EU Merger Reviews Seek to Scoop Up Big Firms’ Killer Deals

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European Union regulators said they’ll review takeovers of innovative companies that make no money, allowing them to zero in on so-called killer acquisitions when big tech companies buy promising startups.

While the EU frequently reviews most of the world’s big deals, it missed on takeovers such as Facebook Inc.’s 2012 bid for photo-sharing site Instagram and other deals because its merger review guidelines didn’t let it scrutinize acquisitions of companies without large revenue streams.

Regulators will now be able to ask national authorities to send them deals they see as potentially troublesome that would otherwise escape a review, particularly purchases of nascent rivals in the digital, pharmaceutical, and biotechnology industries, the EU said in a press release.

“We have an increasing unease with the kind of transactions that we’re discussing here where you have a really big company acquiring a much smaller player that generates little or no turnover,” EU Competition Commissioner Margrethe Vestager told the American Bar Association antitrust conference Friday. “We are thinking that it may not be true anymore that these type of transactions could not have a significant impact” on competition.

An EU paper on the new rules points to the digital economy where business models aim to build up “a significant user base and/or commercially valuable data inventories, before seeking to monetize the business.”

Regulators will be able to catch deals where companies collect data or sell to customers in several EU nations or develop research products, including intellectual property, that could be commercialized in several states.

At the same time, regulators are trying to simplify merger control for cases that don’t raise competition concerns, such as when the two companies don’t hold high market shares. This could include using electronic filings for deals after introducing this during the pandemic, it said in an online notice.

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