This study analyzes the impact of the large U.S. digital platforms such as GAFAM (Google, Apple, Facebook, Amazon, Microsoft) on their performance in terms of innovation and sales, focusing on their mergers and acquisitions (M&A) activities targeting numerous small and medium-sized enterprises over the past 20 years. It also identifies ‘killer acquisitions’, where these platforms acquire innovative companies that could become potential competitors, thereby potentially reducing future market competition. The study provides insights and policy implications for the Korean Fair Trade Commission’s merger review process for digital platforms.

Chapter 2 reviews the literature on the relationship between M&A and innovation and discusses the motives for M&A in the digital platform market, including ‘killer acquisitions’. Traditional M&A motives such as economies of scale and scope, acquisition of unique technologies or new distribution channels, and increased market dominance are contrasted with those in the digital platform industry, which include securing core assets like technology, processes, and intellectual property. Recent literature has raised concerns about ‘killer acquisitions’ that may reduce or eliminate future competition, although the definition of ‘particularly competitive future competitors’ and the limited pre-emptive merger policy pose challenges.

Chapter 3 examines the types, characteristics, and status of M&As conducted by GAFAM, categorizing them into vertical, horizontal, and conglomerate mergers. Despite the unique characteristics of the digital platform industry, most M&As have been approved by the U.S. competition authorities. However, this has led to criticism of high market concentration. Recent arguments suggest the need to actively incorporate data characteristics in assessing the competitive restraints of M&A.

Chapter 4 conducts an empirical analysis of the impact of digital platform M&A on firm performance. It examines how ‘killer acquisitions’ affect innovation performance, using patent applications and citations as indicators. The results show that killer acquisitions have a statistically significant negative impact on patent applications, suggesting potential negative effects on overall innovation performance. We also estimate the impact of digital platform M&A on the sales of both acquiring and acquired companies, and find revealing increased sales for the acquiring firms but decreased sales for the acquired firms.

Based on these findings, Chapter 5 suggests the following policy implications: 1) using patent data and other metrics to evaluate digital platform mergers, 2) examining methodologies such as technology similarity indicators to identify killer acquisitions, 3) considering post-regulation rather than pre-regulation, and 4) shifting the burden of proof of market competition restriction from competition authorities to the digital platforms themselves.