Technology plays a significant and crucial role in the current global economy. It impacts consumer welfare, the job market, economic progress, and the emergence of innovative technology. Due to the fact that the technology sector provides necessary and critical services, technology companies exercise immense power over consumers who rely on their products. The rising concentration in the technology sector magnifies the potential anticompetitive forces at play. This article argues that venture capital financing leads to anticompetitive effects in the technology industry. Although most startups intend to eventually go public through an initial public offering (“IPO”), the liquidity pressures from venture capital firms positions startups for an acquisition. Under these circumstances, venture capital policies create economic opportunities for tech giants to swoop in and acquire startups. This escalation in M&A activity in the technology space increases the market power of tech giants such as Google, Facebook, and Amazon. The result is a highly concentrated technology market which stunts innovation, heightens barriers to entry into the market, and reduces consumer welfare.
The Antitrust Impact of Venture Capital Firms on Concentration in the Technology Sector,
11 Hastings Sci. & Tech. L.J. 155
Available at: https://repository.uchastings.edu/hastings_science_technology_law_journal/vol11/iss2/3