As I explain in both an op-ed and regulatory comments submitted yesterday, the United Kingdom’s Competition and Markets Authority (CMA), the UK’s version of the Federal Trade Commission, is making a move to become the world’s antitrust regulator. By attempting to block Facebook’s acquisition of a minor technology company, GIPHY, it dramatically lowers the bar for when acquisitions can become the subject of antitrust action (never mind scrutiny.)
In the op-ed, I explain why Americans should worry about this. America is by far the biggest provider of business startups to the world, but startups need to have some idea of how they can realize gains—what is called “the exit strategy.” Without the prospect of acquisition by a larger company, the exit strategy is curtailed. That means American dynamism and innovation will suffer.
In the comments, submitted jointly with the Adam Smith Institute in the UK, we explore four reasons why the CMA should reverse its provisional decision and allow the merger to go ahead.
- Extraterritoriality. The CMA has no business in trying to act as the world’s antitrust regulator; it should rethink its decision taking account of that principle.
- Relevant market. The CMA has committed the “relevant market fallacy” and should rethink the decision based around a more appropriate view of market conditions.
- Counterfactual. The CMA constructed a “counterfactual” scenario where GIPHY could survive the pandemic and become a competitor to Facebook in the display advertising business. That is implausible. A better counterfactual would show clear consumer benefits from the merger.
- Chilling effect on innovation and investment. As noted above, the CMA’s actions will chill innovation. They would also lower the opportunities for investment and thereby hamper wealth creation.
If the CMA is successful in blocking this merger, the business environment will have changed across the globe—and American politics will have had nothing to do with it.