“The Federal Trade Commission need not concoct a new antitrust framework when established companies acquire nascent competitors in high-tech markets. It must, however, apply its existing tools in a manner that is appropriately forward-looking.”
—Glenn G. Lammi, WLF Chief Counsel, Legal Studies Division 

(Washington, DC)—Washington Legal Foundation today contributed to the Federal Trade Commission’s ongoing Hearings on Competition and Consumer Protection in the 21st Century. WLF submitted a formal comment on Hearing #3, a panel of which considered “Acquisitions of Nascent and Potential Competitors in Digital Technology Markets.”

FTC asked the panel to address a number of questions, including, “What is the appropriate antitrust framework to evaluate acquisitions of potential or nascent competitors in high-technology markets?” WLF focuses on that particular question, arguing that the Commission should rely upon existing tools and review methodologies to consider mergers and acquisitions involving potential and nascent competitors. In the comment, WLF urges FTC to take a more forward-looking approach to such key aspects of merger review as defining the relevant market.

The Clayton Antitrust Act requires regulators to look beyond the structure and history of an industry, and consider its probable future, when determining whether a combination will substantially lessen competition. Regulators’ failure to look forward when examining mergers in markets that are undergoing significant technological change could harm consumers.  WLF cites as one example the Justice Department’s challenge of the AT&T-Time Warner merger, in which DOJ narrowly defined the relevant market. The companies’ legal challenge succeeded in large part because, as Judge Richard Leon explained, DOJ failed to appreciate the “tectonic changes” in entertainment content creation and delivery.

The comments also point to DOJ’s challenge of print-newspaper mergers, as well as FTC’s rejection of Whole Foods’ 2008 purchase of competitor Wild Oats, as examples of regulatory myopia that harmed, rather than protected, consumer welfare.

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