KILLER ACQUISITIONS AND COMPETITION LAW: IS THERE A GAP AND HOW SHOULD IT BE FILLED

Abstract

In innovation-driven budding markets, there is a high likelihood of ‘killer acquisitions’. Killer acquisitions stifle potential competition where an established player eliminates an innovative new product or removes the potential competitor entirely in its nascent stage. An established, and often cash-rich, large entity’s fear of an innovative competitor undermining its market position incentivises it to make an acquisition with the intent to eliminate future competition. Many jurisdictions, such as India, lack adequate merger control regulations to restrain such acquisitions. This article highlights jurisdictional and substantive gaps which allows killer acquisitions to escape scrutiny. Jurisdictional gaps emerge when the threshold for scrutiny is based on turnover or asset value of the parties involved.Startups and new companies having negligible turnovers escape the regulatory radar when acquired by a large player. Substantively, merger controls are based on the potential merger’s impact on competition in the relevant market, whichis difficult to assess in the case of early-stage start-ups where products are at a nascent stage. Instances of under-enforcement of competition law in cases of killer acquisitions are common, as the new company’s potential is underestimated. Such under-enforcement may not be systemic in most jurisdictions, but poses a serious concern with consequences bordering on monopolisation in certain markets.