WASHINGTON-The Federal Trade Commission (FTC) and some policymakers in Congress are pressing for radical constraints on mergers based on claims that market concentration has increased, and enforcement has been too lax. Yet evidence shows neither a substantial growth in monopoly power, nor relaxed merger enforcement according to a new report from the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy. Instead of pushing the narrative that most mergers are anticompetitive, antitrust regulators should recognize that in many instances mergers can contribute to innovation, productivity, and competition.
“Proposals for new merger laws rely on the assumption that current rules are not enough, and policymakers need more tools to stop mergers,” said Aurelien Portuese, director of ITIF’s Schumpeter Project on Competition Policy and author of the report. “Yet current merger laws overall are broad enough to encompass the competition concerns raised by some acquisitions. Radical changes undermining years of improvement in antitrust doctrine and practice will create legal uncertainty and may harm innovation.”
The report scrutinizes and debunks the claims made in support of reforming merger laws and examines case studies of mergers in the Internet and software, biopharmaceutical, and creative industries-illustrating the need for a more gradual approach to reforming merger enforcement instead of the proposed changes by the FTC and Congress.
To that end, the report offers four policy recommendations based on a more dynamic approach to antitrust:
- Develop wide-ranging retrospective merger analysis to better evaluate discrepancies between predictions and actual outcomes;
- Update merger guidelines with a focus on lowering entry and exit barriers so that antitrust agencies do not place artificially high barriers on small companies at the expense of creative destruction;
- Balance blocking mergers with mandatory licensing, which will ultimately allow firms to reap the benefits of pooled resources and antitrust authorities to ensure the market can utilize the nonexclusive license;
- Increase antitrust agencies’ resources, allowing the agencies to ensure greater accuracy of evidence-based merger analysis.
“Efforts to significantly change merger law not only risk harming U.S. innovation but international competitiveness and economic growth as well,” said Portuese. “Congress should focus on more modest proposals that address the need to adjust policies for mergers without undermining their benefits.”