SHADOW MARKET POWER

Helena Malikova & Brianna Rock

Europe has a blind spot in its approach to regulating mergers and acquisitions. Big Tech firms are amassing what we call “shadow market power” through potentially anti-competitive strategies that bypass current rules for oversight, investigation, and intervention. Generally, transactions involving a change of control will trigger a formal merger review. Yet this condition was met in only around 600 deals struck by Google, Apple, Facebook, Amazon, and Microsoft (GAFAM) since 2014. Meanwhile, the same tech giants have taken minority stakes in more than 7,000 companies, giving them an extensive but largely underappreciated form of market power.

As regulators focus narrowly on mergers and joint ventures, the industry has increasingly been exercising influence through corporate-governance channels, technological standards-setting, strategic capital allocations, and other market-defining relationships that fall outside authorities’ scrutiny. Consider Nvidia’s “significant investment” in the AI startup Thinking Machines Lab; Meta’s 10% stake in the chipmaker AMD; or the increasingly frequent practice of “acquihires,” whereby a larger firm grabs “everything but the company” by recruiting key personnel. In each case, a dominant firm expands its market power by blurring the lines between owner, investor, partner, captive supplier, and infrastructure provider.

Leading the pack is Google. A recent study that one of us (Rock) co-authored, “Google’s Hidden Empire,” shows that the tech giant has invested in more than 6,000 businesses worldwide since 2014, while acquiring only 166. And of these transactions, just six underwent formal review by the European Commission. Much of Google’s investment activity flows through affiliates such as Google for Startups, which often provides grants or in-kind assistance, such as free cloud credits and mentorship workshops. Google Ventures commonly ranks among the largest VC funders globally, alongside traditional players like Y Combinator and Sequoia Capital. Through these and other affiliates, Google draws startups into its own technological ecosystem, creating relationships of dependency. Companies built on Google Cloud and integrated with Google APIs will face considerable switching costs if they try to move to a new provider.

Consider the scale and scope of Big Tech’s shadow market power in different sectors of the economy. Google has expanded its influence across a broad range of sectors, from cloud and digital infrastructure to cybersecurity, healthcare and life sciences, energy and environmental systems, advanced manufacturing, media, and transportation. Other economic researchers have identified similar patterns of interdependence that go beyond formal market shares. Cecilia Rikap of University College London has documented how dominant firms deploy data and technology partnerships with smaller companies to consolidate “intellectual monopolies.” By or ganising research, development, and commercialisation around themselves, they can influence the path that innovation takes and appropriate a disproportionate share of the gains through “control without ownership.”

Owing to their already dominant positions, US Big Tech firms have a panopticon-like view of most emerging technologies, business models, and industry developments, allowing them to stay ahead of shifts in adjacent or potentially disruptive markets. By advising early-stage companies through mentorships, for example, Google can influence the choices that these potential future competitors make, steering them toward product designs that are compatible with Google’s existing offerings and strategies. As AI researchers Nathan Kim and David Gray Widder point out, the recent wave of large-scale investments in cloud infrastructure reflects a “massive, strategic effort to bend the technology ecosystem towards Big Cloud’s interests.” The “Big Three” cloud firms—Google, Microsoft, and Amazon—have moved from headline acquisitions to quieter investments across the AI supply chain. By the third quarter of 2025, they held 63% of the global market—a share worth some $107 billion in revenues for cloud services in that quarter alone—in addition to maintaining partnership agreements with competitors like SAP.

Big Tech’s embrace of shadow market shares and other mechanisms of influence should raise questions for antitrust regulators. Competition authorities need more clarity on the nature of the exchange between hyperscalers and smaller companies—whether it is access to data, special governance rights, or other strategic assets. Only then can regulators and independent researchers analyse how and to what extent these ever-growing networks of investees are connected to the major technological gatekeepers.

For example, if behavioural and performance data from a startup flows back to its Big Tech benefactor, it could further entrench an already dominant platform. With greater transparency, regulators could establish precise counts of shadow-market shares using companies’ internal data, allowing them to map each firm’s broader sphere of influence. The idea would be to combine the market share a company controls through its subsidiary firms with an additional metric: the market share of firms it can influence through existing minority investments or in-kind support. There is already legal precedent for recognising minority investments as potential sources of influence over corporate decision-making.

Under current US law, the Securities and Exchange Commission mandates disclosure when an investor buys more than 5% of a public company, given the potential “to change or influence control” of the issuer. This disclosure could be extended to privately held companies by imposing disclosure obligations on listed investors themselves. In particular, publicly listed Big Tech companies could be required to disclose any investment exceeding 5% of the capital of either private or public companies.

Examining shadow market shares might also reveal additional trends or practices that warrant attention. While media coverage described Google’s 2021 purchase of Fitbit as its entry into the health-care and wearables industry, the truth is that it had already been quietly stepping up its investments in health-care and life-sciences technologies. Similarly, by the time Google announced that it was acquiring the cybersecurity firm Wiz last year, its investments in that sector had already surged.

Yet EU’s competition authority approved the deal unconditionally in February 2026. Until regulators account for the full scope and scale of Big Tech’s grip on markets, Silicon Valley’s power will remain unchallenged and largely in the shadows.

Malikova is a financial analyst at the Directorate General for Competition at the European Commission. Rock is a researcher at Rebalance Now.