John Kwoka and Tommaso Valletti ‘Scrambled Eggs and Paralyzed Policy: Breaking Up Consummated Mergers and Dominant Firms’

Competition policy has been no obstacle to the rise of dominant firms in e-commerce, social media, online search and other important aspects of the modern digital economy. The well-documented results of these trends are increasing market concentration, entrenched dominance, diminished competition and entry, and harm to consumers and businesses alike. Competition agencies, policymakers, academics, interest groups, and others have proposed various ways of addressing the weaknesses of past policy. Most of these proposed policies involve more vigorous application of conventional tools, which, however, are unable to address current levels of market concentration. However, the most obvious solution – breaking up such firms — is generally dismissed as impractical, the equivalent of trying to unscramble eggs. The authors disagree in this paper, available here. The rationale for breaking up companies is straightforward: where the essential competitive problem with a company is its structure, in the sense that its anticompetitive behaviour flows inexorably from that structure and is otherwise difficult to prevent,…