Mergers and Acquisitions in Digital Markets

March 30, 2021 R46739

Mergers and Acquisitions in Digital Markets
March 30, 2021
Some Members of Congress have expressed concern about mergers and acquisitions in digital
markets, specifically those involving “Big Tech”—Alphabet (Google), Amazon, Apple,
Clare Y. Cho
Facebook, and Microsoft. Mergers can be separated into three categories: (1) a merger between
Analyst in Industrial
competitors (i.e., horizontal merger), (2) a merger with a firm in the supply chain (i.e., vertical
Organization and Business
merger), and (3) a merger with a firm in an unrelated or adjacent market. Some Members have

specifically raised concern about Big Tech companies’ acquisitions of nascent firms, which can
occur across all three categories. A merger could potentially increase or decrease competition in

digital markets, depending on the characteristics of the markets involved.
Section 7 of the Clayton Act prohibits mergers whose effect “may be substantially to lessen competition, or to tend to create a
monopoly” (15 U.S.C. §18). Citing this law, the Antitrust Division of the Department of Justice (DOJ), the Federal Trade
Commission (FTC), state attorneys general, and private parties can challenge mergers. Merging parties that meet certain
conditions must file a premerger notification with the FTC and DOJ under the Hart-Scott-Rodino Antitrust Improvement Act
of 1976 (HSR Act). After investigating a proposed merger, the agencies can (1) allow the transaction to proceed
unchallenged, (2) allow the transaction to proceed after entering a consent decree with the merging parties with conditions to
maintain competition in the market, or (3) seek to stop the transaction by filing suit in federal court. The FTC and DOJ have
not sued to block a proposed merger involving Big Tech since 2000; during this time, the Big Tech companies acquired at
least 710 companies.
Determining the effect of a merger on competition in digital markets can be challenging. For example, it can be difficult to
anticipate how a digital market might evolve and how to determine the merging parties’ competitors. Some of these
challenges are exemplified in Amazon’s acquisition of Whole Foods Market in 2017, Facebook’s acquisition of Instagram in
2012, and Google’s acquisition of Fitbit in 2021. The FTC allowed Amazon’s and Facebook’s respective acquisitions to
proceed unchallenged when it reviewed the premerger notifications, and Google completed its acquisition in January 2021,
while the DOJ continued to investigate the merger. In 2020, the FTC and a coalition of state attorneys general filed parallel
lawsuits against Facebook, alleging that it has purchased companies that present competitive threats rather than competing
with them, specifically citing its acquisition of Instagram and WhatsApp.
Amazon’s acquisition of Whole Foods Market may have increased competition in the grocery retail market. Competitive
pressure from Amazon may have incentivized other grocery retailers, such as Walmart and Kroger, to offer online grocery
delivery services. The acquisition also raised concerns that Amazon could dominate e-commerce by expanding the scope of
products it offers online, in addition to strengthening its bargaining power with suppliers. Instagram was a relatively new firm
when it was acquired by Facebook. It cannot be known whether Facebook’s acquisition of Instagram prevented Instagram
from becoming a viable competitor, or if Instagram’s success after the merger was partially due to Facebook’s resources,
such as its advertising services and data-processing infrastructure. Google’s acquisition of Fitbit could increase competition
in the smartwatch market, which is currently dominated by Apple. Google’s access to Fitbit users’ health and fitness data
following the merger could also reduce competition, including in other markets Google operates in.
The DOJ, FTC, and coalitions of state attorneys general have filed antitrust lawsuits and have ongoing investigations of Big
Tech companies. Some Members of the 117th Congress have proposed different legislative actions to address merger
enforcement in digital markets. Congress could increase funding for antitrust enforcement in appropriations bills and by
increasing merger filing fees paid to these agencies under the HSR Act. Increasing funding could prevent anticompetitive
mergers, but there is no guarantee that it will. Congress could also amend antitrust laws. It could shift the burden of proof to
the merging parties to show that the proposed merger would not materially lessen competition. It could also establish that
enforcement of antitrust laws does not require the definition of a relevant market—allowing the plaintiff to provide evidence
of actual or likely harm on competition caused by the merger—or broaden the welfare standard used to evaluate mergers to
include more than consumer welfare, such as protecting workers, entrepreneurs, and independent businesses. Congress could
create a new federal agency, designate an existing agency, or create a new division within an existing agency to regulate
firms that operate in digital markets. These regulations could range from establishing a code of conduct—such as methods to
enable greater data mobility across firms—to regulating digital markets as a public utility.
Any legislative action, including a decision not to take action, could have significant effects on digital markets. Congress is
not the only legislative body concerned about competition in digital markets; state and foreign laws and regulations could
also affect mergers involving U.S. companies.
Congressional Research Service

Mergers and Acquisitions in Digital Markets

Congressional Research Service

Mergers and Acquisitions in Digital Markets

Introduction
Some Members of Congress have raised antitrust concerns about “Big Tech”—Alphabet
(Google), Amazon, Apple, Facebook, and Microsoft.1 The first four companies were the focus of
an investigation on competition in digital markets conducted by the Subcommittee on Antitrust,
Commercial, and Administrative Law of the House Judiciary Committee.2 A staff report issued by
the subcommittee in 20203 asserts that, in digital markets, the “significant and durable market
power is due to several factors, including a high volume of acquisitions by the dominant
platforms.”4 According to the report, over the past 20 years, Facebook acquired at least 63
companies, Alphabet at least 260, Amazon at least 100, and Apple at least 120.5 Microsoft reports
acquiring 167 companies during the same time period.6
This report discusses the potential effects of mergers and acquisitions7 on competition in digital
markets.8 It explains how federal antitrust agencies review proposed mergers, and explores some
of the complications of examining mergers in digital markets. The report concludes with potential
legislative options and some considerations for Congress.
Potential Effects of Mergers on Competition
Mergers can be separated into three categories:
 horizontal mergers, or a merger involving firms that are potential or actual
competitors;
 vertical mergers, or a merger involving firms in the same supply chain (a supplier
or customer);
 mergers involving firms in adjacent or unrelated product markets.

1 The term “Big Tech” comes from these companies being the largest ones in the “technology” sector, which can be
defined as a “sector contain[ing] businesses revolving around the manufacturing of electronics, creation of software,
computers, or products and services relating to information technology;” see Jake Frankenfield, “Technology Sector,”
Investopedia, updated January 25, 2021, at https://www.investopedia.com/terms/t/technology_sector.asp. These
companies were also the most valuable publicly traded companies in the United States as of the publication date of this
report, according to Standard & Poor’s data at https://www.spglobal.com/spdji/en/indices/equity/sp-500-top-50/#data.
2 The investigation started on June 3, 2019. More information is available at https://judiciary.house.gov/issues/issue/?
IssueID=14921.
3 “Investigation of Competition in Digital Markets: Majority Staff Report and Recommendations,” Subcommittee on
Antitrust, Commercial, and Administrative Law of the Committee on the Judiciary, October 6, 2020, at
https://judiciary.house.gov/uploadedfiles/competition_in_digital_markets.pdf (hereinafter House Subcommittee on
Antitrust staff report).
4 The House Subcommittee on Antitrust staff report discusses other forms of anticompetitive conduct that are not
included in this report, such as predatory pricing by dominant platforms and platforms’ use of their “gatekeeper power
to dictate terms and extract concessions.”
5 The number of acquisitions is based on publicly available information; additional companies may have been acquired.
House Subcommittee on Antitrust staff report, pp. 149, 174, 262, 414-423.
6 Microsoft, “Acquisition History,” Microsoft Investor Relations, at https://www.microsoft.com/en-us/Investor/
acquisition-history.aspx.
7 In this report, the term “acquisition” is used to indicate one firm purchasing another, while the term “merger” is used
broadly to include both acquisitions and two firms on relatively equal terms becoming one entity.
8 In this report, “digital markets” refers to services that are primarily offered over the internet, as well as products that
are typically used to connect to the internet, such as computers, mobile devices, and smart devices.
Congressional Research Service

1

Mergers and Acquisitions in Digital Markets

This section briefly describes each type of merger, highlighting potential effects on competition.
It also discusses the acquisition of nascent firms, which has been of particular concern regarding
Big Tech mergers.

Defining a Market
A market refers to the exchange of goods and services between buyers and sellers.9 Defining the market is a key
aspect of evaluating the effect of a merger on competition. The market definition is used to determine the level of
competition faced by the merging parties, and to conduct analyses on the potential effects of the merger. How
digital markets should be defined is beyond the scope of this report.
Horizontal Mergers
Horizontal mergers involve firms that compete directly with each other, offering similar products
or services that are considered substitutes. A horizontal merger inherently means that there will be
fewer firms in the relevant product market, although the merger could motivate other firms to
enter the market. A firm may have several incentives to enter into a horizontal merger, including
to reduce competition or to achieve economies of scale—that is, to increase production and
thereby reduce the cost of producing each unit.
The effect of a horizontal merger on competition depends on the specific conditions in the
market, such as the market shares held by the merging firms and the level of competition in the
market.10 For example, a merger between the two firms with the largest market shares in a highly
concentrated product market could reduce competition and enable the merged firm to raise
prices.11 In contrast, a merger between two firms with small market shares in the same product
market could enable the merged firm to increase competitive pressure on the market leader,
potentially preventing the market leader from raising prices or even forcing it to lower prices. If
many firms sell a particular product or other firms can easily enter the product market, a
horizontal merger may not significantly affect competition.
Vertical Mergers
Vertical acquisitions can be “upstream” (in which a firm purchases one of its suppliers) or
“downstream” (in which a firm purchases one of its customers, a step closer to the final
consumer).12 Vertical mergers can improve efficiency and reduce transaction costs by bringing

9 Joan Violet Robinson, “Market: Economics,” Britannica, February 10, 2017, at https://www.britannica.com/topic/
market.
10 A firm with a large market share is typically assumed to have market power, allowing it to establish prices or terms
of service that may not be possible in a more competitive market. In some markets, a firm may have market power
without having a large market share, based on asymmetric information or other factors (for more information, see
https://www.justice.gov/atr/market-power-without-large-market-share-role-imperfect-information-and-other-consumer-
protection). To determine the level of competition in a market, economists typically use the Herfindahl-Hirschman
Index (calculated by summing the squares of the market shares of each company in the market); the four-firm
concentration ratio (calculated by summing the market shares held by the four largest firms); and the eight-firm
concentration ratio (calculated by summing the market shares held by the eight largest firms).
11 Some studies have found that higher levels of concentration in certain industries are associated with higher prices.
Heterogeneity across industries can make it difficult to make a broad statement about the effect of higher concentration,
highlighting the importance of industry-specific analyses. Steven Berry, Martin Gaynor, and Fiona Scott Morton, “Do
Increasing Markups Matter? Lessons from Empirical Industrial Organization,” Journal of Economic Perspectives, vol.
33, no. 3 (summer 2019), pp. 44-68.
12 For analysis of the effect of vertical integration on competition in digital markets, see CRS Report R46207,
Congressional Research Service

2

Mergers and Acquisitions in Digital Markets

external dealings within the firm, which may result in lower prices for consumers in a competitive
market.13 In particular, vertical mergers can address inefficiencies created when a firm with
market power in the supply chain marks up the price of its product, which is used to produce a
final product. This can lead to lower levels of production and higher prices for the final product.14
The effect of a vertical merger on competition depends on both the upstream and downstream
markets. For example, if a small firm merges with a firm upstream, the merged firm may be able
to lower its prices and improve its competitive position in the downstream market against larger
firms that benefit from economies of scale. The merger could also reduce competition if the
upstream firm is the only supplier of an essential input that competitors in the downstream market
cannot develop themselves. The merged firm may choose not to provide the input to its
competitors downstream, monopolizing the downstream market and foreclosing competitors’
access to the input.
Mergers in Adjacent or Unrelated Product Markets
Firms in digital markets may face incentives to merge with a firm in an adjacent or unrelated
product market,15 such as obtaining a wider range of consumer data and offering more products
integrated with the firms’ services. By merging with a firm in a different product market, a firm
may be able to increase competition in that market or use its dominance in one market to gain a
competitive advantage in another. The House Subcommittee on Antitrust staff report raises
concern that Big Tech firms have been able to use their dominance in one market as leverage in
unrelated lines of business.16 These mergers can affect how markets are defined, particularly if
competitors also start to offer integrated products or services through their own mergers or by
developing these products internally.
Acquisitions of Nascent Firms
The acquisition of nascent firms can occur in horizontal and vertical mergers, as well as between
firms operating in adjacent or unrelated markets. In some cases, such an acquisition can allow the
product or service introduced by the nascent firm to be developed more quickly with the
acquiring firm’s resources, helping to spur innovation without relying solely on internal research
and development. Some nascent firms may be incentivized to create innovative products and
services in anticipation of being acquired, particularly in digital markets.17

Competition on the Edge of the Internet, by Clare Y. Cho. Vertical integration may have different competitive effects in
digital markets than in other markets; see CRS Insight IN11462, Competition in Digital Markets: Vertical Integration
and Acquisitions, by Clare Y. Cho.
13 Some companies in digital markets offer certain products or services for free (e.g., Google search, Facebook user
account), obtaining revenue from advertisers whose advertisements are placed on the product or service. In this case,
the “consumers” would be the advertisers.
14 This is referred to as the elimination of double marginalization. Rather than having two firms in the supply chain
competing in separate markets with different marginal costs (i.e., the cost of producing one additional unit), a merged
firm would have a new cost structure and potentially lower marginal costs. It would remove the negative externality of
a markup in the production process, which could result in higher levels of production and a lower cost for the final
product.
15 In this report, an adjacent product market consists of products or services that are similar to the ones offered by the
firm, but arguably not in the same product market. An unrelated market is a market that consists of products or services
that are not similar to the ones offered by the firm.
16 House Subcommittee on Antitrust staff report, p. 379.
17 Luis Cabral, “Merger Policy in Digital Industries,” Information Economics and Policy, vol. 54 (March 2021): pp. 1-
Congressional Research Service

3

Mergers and Acquisitions in Digital Markets

Acquisitions of nascent firms can also mean firms are acquired before they are able to become
viable competitors, allowing incumbent firms to foreclose competition. If the nascent firm’s
product or service could displace the incumbent’s, the merged firm may choose not to further
develop the innovative technology, potentially suppressing products, services, or technological
improvements.18 The acquisition of nascent firms may not be closely monitored by antitrust
enforcers, particularly if the size of the transaction is relatively small or the firms involved have
relatively small market shares.
Oversight of Mergers and Acquisitions
Two federal agencies—the Department of Justice (DOJ)19 and the Federal Trade Commission
(FTC)—review proposed mergers and acquisitions for potential violations of Section 7 of the
Clayton Act, which prohibits acquisitions that may substantially lessen competition.20 State
attorneys general and private parties can also challenge mergers.21 Companies that meet certain
conditions, such as thresholds for firm size and the value of the transaction, must file a premerger
notification with the FTC and DOJ under the Hart-Scott-Rodino Antitrust Improvement Act of

7, at https://doi.org/10.1016/j.infoecopol.2020.100866.
18 Michael Mazzeo, Katja Seim, and Mauricio Varela, “The Welfare Consequences of Mergers with Endogenous
Product Choice,” Journal of Industrial Economics, vol. 66, no. 4 (2018), pp. 980-1016; Michael Katz, “Big Tech
Mergers: Innovation, Competition for the Market, and the Acquisition of Emerging Competitors,” Information
Economics and Policy, vol. 54 (March 2021): pp. 1-17, at https://doi.org/10.1016/j.infoecopol.2020.100883.
19 References to the DOJ in this report are to the Antitrust Division of the DOJ. There are other divisions within the
DOJ, such as the civil rights division (see https://www.justice.gov/agencies/chart).
20 15 U.S.C. §18. “Merger Enforcement,” Department of Justice, at https://www.justice.gov/atr/merger-enforcement;
“Merger Review,” Federal Trade Commission, at https://www.ftc.gov/news-events/media-resources/mergers-and-
competition/merger-review. These agencies also address other antitrust concerns, such as monopolization cases under
Section 2 of the Sherman Act. For more information about the Sherman Antitrust Act of 1890 and the Clayton Antitrust
Act of 1914, see CRS In Focus IF11234, Antitrust Law: An Introduction, by Jay B. Sykes.
21 For more information about private parties challenging mergers, see M. Royall and Adam Vincenzo, “When Mergers
Become a Private Matter: An Updated Antitrust Primer,” Antitrust, vol. 26, no. 2 (Spring 2012), pp. 41-46, at
https://www.gibsondunn.com/wp-content/uploads/documents/publications/WhenMergersBecomePrivateMatter-
AntitrustPrimer-Royall-DiVincenzo0312.pdf. State attorneys general have the authority to challenge mergers under
federal antitrust laws and state antitrust statutes, but typically work with the FTC or DOJ; see Shepard Goldfein and
Karen Lent, “State Attorneys General and Their Influence on Merger Enforcement,” New York Law Journal,
September12, 2018, at https://www.law.com/newyorklawjournal/2018/09/12/state-attorneys-general-and-their-
influence-on-merger-enforcement/. Recently, some state attorneys general have filed separate lawsuits to challenge
proposed mergers under federal law. For example, on June 11, 2019, nine state attorneys general and the Attorney
General for the District of Columbia filed a lawsuit in a New York federal district court to block a proposed merger
between T-Mobile and Sprint; four additional states joined the suit later that month. On July 26, 2019, the DOJ and five
state attorneys general filed a lawsuit to block the proposed merger with a federal district court in Washington, DC, and
simultaneously filed a proposed settlement that would resolve their competitive concerns. The New York federal
district court rejected the claims of the 14 state attorneys general and refused to block the merger on February 11, 2020,
and the Washington, DC, federal district court accepted the settlement proposed by the DOJ and five state attorneys
general on April 1, 2020. See United States and Plaintiff States v. Deutsche Telekom AG, et al., Department of Justice
updated January 28, 2021, at https://www.justice.gov/atr/case/us-et-al-v-deutsche-telekom-ag-et-al; State of New York
et al. v. Deutsche Telekom AG et al., case number 1:19-cv-05434, June 11, 2019; “Attorney General James’ Multistate
Lawsuit to Block T-Mobile and Sprint Megamerger Gains Additional Support from Attorneys General Across the
Nation,” June 21, 2019, at https://ag.ny.gov/press-release/2019/attorney-general-james-multistate-lawsuit-block-t-
mobile-and-sprint-megamerger; Department of Justice, “Justice Department Welcomes Decision in New York v.
Deutsche Telecom, the T-Mobile/Sprint Merger,” Department of Justice Press Release, February 11, 2020, at
https://www.justice.gov/opa/pr/justice-department-welcomes-decision-new-york-v-deutsche-telecom-t-mobilesprint-
merger.
Congressional Research Service

4

Mergers and Acquisitions in Digital Markets

1976 (HSR Act).22 The companies must wait for a designated period of time while the FTC or
DOJ reviews the premerger notification before proceeding with the merger.23
The DOJ and FTC examine each proposed merger on a case-by-case basis, oftentimes using
detailed data that may be unavailable to the public. Evaluating each merger separately allows
unique characteristics of the industry, markets, and merging parties to be carefully analyzed. The
agencies outline the principal analytical techniques, practices, and enforcement policy used to
review mergers and acquisitions in the Horizontal Merger Guidelines and the Vertical Merger
Guidelines.24 Both agencies “seek to identify and challenge competitively harmful mergers while
avoiding unnecessary interference with mergers that are either competitively beneficial or
neutral.”25 After investigating a proposed merger, the agencies can (1) allow the transaction to
proceed unchallenged, (2) enter a consent agreement with the companies that includes provisions
to maintain competition, such as requiring that certain operations be divested before or shortly
after the merger, and (3) seek to stop the entire transaction by filing suit in federal court.26 The
agencies can also file a lawsuit to unwind a consummated merger for alleged violations of
antitrust laws.
The DOJ and FTC generally have split enforcement of antitrust laws to avoid overlap and enable
each agency to develop industry-specific expertise. The FTC typically reviews cases that involve
industries in which consumer spending is high, such as the health care, pharmaceutical, and food
industries, while the DOJ usually handles mergers in other industries, such as telecommunications
and banking.27 The agencies consult with each other before opening an investigation to ensure

22 15 U.S.C. §18a. The thresholds for filing a premerger notification are updated annually according to changes in gross
national product. Some mergers may be exempt from the premerger notification requirement because they are unlikely
to violate antitrust laws. “Premerger Notification Program,” Federal Trade Commission, at https://www.ftc.gov/
enforcement/premerger-notification-program; “Premerger Notification and the Merger Review Process,” Federal Trade
Commission, at https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/mergers/premerger-
notification-merger-review; “To File or Not to File: When You Must File A Premerger Notification Report Form,”
Federal Trade Commission, at https://www.ftc.gov/sites/default/files/attachments/premerger-introductory-guides/
guide2.pdf.
23 The companies must generally wait 30 days after filing a premerger notification, unless the FTC or DOJ grants early
termination of the waiting period or the transaction involves a cash tender offer or bankruptcy. If the agencies make a
second request for more information about the transaction, additional time, generally 30 days, may be added to the
waiting period (“Premerger Notification and the Merger Review Process,” Federal Trade Commission, at
https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/mergers/premerger-notification-merger-
review). On February 4, 2021, the DOJ and FTC suspended early terminations temporarily while reviewing the process
(Matthew Perlman, “DOJ, FTC Suspend Early Merger Clearances for Review,” Law360, February 4, 2021, at
https://www.law360.com/competition/articles/1352322/doj-ftc-suspend-early-merger-clearances-for-review).
24 The horizontal and vertical merger guidelines are available at https://www.justice.gov/atr/horizontal-merger-
guidelines-08192010 and https://www.justice.gov/atr/page/file/1290686/download, respectively. For a summary of the
vertical merger guidelines, see CRS Legal Sidebar LSB10521, Antitrust Regulators Release New Vertical Merger
Guidelines, by Jay B. Sykes.
25 Federal Trade Commission and Department of Justice, Vertical Merger Guidelines, at https://www.justice.gov/atr/
page/file/1290686/download.
26 The FTC and DOJ can “seek to stop the entire transaction by filing for a preliminary injunction in federal court
pending an administrative trial on the merits.” Federal Trade Commission, “Premerger Notification and the Merger
Review Process,” at https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/mergers/premerger-
notification-merger-review.
27 Federal Trade Commission, “The Enforcers,” at https://www.ftc.gov/tips-advice/competition-guidance/guide-
antitrust-laws/enforcers.
Congressional Research Service

5

link to page 10 Mergers and Acquisitions in Digital Markets

they are not duplicating their efforts. Both agencies have opened separate investigations of Big
Tech.28
The DOJ and FTC have not sued to block a proposed merger involving one of the Big Tech
companies since 2000;29 during this time, the Big Tech firms acquired at least 710 companies.30 In
1996, the DOJ filed a lawsuit to block Microsoft’s proposed acquisition of Intuit, a producer of
personal finance software,31 resulting in Microsoft abandoning the merger.32 The agencies have
also intervened in proposed mergers in digital markets not involving Big Tech firms. For
example, in 2020, the FTC filed a lawsuit against CoStar Group’s proposed acquisition of
RentPath holdings, stating that the acquisition “would significantly increase concentration in the
already highly concentrated markets for internet listing services advertising for large apartment
complexes.”33 Actions taken by the FTC and DOJ related to selected mergers in digital markets
are listed in Table 1.
Table 1. Selected Mergers in Digital Markets Reviewed by the DOJ or FTC
Date of Latest
Action
Acquirer
Proposed Acquiree
Result of Investigation
December 20, 2007
Google
Click Holding
FTC determined no further action needed
Company
at time of merger.34
(DoubleClick)
May 21, 2010
Google
AdMob
FTC determined no further action needed
at time of merger.35

28 The FTC and DOJ reportedly agreed that the FTC would have oversight of Facebook and Amazon, leaving Apple
and Google to the DOJ, but subsequently disagreed over which agency had oversight of which company. Ben Brody
and David McLaughlin, “FTC Turns Up Heat with Justice Department in Dueling Tech Probes,” Bloomberg Law,
February 13, 2020, at https://www.bloomberg.com/news/articles/2020-02-13/ftc-turns-up-heat-with-justice-department-
in-dueling-tech-probes; Lauren Feiner, “Here’s Why the Top Two Antitrust Enforcers in the US Are Squabbling Over
Who Gets to Regulate Big Tech,” September 18, 2019, at https://www.cnbc.com/2019/09/18/the-ftc-and-doj-are-
squabbling-over-the-right-to-regulate-big-tech.html.
29 The DOJ and FTC have filed antitrust lawsuits against Big Tech firms unrelated to mergers. For example, the DOJ
filed a lawsuit in 2020 alleging that Google has unlawfully monopolized general search services and search advertising;
see https://www.ftc.gov/enforcement/cases-proceedings/closing-letters/google-inc. For analysis of this case, which is
still pending, see CRS Legal Sidebar LSB10544, The Google Antitrust Lawsuit: Initial Observations, by Jay B. Sykes,
and CRS In Focus IF11692, Google and Competition: Concerns Beyond the DOJ’s Lawsuit, by Clare Y. Cho.
30 House Subcommittee on Antitrust staff report, pp. 149, 174, 262, 414-423; Microsoft, “Acquisition History,”
Microsoft Investor Relations, at https://www.microsoft.com/en-us/Investor/acquisition-history.aspx.
31 United States v. Microsoft Corp., April 27, 1995, at https://www.justice.gov/sites/default/files/atr/legacy/2012/08/07/
0184.pdf.
32 Elizabeth Corcoran, “Microsoft Halts Merger with Intuit,” Washington Post, May 21, 1995, at
https://www.washingtonpost.com/archive/politics/1995/05/21/microsoft-halts-merger-with-intuit/dcfe213d-5dec-4c75-
8f19-3d08fd575a30/.
33 For more information, see https://www.ftc.gov/enforcement/cases-proceedings/201-0061/costar-group-rentpath-
holdings-matter.
34 “Proposed Acquisition of Hellman & Friedman Capital Partners V, LP (Click Holding Company) by Google Inc.,”
Federal Trade Commission, last updated December 20, 2007, at https://www.ftc.gov/enforcement/cases-proceedings/
071-0170/proposed-acquisition-hellman-friedman-capital-partners-v-lp.
35 “Google, Inc./AdMob, Inc,” Federal Trade Commission, May 21, 2010, at https://www.ftc.gov/enforcement/cases-
proceedings/closing-letters/google-incadmob-inc.
Congressional Research Service

6

Mergers and Acquisitions in Digital Markets

Date of Latest
Action
Acquirer
Proposed Acquiree
Result of Investigation
March 23, 2011
Amazon.com
Quidsi
FTC determined no further action needed
at time of merger.36
October 5, 2011
Google
ITA Software
Court approved consent decree between
DOJ and merging parties. Acquisition
proceeded with conditions.37
April 22, 2014
Facebook
Oculus
FTC determined no further action needed
at time of merger; investigation terminated
early.38
November 25, 2020
Intuit
Credit Karma
Court approved consent decree between
DOJ and merging parties. Acquisition
proceeded with conditions.39
December 9, 2020
Facebook
Instagram
FTC sued Facebook in 2020,40 having
determined no further action needed when
acquisition proposed in 2012.41
January 4, 2021
CoStar Group
RentPath Holdings
FTC dismissed complaint after parties
abandoned proposed acquisition.42
January 12, 2021
Visa
Plaid
Companies abandoned merger after DOJ
filed suit to block it.43
Source: Department of Justice and Federal Trade Commission websites.
Notes: The list does not include lawsuits or investigations that are not related to mergers. The FTC’s websites
list closing letters and early terminations of merger reviews; the FTC provides a closing letter if requested by
one of the merging parties or if it believes a letter would be in the public interest. Both the FTC and DOJ
websites post lawsuits that have been filed by the respective agency.
Some acquisitions made by Big Tech may not have been reviewed by the FTC or DOJ because
they fell below the premerger notification threshold requirement under the HSR Act.44 On
February 11, 2020, the FTC issued Special Orders45 to Big Tech companies, requesting

36 “Amazon.com, Inc./Quidsi, Inc.,” Federal Trade Commission, March 23, 2011, at https://www.ftc.gov/enforcement/
cases-proceedings/closing-letters/amazoncom-inc-quidsi-inc.
37 “U.S. v. Google Inc. and ITA Software, Inc.,” Department of Justice, updated July 7, 2015, at
https://www.justice.gov/atr/case/us-v-google-inc-and-ita-software-inc.
38 “20140779: Mr. Mark Zuckerberg; Oculus VR, Inc.,” Federal Trade Commission, April 22, 2014, at
https://www.ftc.gov/enforcement/premerger-notification-program/early-termination-notices/20140779.
39 “U.S. v. Intuit Inc. and Credit Karma, Inc.,” Department of Justice, updated March 19, 2021, at
https://www.justice.gov/atr/case/us-v-intuit-inc-and-credit-karma-inc.
40 The FTC alleges that Facebook engages in anticompetitive conduct, including acquiring potential rivals such as
Instagram, to maintain its monopoly position in personal social networking services (https://www.ftc.gov/system/files/
documents/cases/1910134fbcomplaint.pdf). For more information about the lawsuit, see CRS Legal Sidebar
LSB10575, The Facebook Antitrust Lawsuits and the Future of Merger Enforcement, by Jay B. Sykes.
41 “Facebook, Inc./Instagram, Inc.,” Federal Trade Commission, August 22, 2012, at https://www.ftc.gov/enforcement/
cases-proceedings/closing-letters/facebook-inc-instagram-inc.
42 “CoStar Group/RentPath Holdings, In the Matter of,” Federal Trade Commission, updated January 4, 2021, at
https://www.ftc.gov/enforcement/cases-proceedings/201-0061/costar-group-rentpath-holdings-matter.
43 “U.S. v. Visa Inc. and Plaid Inc.,” Department of Justice, updated December 15, 2020, at https://www.justice.gov/atr/
case/us-v-visa-inc-and-plaid-inc.
44 House Subcommittee on Antitrust staff report, p. 44.
45 Section 6(b) of the FTC Act empowers the FTC to “prescribe annual or special reports ... or answers in writing to
Congressional Research Service

7

Mergers and Acquisitions in Digital Markets

documentation on the terms, scope, structure, and purpose of transactions consummated between
January 1, 2010, and December 31, 2019, that did not meet the conditions for HSR notification.46
Examples of Mergers and Acquisitions
This section discusses selected mergers to highlight some challenges of examining the
competitive effects of mergers in digital markets. These challenges include defining the relevant
market, anticipating the evolution of markets, and determining which firms should be considered
competitors.
Amazon’s Acquisition of Whole Foods Market
On August 28, 2017, Amazon acquired Whole Foods Market, a grocery retailer, for
approximately $13.2 billion.47 After reviewing the proposed acquisition, the FTC determined no
further action was needed at the time.48 Prior to the acquisition, Amazon offered the online
grocery delivery service Amazon Fresh, which launched in 2007,49 and Prime Pantry, which
launched in 2014 and ended in January 2021.50 By acquiring Whole Foods Market, Amazon
obtained brick-and-mortar grocery store locations that it was able to integrate with its online
services.51 For example, shoppers with an Amazon Prime membership52 are eligible for discounts
and free pickup or delivery of Whole Foods Market groceries in selected zip codes,53 and Amazon
Hub Lockers—where consumers can pick up products purchased on Amazon’s website—are
often located in Whole Foods Markets.54

specific questions.” 15 U.S.C. §46(b).
46 “FTC to Examine Past Acquisitions by Large Technology Companies,” Federal Trade Commission Press Release,
February 11, 2020, at https://www.ftc.gov/news-events/press-releases/2020/02/ftc-examine-past-acquisitions-large-
technology-companies.
47 See Amazon.com Inc., SEC Form 10-K for the fiscal year ending December 31, 2018, p. 52.
48 Federal Trade Commission, “Statement of Federal Trade Commission’s Acting Director of the Bureau of
Competition on the Agency’s Review of Amazon.com, Inc.’s Acquisition of Whole Foods Market Inc.,” Federal Trade
Commission Press Release, August 23, 2017, at https://www.ftc.gov/news-events/press-releases/2017/08/statement-
federal-trade-commissions-acting-director-bureau.
49 Amazon Fresh initially launched as a pilot study with a limited by-invitation service to selected residents in Mercer
Island, WA. Its service was slowly expanded in Seattle, and starting in 2013, expanded to other cities. JeeYoon Park,
“Amazon Gets Fresh Challenges with New Grocery Business,” CNBC, August 27, 2007, at https://www.cnbc.com/id/
20463088; Greg Bensinger, “Amazon Expands Grocery Business,” Wall Street Journal, June 5, 2013, at
https://www.wsj.com/articles/SB10001424127887324798904578526820771744676.
50 Grace Kay, “Amazon Shuts Down Prime Pantry, Its First Foray into Online Food Delivery, In a Move Towards
Simpler Shopping,” Business Insider, January 8, 2021, at https://www.businessinsider.com/amazon-shuts-down-prime-
pantry-2021-1.
51 Amazon also started opening brick-and-mortar Amazon Fresh locations in August 2020. Jeff Helbling, “Introducing
the First Amazon Fresh Grocery Store,” Amazon News, August 27, 2020, at https://www.aboutamazon.com/news/retail/
introducing-the-first-amazon-fresh-grocery-store.
52 For $119 per year, an Amazon Prime membership provides various services, including free two-day shipping on
items bought on Amazon and access to Amazon Prime videos, unlimited photo storage, and a free Kindle e-book each
month. See https://www.amazon.com/gp/prime/pipeline/partner_landing.
53 Whole Foods Market, “Prime at Whole Foods Market,” accessed on March 19, 2021, at
https://www.wholefoodsmarket.com/amazon.
54 Amazon Hub Lockers are also available in other locations, such as convenience stores and apartment buildings.
Amazon, “Everything You Need to Know about Amazon Hub Locker,” Prime Insider, June 21, 2018, at
https://www.amazon.com/primeinsider/tips/amazon-locker-qa.html.
Congressional Research Service

8

Mergers and Acquisitions in Digital Markets

Amazon’s acquisition of Whole Foods Market may have increased competition in the grocery
retail market. Prior to the acquisition, Walmart was the largest grocery retailer, followed by
Kroger.55 Progressive Grocer, a research group, estimates that in 2020, Walmart had the highest
U.S. retail sales of grocery items, followed by Amazon.56 However, Duff & Phelps, a consulting
firm, indicates that Amazon comprises only a small portion of the grocery retail market and that it
serves as “more of a symbolic threat.”57 Nevertheless, other grocery retailers have responded by
implementing changes in response to competitive pressure from Amazon.58
Competitive pressure from Amazon may have incentivized other grocery retailers to start offering
online delivery services. In 2017, the year Amazon acquired Whole Foods, Walmart launched an
online delivery service in selected cities;59 Kroger launched an online delivery service in selected
cities in 2018.60 In 2020, Walmart launched Walmart+,61 a membership delivery service that does
not have a minimum order requirement,62 similar to an Amazon Prime membership. Consumers
may have benefited from food retailers offering their own online delivery services, particularly as
many of these stores offer free delivery on orders over $35. These changes may have also
increased pressure on other online grocery delivery services, such as Instacart, a third-party
service that delivers online groceries from selected stores in selected cities; the service launched
in 2012 and stopped delivering groceries from Whole Foods in 2019.63

55 Jim Dudlicek, “Editor’s Note: Masters Tour,” Progressive Grocer, May 12, 2017, at https://progressivegrocer.com/
editors-note-masters-tour. Commentators have raised concern about increasing concentration in the grocery retail
market (e.g., Stacy Mitchell, “Walmart’s Monopolization of Local Grocery Markets,” Institute for Local Self-Reliance,
June 2019, at https://ilsr.org/wp-content/uploads/2019/06/Walmart_Grocery_Monopoly_Report-_final_for_site.pdf;
“Retail Trends,” USDA Economic Research Service, last updated September 10, 2020, at https://www.ers.usda.gov/
topics/food-markets-prices/retailing-wholesaling/retail-trends/). Details about concentration in the grocery retail market
are beyond the scope of this report.
56 Mike Troy, “The PG 100: Walmart, Amazon, Kroger Dominate Top Retailers of Food and Consumables,”
Progressive Grocer, May 11, 2020, at https://progressivegrocer.com/pg-100-walmart-amazon-kroger-dominate-top-
retailers-food-and-consumables. The percentage was calculated after combining sales from the previous year. The
percentage increase for Amazon was greater than for Whole Foods Market alone (24.5% and 4.7%, respectively).
57 Duff & Phelps, “Food Retail Industry Insights,” spring 2020, at https://www.duffandphelps.com/-/media/assets/pdfs/
publications/mergers-and-acquisitions/food-retail-industry-insights-spring-2020.pdf.
58 For example, Walmart is experimenting with using artificial intelligence technologies in stores and new checkout
layouts, potentially partially in response to the Amazon Dash Cart, which identifies the items in a customer’s cart and
automatically processes the payment, allowing the customer to skip the checkout line. Sarah Perez, “Walmart Unveils
an AI-Powered Store of the Future, Now Open to the Public,” TechCrunch, April 25, 2019, at https://techcrunch.com/
2019/04/25/walmart-unveils-an-a-i-powered-store-of-the-future-now-open-to-the-public/; Matt Smith, “New Checkout
Experience Seeks to Eliminate the Wait and Add Options at the Register,” Walmart Newsroom, June 30, 2020, at
https://corporate.walmart.com/newsroom/2020/06/30/new-checkout-experience-seeks-to-eliminate-the-wait-and-add-
options-at-the-register; Amazon, “Amazon Dash Cart,” accessed on March 19, 2021, at https://www.amazon.com/b?
node=21289116011.
59 Walmart, “Walmart Launches Free Two-Day Shipping on More Than Two Million Items, No Membership
Required,” Walmart Newsroom, January 31, 2017, at https://corporate.walmart.com/newsroom/2017/01/31/walmart-
launches-free-two-day-shipping-on-more-than-two-million-items-no-membership-required.
60 Kroger, “Kroger Launches Ship,” Kroger Press Release, August 1, 2018, at http://ir.kroger.com/CorporateProfile/
press-releases/press-release/2018/Kroger-Launches-Ship/default.aspx.
61 Walmart, “Walmart Introduces Walmart+,” Walmart Newsroom, September 1, 2020, at
https://corporate.walmart.com/newsroom/2020/09/01/walmart-introduces-walmart.
62 Walmart offers free next-day and two-day delivery for selected items with a $35 order minimum requirement or a
Walmart+ membership ($12.95/month or $98/year). See https://www.walmart.com/plus.
63 Uday Sampath Kumar, “Instacart, Amazon’s Whole Foods Relationship to End Next Year,” Reuters, December 13,
2018, at https://www.reuters.com/article/us-instacart-whole-foods/instacart-amazons-whole-foods-relationship-to-end-
next-year-idUSKBN1OC2O4.
Congressional Research Service

9

link to page 14

Mergers and Acquisitions in Digital Markets

Amazon’s acquisition of Whole Foods Market raised concern about its growing dominance in the
retail industry, particularly in e-commerce. According to eMarketer, a market research company,
Amazon had the greatest share of e-commerce sales at 38.7% in 2020; Walmart had the second-
greatest share at 5.3% (Figure 1). The estimate from eMarketer includes all online sales,
including products that Amazon does not offer. The House Subcommittee on Antitrust staff report
finds that by restricting products to those sold on Amazon, a market share of 50% or higher may
be a more credible estimate of Amazon’s share of online sales, and that over 60% of all U.S.
online product searches begin on Amazon.64 Through its acquisition of Whole Foods, Amazon
gained access to additional consumer data, strengthening its bargaining power with suppliers.65 In
addition, Amazon has integrated vertically, such as by offering products under its private label
AmazonBasics and by creating its own delivery system. Amazon has reportedly invested $60
billion since 2014 in its delivery network, including capital leases for warehouses and aircraft; in
2019, it had the fourth-largest share of U.S. package deliveries, behind FedEx, United Parcel
Service, and the U.S. Postal Service.66 By integrating vertically, Amazon may be able to further
strengthen its position in e-commerce; if, for example, it is able to provide faster delivery,67
consumers could benefit even if it becomes more difficult for other companies to compete.
Figure 1. Share of U.S. Retail E-Commerce Sales
(2020)

Source: eMarketer, February 2020.
Notes: Represents the gross value of products or services sold (browser or app), regardless of the method of
payment or fulfil ment. Excludes travel and event tickets.

64 House Subcommittee on Antitrust staff report, pp. 254, 256.
65 House Subcommittee on Antitrust staff report, pp. 265.
66 Don Davis, “Amazon Is the Fourth-Largest U.S. Delivery Service and Growing Fast,” Digital 360 Commerce, May
26, 2020, at https://www.digitalcommerce360.com/2020/05/26/amazon-is-the-fourth%E2%80%91largest-us-delivery-
service-and-growing-fast/.
67 Amazon could also face higher total costs investing in a delivery network rather than working with existing package
delivery services.
Congressional Research Service

10

Mergers and Acquisitions in Digital Markets

Facebook’s Acquisition of Instagram
Facebook announced that it had reached an agreement to acquire Instagram, a social networking
service (i.e., social media platform), for $1 billion on April 9, 2012.68 The FTC reviewed the
acquisition, and on August 22, 2012, it closed the investigation without taking action.69 On
December 9, 2020, the FTC filed a lawsuit against Facebook, alleging that “Facebook has
maintained its monopoly position by buying up companies that present competitive threats,” in
addition to imposing restrictive policies against companies it does not acquire.70 A coalition of 46
state attorneys general, led by New York Attorney General Letitia James, filed a parallel lawsuit
against Facebook, also alleging that Facebook acquired companies to eliminate competitive
threats.71 Both lawsuits72 specifically mention Facebook’s acquisitions of Instagram and
WhatsApp, a messaging app for mobile devices.73
Prior to the acquisition, Facebook CEO Mark Zuckerberg stated in an internal email that
“Instagram has become a large and viable competitor to us on mobile photos, which will
increasingly be the future of photos.”74 This statement has been used to support the claim that
Facebook acquired Instagram with the intention of eliminating a potential competitor.
It is unclear how successful Instagram would have been had it not been acquired by Facebook,
illustrating the difficulty of predicting whether a nascent firm could become a viable competitor.
Instagram was a relatively new company when it was acquired,75 and grew rapidly thereafter,
from about 100 million monthly active users (MAUs) in February 2013 to 500 million MAUs in

68 Facebook, “Facebook to Acquire Instagram,” Facebook Newsroom, April 9, 2012, at https://about.fb.com/news/
2012/04/facebook-to-acquire-instagram/.
69 The press release and closing letters to both Facebook and Instagram are available at https://www.ftc.gov/
enforcement/cases-proceedings/closing-letters/facebook-inc-instagram-inc.
70 The FTC alleged that Facebook requires third-party apps that use Facebook’s application programming interfaces,
which are software needed to send and retrieve data from Facebook, to agree not to provide the same core functions as
Facebook and to not connect with or promote other social networking services. Federal Trade Commission v.
Facebook, Inc., case no. 1:20-cv-03590, December 9, 2020, at https://www.ftc.gov/enforcement/cases-proceedings/
191-0134/facebook-inc-ftc-v.
71 State of New York et al. v. Facebook, Inc., case no. 1:20-cv-03589, December 9, 2020, at https://ag.ny.gov/sites/
default/files/facebook_complaint_12.9.2020.pdf.
72 For more information about the lawsuits, see CRS Legal Sidebar LSB10575, The Facebook Antitrust Lawsuits and
the Future of Merger Enforcement, by Jay B. Sykes. Facebook users and advertisers also filed a lawsuit on December
9, 2020, alleging that they have been harmed by Facebook’s lack of transparency; see Nadia Dreid, “Facebook Users
Hit Social Media Giant With Monopoly Suit,” Law360, December 10, 2020, at https://www.law360.com/competition/
articles/1336479/facebook-users-hit-social-media-giant-with-monopoly-suit.
73 After Facebook filed a premerger notification of its planned acquisition of WhatsApp in 2014, the FTC allowed the
merger to proceed unchallenged, but notified both WhatsApp and Facebook about their privacy obligations. Federal
Trade Commission, “FTC Notifies Facebook, WhatsApp of Privacy Obligations in Light of Proposed Acquisition,”
Federal Trade Commission Press Releases, April 10, 2014, at https://www.ftc.gov/news-events/press-releases/2014/04/
ftc-notifies-facebook-whatsapp-privacy-obligations-light-proposed; Alexei Oreskovic, “Facebook Says WhatsApp Deal
Cleared by FTC,” Reuters, April 10, 2014, at https://www.reuters.com/article/us-facebook-whatsapp/facebook-says-
whatsapp-deal-cleared-by-ftc-idUSBREA391VA20140410.
74 Zuckerberg’s comment was made in September 2011, approximately seven months before the acquisition was
announced. Federal Trade Commission v. Facebook, Inc., case no. 1:20-cv-03590, December 9, 2020, at
https://www.ftc.gov/enforcement/cases-proceedings/191-0134/facebook-inc-ftc-v.
75 Instagram launched on October 6, 2010; it was initially accessible only on Apple devices. In April 2012, Instagram
became available on Android devices and Facebook announced it had reached an agreement to acquire Instagram. Kim-
Mai Cutler, “From 0 to $1 Billion in Two Years: Instagram’s Rose-Tinted Ride to Glory,” TechCrunch, April 9, 2012,
at https://techcrunch.com/2012/04/09/instagram-story-facebook-acquisition/
Congressional Research Service

11

Mergers and Acquisitions in Digital Markets

June 2016 and 1 billion MAUs in June 2018.76 As it grew in popularity, Instagram was able to use
Facebook’s resources, such as its advertising services and its infrastructure, which hosts and
processes large amounts of consumer data. These have been key to the profitability of Instagram,
which hosts a wide range of users, including “influencers”—that is, users with a large number of
followers who are paid by sponsors to market certain products.77 It is possible that without the
merger, Instagram would have been among the platforms that have struggled to compete in digital
markets because of resource constraints. This occurred with the social networking service
Friendster, which turned down a $30 million buyout offer from Google in 2003 but then struggled
with technical difficulties as its user base grew; users left the platform for other social media
sites, and Friendster eventually closed down.78
Another complication in evaluating the effect of Facebook’s acquisition of Instagram is
determining how the market should be defined, particularly in digital markets that can quickly
evolve. Social networking services can include a wide range of platforms. When Facebook
acquired Instagram in 2012, one of the defining features of social networking services—a
category that than included Friendster and Myspace, among others—was the networks users
could create. Users could clearly indicate the users in their respective network(s) on the social
networking service,79 although some may have chosen to keep their network(s) private. At that
time, Instagram was described as a photo-sharing app, arguably competing with apps like
Photobucket and Flickr, rather than with Facebook.
Additional types of platforms can be considered social networking services: Reddit allows users
to create communities based on their interests; LinkedIn allows users to create connections for
business and employment opportunities; and TikTok allows users to share short-form videos.80
Some of these platforms allow users to connect with any other user on the platform rather than
only with users in their personal network, focusing on the content rather than the user. These
changes suggest that a user’s ability to create social networks may no longer be the defining
feature of social networking services.
In addition, social networking services are not necessarily substitutes for one another. For
example, although Instagram and Microsoft’s LinkedIn are both typically viewed as social
networking services, it is unlikely that users would substitute one platform for the other. One
report estimates that internet users had an average of about seven social media accounts,
suggesting that some users rely on different social media platforms for different purposes.81

76 Business of Apps using data from various sources, at https://www.businessofapps.com/data/instagram-statistics/#1.
77 For a recent list of top Instagram influencers across certain subject areas, see https://blog.hubspot.com/marketing/
instagram-influencers. To learn more about the history of influencers, see https://www.theshelf.com/the-blog/
influencer-marketing-timeline and https://www.forbes.com/sites/petersuciu/2020/12/07/history-of-influencer-
marketing-predates-social-media-by-centuries--but-is-there-enough-transparency-in-the-21st-
century/?sh=43ed8b340d70.
78 Emerging Technology from the arXiv, “An Autopsy of a Dead Social Network,” MIT Technology, February 27,
2013, at https://www.technologyreview.com/2013/02/27/253657/an-autopsy-of-a-dead-social-network/; Alexandra
Samur, “The History of Social Media: 29+ Key Moments,” Hootsuite, November 22, 2018, at
https://blog.hootsuite.com/history-social-media/.
79 Danah Boyd and Nicole Ellison, “Social Networking Sites: Definition, History, and Scholarship,” Journal of
Computer-Mediated Communication, vol. 13 (2008): pp. 210-213.
80 For discussions on the history of social media platforms, see https://blog.hootsuite.com/history-social-media/,
https://www.zenesys.com/infographics/social-media-evolution, and https://interestingengineering.com/a-chronological-
history-of-social-media.
81 Simon Kemp, Digital 2020: The United States of America, Datareportal, February 11 2020, slides 17 and 42, at
https://datareportal.com/reports/digital-2020-united-states-of-america.
Congressional Research Service

12

link to page 18 Mergers and Acquisitions in Digital Markets

Google’s Acquisition of Fitbit
On November 1, 2019, Fitbit, a consumer electronics company,82 announced that it had reached
an agreement with Google to be acquired for approximately $2.1 billion.83 Google completed its
acquisition of Fitbit on January 14, 2021.84 At that time, the DOJ was continuing to investigate
the transaction,85 but Google was able to complete the merger because the waiting period for the
DOJ’s premerger review had expired.86 The European Commission conditionally approved the
merger on December 17, 2020.87
By acquiring Fitbit, Google may increase competition for smartwatches (i.e., wrist-worn wearable
devices). According to the industry analysis firm Counterpoint Research, Apple had over 50% of
the global revenue from smartwatch shipments in the first half of 2020 (Figure 2). Google has
developed an operating system for smartwatches, WearOS, and partners with other companies
that sell watches—such as Fossil, Cassio, and Michael Kors—to create smartwatches.88 Prior to
its acquisition of Fitbit, Google did not have the means to create its own smartwatches. Fitbit’s
smartwatches are compatible with both Google’s Android and Apple’s iOS devices, allowing
users to receive notifications about calls, texts, and other alerts from their Android or iOS device
on their smartwatch.89 Other features, such as answering calls or sending personalized texts, are
available only on certain Fitbit smartwatches;90 none of the Fitbit devices allow users to make

82 Fitbit is primarily known for its smartwatches. More information about additional products offered by Fitbit is
available at https://www.fitbit.com/global/us/products.
83 Fitbit, “Fitbit to be Acquired by Google,” Fitbit Press Release Details, November 1, 2019, at
https://investor.fitbit.com/press/press-releases/press-release-details/2019/Fitbit-to-Be-Acquired-by-Google/
default.aspx.
84 Google, “Google Completes Fitbit Acquisition,” Google Blog, January 14, 2021, at https://blog.google/products/
devices-services/fitbit-acquisition/.
85 The DOJ Deputy Assistant Attorney General at that time reportedly told various media outlets, “The Antitrust
Division’s investigation of Google’s acquisition of Fitbit remains ongoing. Although the Division has not reached a
final decision about whether to pursue an enforcement action, the Division continues to investigate whether Google’s
acquisition of Fitbit may harm competition and consumers in the United States.” David McLaughlin, “Google Closes
Fitbit Deal Amid Ongoing U.S. DOJ Review,” Bloomberg, January 14, 2021, at https://www.bloomberg.com/news/
articles/2021-01-14/google-closes-fitbit-deal-amid-ongoing-u-s-doj-review; Sarah Young, “DOJ Says It’s Still
Investigating Google’s Acquisition of Fitbit,” ConsumerAffairs, January 15, 2021, at
https://www.consumeraffairs.com/news/doj-says-its-still-investigating-googles-acquisition-of-fitbit-011521.html.
86 Ron Amadeo, “Google Says It’s Closing the Fitbit Acquisition—Uh, Without DOJ Approval?,” ArsTechnica,
January 14, 2021, at https://arstechnica.com/gadgets/2021/01/google-closes-the-fitbit-acquisition-pledges-to-not-use-
data-for-ads/; Jon Swartz, “Google and Fitbit Said ‘I Do,’ But the Marriage Could Still be Annulled,” MarketWatch,
January 20, 2021, at https://www.marketwatch.com/story/google-fitbit-acquisition-closes-but-antitrust-scrutiny-is-far-
from-over-11611154278.
87 The European Commission included conditions to its approval that Google agreed to, such as not giving its Google
Ads digital advertising business access to the health and wellness data collected from Fitbit devices. European
Commission, “Mergers: Commission Clears Acquisition of Fitbit by Google, Subject to Conditions,” European
Commission Press Corner, December 17, 2020, at https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2484.
Some commentators have been skeptical about this promise, referencing similar promises that were made and broken
with Google’s acquisition of DoubleClick, a company that provided online advertising services; for example, see Hugh
Langley, “Google’s Deal for Fitbit Faces an EU Probe—and Regulators Who Watched the Company Break a Major
Promise After Buying DoubleClick in 2008,” Business Insider, August 4, 2020, at https://www.businessinsider.com/eu-
probes-googles-fitbit-deal-the-doubleclick-broken-promise-2020-8.
88 For a list of some of the companies Google partners with, see https://wearos.google.com/#find-your-watch.
89 Fitbit, “How Do I Get Notifications from my Phone on my Fitbit Device?,” at https://help.fitbit.com/articles/en_US/
Help_article/1979.htm#Troubles.
90 Fitbit, “Make & Take Calls on Watch?,” at https://community.fitbit.com/t5/Other-Versa-Smartwatches/Make-amp-
Take-calls-on-watch/td-p/2596639; Fitbit, “How Do I Respond to Messages with my Fitbit Device?,” at
Congressional Research Service

13

Mergers and Acquisitions in Digital Markets

calls. All of these features are available on Apple smartwatches. If Google expands the features
offered on Fitbit devices by integrating the WearOS system,91 Fitbit may be better able to
compete with Apple in the smartwatch market.
In the longer run, Google’s acquisition of Fitbit could reduce competition in the smartwatch
market. For example, if Google were to stop providing WearOS to other sellers, some might be
unable to survive in the smartwatch market, particularly if they do not have the means to develop
their own operating systems.92 In its agreement with the European Commission, Google stated
that it would continue to license for free its Android application programming interface (API),
maintaining compatibility between Android smartphones and Google competitors’
smartwatches.93
Figure 2. Global Smartwatch Shipment Revenue Share by Company
(first half of 2020)

Source: Sujeong Lim, “Global Smartwatch Market Revenue up 20% in H1 2020, Led by Apple, Garmin, and
Huawei,” Counterpoint Research, August 20, 2020, at https://www.counterpointresearch.com/global-smartwatch-
market-revenue-h1-2020/.
Note: According to the article, total revenue in the global smartwatch market increased by about 20% from the
first half of 2019 to the first half of 2020, with the U.S. market growing by about 5%.

https://help.fitbit.com/articles/en_US/Help_article/2344.htm; Fitbit, “Make Phone Calls on the Sense,” at
https://community.fitbit.com/t5/Feature-Suggestions/Make-phone-calls-on-the-Sense/idi-p/4485709#.
91 Fitbit created its own operating system; it did not use WearOS. James Peckham, “Best WearOS Watch 2021: Our
List of the Top Ex-Android Wear Smartwatches,” TechRadar, January 2021, at https://www.techradar.com/news/best-
wear-os-watch; Michael Simon, “4 Fitbit Features that Are Likely Going Away After the Google Deal,” MacWorld,
November 4, 2019, at https://www.macworld.com/article/3451360/fitbit-google-devices-features-leaving-
improving.html.
92 For more information about WearOS, see https://developer.android.com/wear and https://developer.android.com/
training/wearables.
93 For a list of public APIs developed by Google, see https://developers.google.com/apis-explorer. European
Commission, “Mergers: Commission Clears Acquisition of Fitbit by Google, Subject to Conditions,” European
Commission Press Corner, December 17, 2020, at https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2484.
Congressional Research Service

14

link to page 20 link to page 26 Mergers and Acquisitions in Digital Markets

A number of companies, including Google, have acquired large amounts of consumer data,
including through third-party tracking of individuals’ online behavior.94 These data can be used
for a variety of purposes, including online advertising and creating or refining algorithms.
Acquiring Fitbit allows Google to obtain additional consumer data, such as information about
users’ health and fitness. Google may be able to combine these data with other health-related data
it has reportedly acquired. Legislators and commentators have expressed concern about Google
obtaining patient data, particularly regarding Project Nightingale, a project to collect and process
large amounts of patient data.95 Google has reportedly been working with Ascension, a St. Louis-
based chain of hospitals, doctors’ offices, and other facilities, to design software to process patient
data and suggest possible changes to patients’ care.96 It is unclear whether the potentially large
volume of user health data from Fitbit could be used to help develop and improve this software,
potentially giving Google a competitive advantage among software providers for the health care
industry.
Options for Congress
The DOJ, FTC, and coalitions of state attorneys general have filed antitrust lawsuits and have
ongoing investigations of Big Tech companies. It may take years for these court cases or
investigations to be resolved. During this time, the companies could further integrate products
and services, potentially making it difficult for a court to order a divesture that could create a
viable competitor. Divestures could also negatively affect users’ experiences with the platforms,
such as the interoperability of the services and products, which could also harm the divested
business. Digital markets can evolve quickly, and it is possible that a merger that is the subject of
a lawsuit has become a less significant factor in competition than a subsequent merger. In
addition, there is no guarantee that the courts will determine that a merger violated antitrust law
or that a remedy ordered by a court will increase competition in digital markets.
Some Members of the 117th Congress have introduced legislation that could affect merger
enforcement (Table 2).97 Congress may choose not to take legislative action; its concerns about
mergers in digital markets may be addressed in lawsuits filed by the DOJ, FTC, and state
attorneys general. Congress may also take various forms of legislative action, including
increasing funding for merger oversight, amending antitrust laws, or regulating firms that operate
in digital markets.

94 Reuben Binns and Elettra Bietti, “Dissolving Privacy, One Merger at a Time: Competition, Data, and Third-Party
Tracking,” Computer Law and Security Review, vol. 36 (2020), pp. 1-19, at https://doi.org/10.1016/j.clsr.2019.105369;
Jenny Lee, “The Google-DoubleClick Merger: Lessons from the Federal Trade Commission’s Limitations on
Protecting Privacy,” Communication Law and Policy, vol. 25, no. 1 (2020), pp. 77-103.
95 Laura Lovett, “U.S. Senators Question Ascension on Its Google Collaboration Project Nightingale,”
MobileHealthNews, March 4, 2020, at https://www.mobihealthnews.com/news/us-senators-question-ascension-its-
google-collaboration-project-nightingale; Rob Copeland, “Google’s ‘Project Nightingale’ Gathers Personal Health Data
on Millions of Americans,” Wall Street Journal, November 11, 2019, at https://www.wsj.com/articles/google-s-secret-
project-nightingale-gathers-personal-health-data-on-millions-of-americans-11573496790.
96 Rob Copeland, “Google’s ‘Project Nightingale’ Gathers Personal Health Data on Millions of Americans,” Wall
Street Journal, November 11, 2019, at https://www.wsj.com/articles/google-s-secret-project-nightingale-gathers-
personal-health-data-on-millions-of-americans-11573496790.
97 Some of these bills were previously introduced in the 116th Congress; see Table A-1.
Congressional Research Service

15

Mergers and Acquisitions in Digital Markets

Table 2. Selected Legislation in the 117th Congress Related to Antitrust Laws
Legislation
Title
Section on Antitrust
S. 225
Competition and
Would (1) define market power; (2) amend the definition of unlawful
Antitrust Law
acquisitions, such as prohibiting mergers that materially, rather than
Enforcement Reform
substantially, lessen competition; (3) shift the burden of proof for certain
Act
merging parties to show that the merger would not harm competition;
(4) require companies to report information allowing the DOJ or FTC
to assess the competitive impact for five years after a merger; (5)
commission studies related to mergers from the FTC and Government
Accountability Office; (6) establish an Office of the Competition
Advocate under the FTC; (7) make it unlawful to engage in exclusionary
conduct that presents an appreciable risk of harming competition; (8)
establish civil penalties for violations of antitrust laws; and (9) establish
that enforcement of antitrust laws does not require the definition of a
relevant market.
S. 228
Merger Filing Fee
Would adjust premerger filing fees and increase appropriated funding for
Modernization Act of
FY2022.
2021
S. 633
One Agency Act
Would transfer antitrust enforcement functions from the FTC to the
DOJ.
Source: CRS, using Congress.gov.
Notes: The listed legislation was selected because of its potential effect on merger enforcement in digital
markets. The list was last updated on March 24, 2021.
Increase Funding for Antitrust Enforcement
Funding for antitrust enforcement through appropriations bills has been falling in inflation-
adjusted dollars since 2010.98 Some Members of Congress have introduced bills to increase
funding for the FTC and Antitrust Division of the DOJ in appropriations bills and by increasing
merger filing fees paid to these agencies (S. 225 and S. 228).99 The House Subcommittee on
Antitrust staff report suggests that increasing the agencies’ budgets could “restore the antitrust
agencies to full strength.”100
Increasing funding for the FTC and the Antitrust Division of the DOJ may help both agencies
enforce existing antitrust laws, including those applicable to mergers. The agencies could use
increased funding to hire additional staff to review proposed mergers in digital markets and to

98 Michael Kades, “The State of U.S. Federal Antitrust Enforcement,” Washington Center for Equitable Growth,
September 2019, at https://equitablegrowth.org/wp-content/uploads/2019/09/091719-antitrust-enforcement-report.pdf.
99 Merging parties are required to pay a filing fee with the premerger notification under the HSR Act. Although the
threshold to determine whether merging parties need to file a premerger notification is updated annually based on
changes in gross national product, the premerger filing fees are not; these fees have not been adjusted since 2000 in
P.L. 106-553. Inflation for legal services increased by about 36% from 2000 to 2020, according to data from the
Bureau of Labor Services producer price index data at https://www.bls.gov/ppi/#data (the estimate for 2020 is
preliminary; all indexes are subject to revision four months after original publication). Federal Trade Commission,
“The Most Frequently Asked HSR Questions,” Federal Trade Commission HSR Resources, at https://www.ftc.gov/
enforcement/premerger-notification-program/hsr-resources/most-frequently-asked-hsr-questions; “Federal Trade
Commission: Revised Judicial Thresholds for Section 7A of the Clayton Act,” 85 Federal Register 4984-4985, January
28, 2020.
100 House Subcommittee on Antitrust staff report, pp. 403.
Congressional Research Service

16

Mergers and Acquisitions in Digital Markets

help pay for expert witnesses. The FTC reportedly told its staff in 2020 that pursuing a record
number of antitrust cases had strained its budget.101
Some legislators have expressed skepticism that increasing funding for the FTC and the Antitrust
Division of the DOJ would increase antitrust enforcement in digital markets. Some Members of
Congress have been critical of the alleged lack of antitrust enforcement by the two agencies,
particularly with the acquisitions of nascent firms made by Big Tech companies.102 Prior to the
filing of the DOJ and FTC lawsuits against Google and Facebook, respectively, some Members
questioned why the two agencies opened separate investigations into the same Big Tech
companies;103 S. 633 would create a single antitrust agency by transferring the FTC’s antitrust
enforcement functions to the DOJ.
Amend Antitrust Laws
Antitrust laws are intended to protect competition and prevent the use of anticompetitive behavior
to obtain market power. Congress could amend antitrust laws, if it determines that they are not
sufficient for addressing anticompetitive mergers in digital markets. Legislation amending the
Clayton Act would apply to mergers in all industries, not only those affecting digital markets,
unless otherwise specified.
Shifting Burden of Proof
Section 7 of the Clayton Act prohibits mergers whose effect “may be substantially to lessen
competition, or to tend to create a monopoly.”104 As it has been interpreted by the courts, Section
7 places the burden of proof on the plaintiff—such as the DOJ or FTC—to show that a merger
has harmed or likely would harm competition in this way. S. 225 would amend the Clayton Act to
shift the burden to the merging parties, which could have to show in certain proceedings brought
by governmental plaintiffs that a proposed merger would not materially lessen competition.105
Proponents of shifting the burden of proof have argued that current antitrust laws favor merging
parties.106 They argue that even in cases where merging parties include dominant firms in highly

101 Alex Kantrowitz, “‘A Breathtaking Constraint on Capacity’: Internal FTC Memo Announces Major Cuts Ahead of
Tech Giant Action,” Big Technology, November 19, 2020, at https://bigtechnology.substack.com/p/a-breathtaking-
constraint-on-capacity; Leah Nylen, “FTC Short on Funds as Facebook Case, Amazon Probe Loom,” Politico,
November 24, 2020.
102 For example, see the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights
hearing “Antitrust Laws Oversight” on September 17, 2019, and the House Judiciary Subcommittee on Antitrust,
Commercial, and Administrative Law hearing “Online Platforms and Market Power, Part 4: Perspectives of the
Antitrust Agencies” on November 13, 2019.
103 Ibid.
104 15 U.S.C. §18. For a summary of Section 7 of the Clayton Act, see CRS In Focus IF11234, Antitrust Law: An
Introduction, by Jay B. Sykes.
105 S. 225 specifies that the burden of proof would shift for acquisitions that would (1) result in the acquiring person to
hold more than $5 billion in voting securities and assets, or (2) the person being acquired or acquiring person has
assets, net annual sales, or market capitalization greater than $100 billion, and as a result of the acquisition, the
acquiring person would hold an aggregate total amount of voting securities and assets in excess of $50 million. All of
these thresholds would be annually updated. Both bills define “materially” as “more than a de minimis amount.”
106 House Subcommittee on Antitrust staff report, p. 393; Krista Brown et al., “The Courage to Learn: A Retrospective
on Antitrust and Competition Policy During the Obama Administration and Framework for a New Structuralist
Approach,” American Economic Liberties Project, January 2021, at https://www.economicliberties.us/our-work/
courage-to-learn/.
Congressional Research Service

17

Mergers and Acquisitions in Digital Markets

concentrated markets, antitrust enforcers need to prove that a merger will have anticompetitive
effects in order to block it. In particular, they raise concern that it can be difficult to challenge Big
Tech’s acquisition of a nascent company, which may become a viable competitor even if the
transaction would not significantly affect the level of competition in the market at the time of the
acquisition.107 The House Subcommittee on Antitrust staff report suggests amendments requiring
merging parties to “show that the transaction was necessary for serving the public interest and
that similar benefits could not be achieved through internal growth and expansion.”108 While
shifting the burden of proof to merging parties may help antitrust enforcers block anticompetitive
mergers, it could also discourage mergers that might ultimately increase competition or lead to
greater innovation.109
Shifting from Defining the Relevant Market
Evaluating whether a merger would reduce competition typically starts by defining the relevant
market. S. 225 would change this practice by establishing that the enforcement of antitrust laws
does not require the definition of a relevant market. Instead, the plaintiff could provide evidence
of actual or likely harm to competition.
Eliminating the requirement to define the relevant market may be particularly consequential for
proposed mergers involving firms in digital markets. It can be difficult to determine the
boundaries of a digital market, particularly for a product or service that could be placed in
multiple markets. For example, Google’s YouTube hosts a wide variety of videos, including TV
shows and movies (sometimes for a fee), music videos, and videos posted by users. Thus,
YouTube could arguably be considered active in at least three different markets: (1) a social
media market, competing with companies like Facebook, (2) a video streaming service market,
competing with companies like Netflix, and (3) a music streaming service market, competing
with companies like Spotify. While some users may consider some of these platforms to be
substitutes (e.g., a consumer might choose to listen to music on YouTube rather than Spotify),
others might not consider them substitutes and instead maintain accounts on some or all of these
platforms. In digital markets, a unique feature often attracts users to a new service; consumers
may not want to use multiple platforms for the same purpose. This can make it easier for one
firm—oftentimes the earliest entrant that is able to gain a substantial number of users—to obtain
dominance in a digital market.
Even without having to define the relevant market, plaintiffs challenging mergers in digital
markets could face difficulties arguing that a proposed merger harms competition. For example,
in 2019, the DOJ challenged Sabre’s proposed acquisition of Farelogix, alleging that an
established dominant provider of airline booking services was seeking to eliminate a potential
competitor.110 A federal district court rejected the challenge, finding that the DOJ failed to show

107 Michael Katz, “Big Tech Mergers: Innovation, Competition for Market, and the Acquisition of Emerging
Competitors,” Information Economics and Policy, vol. 54 (March 2021): pp. 1-17, at https://doi.org/10.1016/
j.infoecopol.2020.100883.
108 House Subcommittee on Antitrust staff report, pp. 388.
109 Michael Katz, “Big Tech Mergers: Innovation, Competition for the Market, and the Acquisition of Emerging
Competitors,” Information Economics and Policy, vol. 54 (March 2021): pp. 1-17, at https://doi.org/10.1016/
j.infoecopol.2020.100883; Jay Ezrielev, “Shifting the Burden in Acquisitions of Nascent and Potential Competitors:
Not so Simple,” Competition Policy International, November 4, 2020, at
https://www.competitionpolicyinternational.com/shifting-the-burden-in-acquisitions-of-nascent-and-potential-
competitors-not-so-simple/.
110 United States v. Sabre Corporation, August 20, 2019, at https://www.justice.gov/opa/press-release/file/1196816.
Congressional Research Service

18

Mergers and Acquisitions in Digital Markets

the two companies are outright competitors.111 Determining which companies compete directly
against each other in digital markets could remain difficult even if the market is not precisely
defined.
The potential challenges of defining a relevant market or determining which competitors are
directly affected by a merger in digital markets are highlighted in Facebook’s motion to dismiss
the lawsuit filed by the FTC.112 Facebook alleges that the FTC has not established “a market that
includes all products that consumers consider acceptable substitutes,” and that the FTC has not
alleged sufficient facts to show that other platforms (such as YouTube, iMessage, LinkedIn,
Netflix, and Pinterest, among others) do not compete with Facebook.
Shifting Focus from Consumer Welfare
The House Subcommittee on Antitrust staff report suggests that Congress reassert what the report
describes as the original intent and broad goals of antitrust laws by clarifying that these laws
protect not only consumers, but also workers, entrepreneurs, independent businesses, and other
democratic ideals.113 Others have made similar suggestions, such as asserting that courts should
evaluate the effect of a merger on overall social welfare rather than focusing only on the welfare
of consumers of the merging parties’ products.114 One justification for this change in focus is that
harm to consumer welfare is typically evaluated by examining the potential for the merger to lead
to higher consumer prices, which may not be relevant in digital markets where consumers do not
pay for the product or service.115
The Vertical Merger Guidelines specify that the antitrust enforcement agencies are concerned
about harm to competition, not to competitors.116 If the standard for evaluating proposed mergers
was expanded to include potential harm to competitors as well as consumers, firms may be more
reluctant to propose mergers, including those that might lead to increased competition and
innovation. A proposed merger might be deemed to harm competitors, even if it seems unlikely to
harm competition.117

111 See United States v. Sabre Corp., 452 F.Supp.3d 97 (D. Del. 2020). A federal court of appeals vacated the district
court order because Sabre did not follow through with the acquisition. See United States v. Sabre Corp., 2020 WL
4915824 (3d Cir. 2020).
112 Federal Trade Commission v. Facebook, Inc., case no. 1:20-cv-03590-JEB, March 10, 2021, at https://about.fb.com/
wp-content/uploads/2021/03/2021-03-10-56-1-Memo-ISO-FBs-MTD-FTCs-Complaint.pdf. Facebook also filed a
motion to dismiss the lawsuit filed by state attorneys general (State of New York et al. v. Facebook, Inc., case no. 1:20-
cv-03589-JEB, March 10, 2021, at https://about.fb.com/wp-content/uploads/2021/03/2021-03-10-114-1-Memo-ISO-
FBs-MTD-States-Complaint.pdf). For a summary of both motions to dismiss, see https://about.fb.com/news/2021/03/
motions-to-dismiss-ftc-state-ag-lawsuits/.
113 House Subcommittee on Antitrust staff report, pp. 392.
114 Carl Shapiro, “Protecting Competition in the American Economy: Merger Control, Tech Titans, Labor Markets,”
Journal of Economic Perspectives, vol. 33, no. 3 (summer 2019), pp. 69-93; Ken Heyer, “Welfare Standards and
Merger Analysis: Why Not the Best?,” Competition Policy International, vol. 2, no. 2 (autumn 2006), pp. 29-54.
115 Some companies that operate web browsers, search services, social networking services, and other products and
services collect consumer data and obtain revenue from advertisers. The consumer data are used to send targeted
advertisements. For more information, see CRS In Focus IF11448, How Consumer Data Affects Competition Through
Digital Advertising, by Clare Y. Cho.
116 Federal Trade Commission and Department of Justice, Vertical Merger Guidelines, p. 2.
117 In this report, to harm competition means to harm the competitive process, such as using exclusionary practices to
prevent other firms from competing in the market. For more discussions of how to define “harm to competition,” see
Department of Justice, “Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act:
Chapter 1,” updated June 25, 2015, at https://www.justice.gov/atr/competition-and-monopoly-single-firm-conduct-
Congressional Research Service

19

Mergers and Acquisitions in Digital Markets

The lack of antitrust enforcement in digital markets arguably may not be caused by antitrust
agencies’ reliance on the consumer welfare standard, but rather by how the standard has been
applied.118 The Horizontal Merger Guidelines mention diminished innovation and “harm to
consumers as a result of competitive constraints or incentives,” in addition to higher prices and
reduced output, as negative outcomes that the agencies examine in merger review. It is possible to
define consumer welfare to include more than the price consumers face. If a merger has the
potential to reduce quality or innovation, this could be considered a potential harm to consumers,
even if prices are not expected to rise.119
Regulate Digital Markets
Individuals and companies that provide content, applications, and services on the internet—
known as content providers or edge providers—are not federally regulated as an industry,
although they may be held accountable for violating certain federal laws and regulations that are
applicable to firms in other industries as well.120 Congress could create a new federal agency,
designate an existing agency, or create a new division within an existing agency to regulate firms
that operate in digital markets. These regulations could range from establishing a code of
conduct—which could include methods to enable greater data mobility across firms—to
regulating firms in digital markets as public utilities.121
One justification for regulating digital markets is that they tend to create natural monopolies.
Companies in digital markets benefit from incumbency advantages, such as positive feedback
loops from network effects122 and economies of scale from the collection and use of large
amounts of consumer data.123 The creation of software and intellectual property is typically

under-section-2-sherman-act-chapter-1; Eleanor Fox, “What is Harm to Competition? Exclusionary Practices and
Anticompetitive Effect,” Antitrust Law Journal, vol. 70, no. 2 (2002), pp. 371-411.
118 Kevin Caves and Hal Singer, “When the Econometrician Shrugged: Identifying and Plugging Gaps in the
Consumer-Welfare Standard,” George Mason Law Review, vol. 26, no. 2 (winter 2018), pp. 395-425.
119 “Unlocking Digital Competition: Report of the Digital Competition Expert Panel,” Open Government License,
March 2019, at https://www.gov.uk/government/publications/unlocking-digital-competition-report-of-the-digital-
competition-expert-panel (i.e., U.K. Furman Report).
120 For example, content providers can be held accountable for violating Section 5(a) of the Federal Trade Commission
Act, which prohibits the use of “unfair or deceptive acts or practices in or affecting commerce” (15 U.S.C. §45). For
more information about edge providers, see CRS Report R46207, Competition on the Edge of the Internet, by Clare Y.
Cho. For more information about the regulatory landscape, see CRS Legal Sidebar LSB10309, Regulating Big Tech:
Legal Implications, coordinated by Valerie C. Brannon.
121 If Congress chose to regulate digital markets as a public utility, it could include an antitrust savings clause to ensure
that antitrust enforcers could still challenge mergers. For example, the Telecommunications Act of 1996 (P.L. 104-104)
included an antitrust savings clause, meaning that antitrust authorities can challenge a merger between firms that are
operating under the Federal Communications Commission’s jurisdiction, such as two land-line telephone companies.
Dennis Carlton, “Does Antitrust Need to be Modernized?,” Journal of Economic Perspectives, vol. 21, no. 3 (2007),
pp. 155-176; “Committee for the Study of Digital Platforms: Market Structure and Antitrust Subcommittee Report,”
Stigler Center for the Study of the Economy and State, The University School of Business, July 1, 2019; “Unlocking
Digital Competition: Report of the Digital Competition Expert Panel,” Open Government License, March 2019, at
https://www.gov.uk/government/publications/unlocking-digital-competition-report-of-the-digital-competition-expert-
panel (i.e., U.K. Furman Report); Dipayan Ghosh, “Don’t Break Up Facebook—Treat It Like a Utility,” Harvard
Business Review, May 30, 2019, at https://hbr.org/2019/05/dont-break-up-facebook-treat-it-like-a-utility.
122 A network effect is when an increase in the number of users increases the value of the good or service for other
users.
123 Michael Katz, “Big Tech Mergers: Innovation, Competition for Market, and the Acquisition of Emerging
Competitors,” Information Economics and Policy, vol. 54 (March 2021): pp. 1-17, at https://doi.org/10.1016/
j.infoecopol.2020.100883.
Congressional Research Service

20

Mergers and Acquisitions in Digital Markets

associated with high fixed costs and low marginal costs, which can result in high barriers to entry
and limit the number of viable competitors. It is typically less costly for a company to integrate a
new feature on an existing online platform than for a new company to create a new platform. The
underlying infrastructure needed to make a profitable platform—such as the ability to collect,
process, and store large amounts of consumer data—can be costly. In addition, a regulator of
content providers could address other issues, including consumer privacy and content moderation
concerns.124
Antitrust and consumer privacy concerns are intertwined because of the growing importance of
consumer data for companies operating in digital markets, particularly for those that rely on
online advertising. One incentive for Big Tech firms to enter multiple product markets is to
collect large amounts of consumer data, which can be used for a variety of purposes, such as
targeting online advertisements and developing and refining algorithms. On December 14, 2020,
the FTC issued orders to nine social media and video streaming service companies, “requiring
them to provide data on how they collect, use, and present personal information.”125 It is unclear
how the FTC intends to use these data.126
Increased competition could address user privacy concerns; it could also exacerbate them by
giving firms even greater incentives to use consumer data to gain a competitive edge. Any
legislation targeting consumer data and privacy concerns is likely to indirectly affect antitrust
concerns and vice versa.
Considerations for Congress
Any legislative action, including a decision not to take action, could have significant effects on
digital markets. Additionally, Congress is not the only legislative body concerned about
competition in digital markets. State laws and foreign legislation—such as the European Union’s
proposed Digital Markets Act and Digital Services Act127 and bills that establish consumer
privacy restrictions, including Virginia’s Consumer Data Protection Act,128 California’s Consumer
Privacy Act,129 and the European Union’s General Data Protection Regulation130—all have the
potential to affect competition in digital markets and to change the incentives for mergers and
acquisitions. Congress may wish to consider what type of legislative actions, if any, would help
maintain competition both within the United States and in the global market.

124 For more information about social media companies and concerns about their content moderation practices, see CRS
Report R46662, Social Media: Misinformation and Content Moderation Issues for Congress, by Jason A. Gallo and
Clare Y. Cho.
125 Federal Trade Commission, “FTC Issues Orders to Nine Social Media and Video Streaming Services Seeking Data
About How They Collect, Use, and Present Information,” press release, December 14, 2020, at https://www.ftc.gov/
news-events/press-releases/2020/12/ftc-issues-orders-nine-social-media-video-streaming-services.
126 Ibid.
127 More information about both pieces of legislation is available at https://ec.europa.eu/digital-single-market/en/
digital-services-act-package.
128 The bill, HB 2307 (identical to SB 1392), was signed into law by Governor Ralph S. Northam on March 2, 2021;
see https://lis.virginia.gov/cgi-bin/legp604.exe?212+sum+HB2307.
129 Title 1.81.5. California Consumer Privacy Act of 2018 [1798.100-1798.199.100], at
https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?division=3.&part=4.&lawCode=CIV&title=1.81.5.
130 More information is available at https://gdpr.eu/.
Congressional Research Service

21

Mergers and Acquisitions in Digital Markets

Appendix. Selected Legislation in the 116th Congress
Related to Antitrust Laws
Table A-1. Selected Legislation in the 116th Congress Related to Antitrust Laws
Legislation
Title
Section on Antitrust
S. 306
Merger Enforcement Improvement Act
Would have (1) adjusted premerger notification
filing fees, (2) required merger filers that entered
an agreement with the FTC to report sufficient
information to assess the competitive impact of
the merger, (3) commissioned studies related to
mergers from the FTC and the Government
Accountability Office, and (4) increased FTC and
Antitrust Division of the DOJ appropriations
funding for FY2020.
S. 307
Consolidation Prevention and Competition
Would have (1) amended the definition of unlawful
Promotion Act of 2019
acquisitions, such as prohibiting mergers that
materially, rather than substantially, lessen
competition; (2) shifted the burden of proof for
certain merging parties to show that the merger
would not harm competition; (3) required
companies to report information allowing the DOJ
or FTC to assess the competitive impact for five
years after a merger; and (4) established an Office
of the Competition Advocate under the FTC.
S. 1937
Merger Filing Fee Modernization Act of 2019 Would have adjusted premerger filing fees and
increased appropriations funding for FY2020.
S. 2237
Monopolization Deterrence Act of 2019
Would have established civil penalties for violating
Section 2 of the Sherman Act, or for monopolistic
conduct. The FTC and DOJ would also be
required to issue joint guidelines for determining
the amount of civil penalties they would seek.
S. 3426
Anticompetitive Exclusionary Conduct
Would have amended the Clayton Act to make it
Prevention Act of 2020
unlawful to engage in exclusionary conduct that
presents an appreciable risk of harming
competition. It would also establish civil penalties
for violations of antitrust laws and establish that
enforcement of antitrust laws does not require the
definition of a relevant market.
S. 4918
One Agency Act
Would have placed the antitrust enforcement
jurisdiction of the FTC under the DOJ, creating
one agency to enforce antitrust laws.
S. 5057
Antitrust Freedom Act of 2020
Would have established that antitrust laws would
not prohibit any voluntary economic coordination.
Source: CRS, using Congress.gov.
Note: The listed legislation were selected because the proposed amendments to antitrust laws could affect
merger enforcement in digital markets.
Congressional Research Service

22

Mergers and Acquisitions in Digital Markets

Author Information

Clare Y. Cho

Analyst in Industrial Organization and Business

Acknowledgments
Rita Tehan, Senior Research Librarian, helped compile the list of selected mergers in digital markets
reviewed by the DOJ or FTC.

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

Congressional Research Service
R46739 · VERSION 1 · NEW
23

Download PDF

Download EPUB

Revision History

Mar. 30, 2021

HTML · PDF

Metadata

Topic areas

Economic Policy

Industry and Trade

Report Type: CRS Report

Source: CRSReports.Congress.gov

Raw Metadata: JSON