This paper argues that role of innovation in merger control is a hot topic because “recent statements and enforcement actions on both sides of the Atlantic reflect the agencies’ growing emphasis on innovation in their merger investigations and decisions”. The paper provides an overview of these developments.
The paper begins by providing an overview of the context in which this increased focus on innovation is taking place. First, because technological development is now fundamental to business success in so many industries, assessing the impact of mergers on innovation now plays a key role in merger control. Second, innovation is at the heart of wider policies, such as the “Europe 2020 strategy” and the US’ “Strategy for American Innovation”.
The paper then moves to the more interesting topic of how innovation has been taken into account in practice by enforcement agencies.
In Europe, the European Commission has focused on the effects of a merger on innovation in a number of decisions in the last few years. A number of examples are provided. These include GE’s acquisition of Alstom’s energy business, Novartis’s acquisition of GSK’s oncology business, ASL’s acquisition of space company Arianespace in 2016, and the proposed (and prohibited) acquisition of O2 by Hutchison. The authors‘ conclude that “Typically when analyzing efficiencies, the European Commission will examine the rationale for the merger” and that “These decisions illustrate how high the threshold for acceptance of an efficiency argument by the European Commission is”.
It is further argued that the U.S. antitrust agencies’ approach to innovation in merger cases is largely the same as the European Commission’s. This section begins by looking at the 2010 Horizontal Merger Guidelines. It then examines a number of mergers where innovation was a concern, such as the Halliburton/Baker Hughes merger, the proposed merger between Applied Materials and Tokyo Electron, AT&T’s proposed acquisition of TMobile, and Steris Corp.’s acquisition of Synergy Health. It concludes that : “In some cases, the FTC and DOJ may investigate whether innovation by one of the merging parties could lead to potential competition that would be eliminated by the merger.”
The paper then sets forth two conclusions. First, “The antitrust agencies’ recent cases and policy statements underscore the importance of innovation for merger control assessment, but the term “innovation” remains ill- or undefined. Unlike revenues, volumes or market shares, innovation cannot be assessed based on equivalent hard data.” Second, in order to assess innovation issues, not only do agencies increasingly require access to the internal documents and data of the merging parties and third parties, but they also increasingly cooperate with each other when they are reviewing the same merger.
This is a short introduction, that can provide a useful entry point into the topic for anyone wanting to identify the main merger control cases concerning where innovation was a prominent issue (even though the absence of the Bayer/Monsanto and Dow/DuPont are a bit glaring). The paper does not really provide any information about how these cases are solved in practice though – even if it raises the (I think very relevant) issue of lack of standards and tests to determine when a competition issue related to innovation will arise.