Merger control

Merger control in DFS must address the complexity of transactions that may not meet traditional thresholds for notification but pose substantial competitive risks. "Killer acquisitions"—where incumbents acquire innovative start-ups to preclude future competition—are a growing concern, particularly in markets characterized by rapid technological evolution and high entry barriers. Regulators should consider revising notification thresholds to capture deals based on transaction value or other qualitative criteria and apply a forward-looking analysis that incorporates potential competition, innovation pipelines, and access to key datasets.^1;2

Effective merger review requires the adoption of new tools and theories of harm that reflect the distinct features of digital finance ecosystems. For example, a merger may reduce dynamic competition by consolidating data sources or locking in users through interoperable ecosystems. Authorities should also assess conglomerate effects where mergers combine complementary services under one digital roof, potentially raising entry barriers for rivals. Detection and proof of anticompetitive mergers and acquisitions can be done by running market studies, ad hoc investigations, incoming whistleblowing from the industry and on-site inspections. The particularities of DFS and their markets impose on authorities to keep up with the innovation pace of their supervised entities, which is attained by assembling dedicated teams on the topic and experimenting with innovative tools and technologies.

A post-acquisition or post-merger concentrated market, albeit a worrying sign, is not always a sharp or sufficient indicator of competition problems. The authority should collect as much evidence as feasible to build a solid case against market movement, which can be erroneously judged anticompetitive.

EXAMPLE: Several jurisdictions have adapted their approach to merger control, aiming to better tackle platform business, where a bilateral analysis of acquisitions doesn’t suffice. The UK demands and India recommends that market power-waging digital platforms communicate local competition authorities of intended M&As prior to their realization, while Australia proposed that a merger review be motivated by the nature of assets involved, notably data and technology³.