What tech entrepreneurs think about the ACCC regulating startup acquisitions

The Australian Competition and Consumer Commission may be looking to increase its power to regulate mergers and acquisitions of local tech startups based on concerns that market concentration will kill fair competition.

While an acquisition by a big company is the perfect exit for many startups, ACCC chairman Rod Sims is concerned about the harmful effects of incumbents like Google swallowing up emerging high-growth startups.

Speaking to The Australian Financial Review, Sims said that though his ideas may upset some founders, they’re important considerations to make in ensuring the growing tech sector remains a fair and levelled playing field.

“The more we get into the tech startup world, the more we may need to broaden our horizons a bit in our thinking, and others may need to as well, like the courts and commentators,” Sims said.

“We need to take a view on whether this sort of activity is taking out future competition and entrenching the incumbent.

“Of course we understand that sometimes when a big bank or a big company buys a startup, they can get the ideas and products out to the market more quickly, but if this is taking out a company that looks like a serious future competitor then I think we have to look at it differently.”

Is collaboration between corporates more important than fair competition for startups? 

OneShift founder Gen George says a $5 million investment from ASX-listed Programmed gave her venture a real fighting chance in the market.

“It has only added value,” George tells StartupSmart.

She says collaboration between incumbents and new players in the market forge great opportunities for innovation.

It also gives small companies like hers access to critical funding and resources like marketing or legal aid to help them achieve strong growth.

“Corporates don’t only bring cash they can also bring infrastructure that can actually assist your business,” she says.

“It would be a shame to shut off startups from corporates and corporates from startups.”

George notes that market concentration is a problem that affects all industries and that the startup sector is not mature enough yet for this issue to be a regulatory concern.

“It could happen anywhere. What if Woolworths buys Coles? The ACCC would never let that happen,” she says.

“The Australian market for startups and investments is still very young, I don’t think we’ve seen any corporates stepping in that direction yet.

“We need to see how the market evolves and maybe in five years start looking at [restrictions].”

Where the ACCC should focus regulation 

Vinomofo co-founder Andre Eikmeier says tighter regulation is rarely the best solution for startups.

“If founders want to sell what they’ve built to a major player, then they shouldn’t be restricted from doing that on account of anti-competitive legislation,” he tells StartupSmart.

“The concerns that this would be taking out a potential future competitor are moot in my mind if the founders or owners have made the decision to sell themselves.”

Instead of blanket restrictions on what big companies can or can’t acquire, Eikmeier says the ACCC should focus its efforts on regulating what big companies do after they’ve acquired startups.

“After all, that’s really what we’re trying to prevent through restricting anti-competitive behaviour, right? That and the way suppliers are treated?” he says.

This article was first published by StartupSmart.