The Dutch competition regulator is pushing for greater authority to investigate smaller acquisitions in the tech sector, following a significant legal ruling that limited the European Union’s ability to scrutinize certain deals. This move by the Netherlands Authority for Consumers and Markets (ACM) comes in response to concerns that smaller transactions, which currently don’t meet traditional sales thresholds, could stifle competition in emerging markets, particularly in the fast-evolving tech industry.
Martijn Snoep, Chairman of the ACM, emphasized the need for enhanced regulatory oversight. “There’s a gap in our ability to assess the consequences of these acquisitions, and we currently lack the tools to prevent harmful market dominance,” he said in a statement on Thursday. The ACM is urging the Dutch government to grant it powers to examine mergers and acquisitions that may not hit standard revenue benchmarks but could still pose risks to consumers and smaller competitors.
This development follows a ruling by the European Court of Justice (ECJ) in a high-profile case involving Illumina Inc.’s $7 billion acquisition of Grail Inc., a cancer detection firm. The European Commission had initially sought to block the deal, even though it didn’t meet the usual EU thresholds for competition scrutiny. However, the court ruled that the Commission’s approach of encouraging national regulators to refer such deals for EU review was illegal, effectively hamstringing its efforts to regulate smaller but potentially anti-competitive transactions.
The fallout from this ruling was felt earlier this week when Microsoft’s investment in Inflection AI, a major artificial intelligence company, managed to avoid scrutiny from the European Commission. Seven regulators, including the Dutch ACM, initially requested that the Commission examine the deal, but they withdrew their requests after the ECJ’s decision in the Illumina case.
The ACM’s push for more authority reflects broader concerns that smaller acquisitions—especially in the tech sector—can have outsized impacts on competition. As emerging technologies continue to shape the future of markets, smaller players are at risk of being absorbed by dominant incumbents, potentially leading to reduced innovation and higher prices for consumers.
With the European Commission’s power now constrained by the court ruling, national regulators like the ACM may play a more critical role in maintaining competitive markets, particularly in cutting-edge industries such as artificial intelligence, biotechnology, and other tech-driven fields.
For investors, the growing scrutiny on smaller deals in the tech sector signals potential risks in merger and acquisition strategies. Companies looking to expand through strategic acquisitions may face increased regulatory hurdles in Europe, particularly if national authorities secure greater investigative powers.
The opportunity for profit lies in anticipating regulatory trends. Investors who can navigate these evolving frameworks by targeting companies less likely to face scrutiny or by identifying sectors poised for regulatory reform may stand to gain. On the other hand, those heavily invested in large-scale acquisitions could face delays and increased compliance costs as regulators tighten their grip on deal-making.
