Subject Matter: Articles

https://doi.org/10.1177/0003603X221082748

The Antitrust Bulletin

2022, Vol. 67(2) 208 –236

© The Author(s) 2022

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DOI: 10.1177/0003603X221082748

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Article

Who’s Afraid of Conglomerate

Mergers?

Anne C. Witt*

Abstract

Conglomerate merger control went out of fashion in the United States and the European Union

several decades ago. Both jurisdictions embraced the premise that nonhorizontal mergers should

normally be considered benign because exclusionary theories of harm are economically implausible,

and nonhorizontal mergers are almost always certain to result in significant efficiency effects that the

merged entity can be expected to pass on to consumers. Conglomerate effects analysis subsequently

all but disappeared from the enforcement practice. However, the emergence of a handful of powerful

digital platforms with vast global ecosystems of interconnected services is currently causing competition

agencies a great deal of concern. Their growth has not been entirely internal. Collectively, Alphabet,

Meta, Apple, Amazon, and Apple have acquired over eight hundred companies. Many of their targets

were innovative start-ups operating in complementary markets. This contribution compares and

critically assesses how this development has affected the U.S., EU, and U.K. competition agencies’

approach to conglomerate merger control. It finds that, as a reaction to the advent of Big Tech,

conglomerate effects analysis has made a significant comeback in EU merger control. While the

U.S. and U.K. authorities have not yet intervened against any conglomerate acquisitions in practice,

evidence suggests that they are also more open to nonhorizontal theories of harm again.

Keywords

merger control, conglomerate effects, tying leveraging, digital platforms, consumer welfare, competitive

process, Digital Markets Act

I. Introduction

Over the relatively short course of their existence, the five biggest U.S. tech companies, Alphabet

(formerly Google), Amazon, Meta (formerly Facebook), Apple, and Microsoft,1 have collectively

acquired in excess of eight hundred businesses. The targets of these acquisitions are frequently not

competitors, but innovative start-ups, which have developed technologies that are complementary to

*EDHEC Augmented Law Institute, EDHEC Business School, Roubaix, France

Corresponding Author:

Anne C. Witt, EDHEC Augmented Law Institute, EDHEC Business School, 59057 Roubaix, France.

Email: anne-christine.witt@edhec.edu

1082748ABXXXX10.1177/0003603X221082748The Antitrust BulletinWitt

research-article2022

1. Before Facebook reinvented itself as Meta, and Google became part of Alphabet, these five companies were commonly

known as GAFAM. Several new acronyms have since been suggested, including most recently MAMAA (see e.g.

Marco Quiroz-Gutierrez, Not FAANG but MAMAA: Jim Cramer Reveals New Acronym for the Five Largest Tech Giants,

Fortune, Oct. 29, 2021). In view of the evolving terminology, the following simply refers to them as the ‘Big Five’.

Witt 209

2. European Commission, decisions COMP/M.4439—Ryanair/Aer Lingus, and COMP/M.6663—Ryanair/ Aer Lingus III.

3. See e.g. European Commission, decision IV/M.1036—Chrysler/Distributors (Benelux And Germany), 1998 O.J. (C

79/3).

4. See e.g. US Department of Justice, 1968 Merger Guidelines, paras 4, 11, 17; European Commission, Guidelines on the

assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertak-

ings (‘non-horizontal merger guidelines’), 2008 O.J. (C 265/6), paras 2–4.

5. European Commission, decision M.8124—Microsoft/LinkedIn.

that of the acquiring Tech giant. This type of transaction is traditionally referred to as a conglomerate

acquisition. Whether conglomerate mergers are capable of anticompetitive effects has long been one of

the most contentious areas of substantive merger control. While both the U.S. and EU antitrust authori-

ties had intervened against conglomerate mergers in the earlier days of merger control, conglomerate

effects analysis all but disappeared after the two jurisdictions adopted the consumer welfare aim and

other key teachings of the Chicago School.

This contribution examines whether the advent of the Big Five has changed the European and U.S.

enforcement agencies’ views on conglomerate merger control. To this end, Part II briefly defines key

concepts and terminology. Parts III and IV analyze the evolution of the U.S. and EU antitrust authori-

ties’ approach to conglomerate merger control up until the mid-2000s. Part V explores the enforcement

practice of the past fifteen years — this analysis includes the enforcement practice of the U.K. competi-

tion agency, which is currently developing its own competition policy, having left the European Union

on Jan. 31, 2020. Part VI provides a critical analysis of the key findings and considers whether these

are likely to be lasting changes. Part VII concludes.

II. Typology of Mergers

Conventional wisdom has it that enforcers should differentiate between three types of mergers: hori-

zontal, vertical, and conglomerate. These categories were developed in the age of brick-and-mortar

outlets, when the key commodities traded were either tangible objects or services provided by human

beings. According to this nomenclature, mergers are horizontal if they occur between competitors, that

is, firms that are active in the same product and geographic markets. An example would be an air carrier

acquiring another air carrier operating on the same routes.2

Mergers between companies that are not competitors are commonly described as nonhorizontal.

According to the classic taxonomy, there are two types of nonhorizontal merger: vertical and conglom-

erate. Vertical mergers occur between companies operating at different levels of a product’s supply

chain. They may consist in a manufacturer acquiring a distributor, for example, a car manufacturer

acquiring a car retailer.3 A vertical merger could also entail the manufacturer of an end product acquir-

ing the supplier of a key input, that is, a car manufacturer acquiring a steel company.

Conglomerate mergers, finally, are traditionally defined as mergers between firms that are neither

competitors nor in a vertical relationship, but active in separate, albeit often related, markets.4 An

example of a conglomerate merger would be a tea company acquiring a producer of orange juice.

The preceding examples are fairly clear-cut. However, in the age of digital platforms operating

entire ecosystems of interrelated product and services, the categorization is often less obvious. Take the

example of Microsoft, a global technology company offering, among others, PC operating systems,

servers and mobile devices, related services, cross-device productivity applications, other software

solutions, hardware devices, cloud-based solutions, and online advertising. If Microsoft acquires

LinkedIn,5 which operates a professional social network, with the intention of preinstalling LinkedIn

on its PC operating system Windows, is LinkedIn an input for the Microsoft ecosystem, making the

merger vertical in nature? Or is this a conglomerate merger as Microsoft had not previously offered