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US Tech Companies Devour Smaller Rivals

30/10/2018 | Centre for European Economic Research

In the past decade, the US tech giants Apple, Google, Facebook and Amazon bought a total of 313 companies. Economic researchers now give warning of the harm they do to the competition.


There are many factors driving these acquisitions. The targeted companies have been competitors, promising start-ups, or gateways into a new market. In 2017, Amazon acquired the supermarket chain Whole Foods for 13.7 billion dollars. In 2009, the Seattle-based firm bought its competitor Zappos for 930 million dollars, a relative steal.

Apple and Google both purchased promising start-ups with interesting technologies early on and integrated them into their ecosystems. Through acquisitions like these, Google was able to launch Google Docs and Google Maps. Apple used its acquisitions to start Siri. Facebook has been more defensive in its purchases, acquiring companies that threaten its own business such as the photo and video-sharing app Instagram and the instant-messaging service WhatsApp. When it has failed to acquire a potential competitor, Facebook has simply copied its services, as it did with the multimedia messaging app Snapchat.

Increasingly, the acquisitions of tech giants have increasingly been the subject of criticism. “Because of their large reserves of cash, these companies can buy up any competitor that might harm their bottom line. And if they swallow very small companies early enough, it is hard for regulatory agencies to prevent acquisitions and the harm they do to the competition,” explains Dr. Niklas Dürr, a researcher in the ZEW Research Department “Economics of Innovation and Industrial Dynamics”. What complicates the situation further is that many start-ups have an interest in being bought by large tech companies.

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