Giulio Federico ‘Horizontal Mergers, Innovation and the Competitive Process’ (2017) Journal of European Competition Law & Practice 8(10)

Recent merger decisions have revived the debate on the role of innovation in merger control. The theory of harm put forward by competition authorities in these recent merger cases posits that a merger between rival innovators may lessen competition not only because of a reduction in (static) competition on current products, but also because of a lessening of (dynamic) competition on future products. According to this theory of harm, the loss of future competition may, at least in part, stem from a reduction in innovation. This article, available here, reviews the debate on the relationship between horizontal mergers and innovation up to this point (i.e. 2017). I think it provides a good overview of the various arguments invoked to subject mergers affecting innovation to more stringent scrutiny during a first stage of the debate. Section II offers a succinct historical account of economic thinking on the relationship between competition and innovation. Innovation theories of harm in merger control are premised…

Justus Haucap, Alexander Rasch and Joel Stiebale on ‘How mergers affect innovation: Theory and evidence’ (2019) International Journal of Industrial Organization 63 283

This article, available here, argues that a complete analysis of potential efficiencies from mergers should not only analyse how the merged entity’s prices, quantities and innovation incentives change (i.e., the direct effects of a merger), but also how these change for rival firms (indirect effects). While competition authorities sometimes analyse how mergers directly affect the merged firm’s innovation incentives, especially in high-tech industries, impacts on rivals’ innovation incentives have been rarely mentioned in merger guidelines or competition cases. This is unfortunate, since the effects of mergers on innovation in the relevant market depend on the reactions of non-merging competitors. While there is a growing literature on the effects of mergers on the innovation of the merging firms, evidence on the effects of mergers on outsiders’ innovation incentives is scarce. Thus, this paper studies how horizontal mergers affect the innovation efforts of both the merged entity and its non-merging competitors. Using data on horizontal mergers among pharmaceutical firms in Europe, it…