US Merger Enforcement in the Information Technology Sector

Forthcoming in Roger Blair and Daniel Sokol, Eds., Handbook of Antitrust, Intellectual Property and High Tech, Cambridge University Press (2017 Forthcoming)

25 Pages Posted: 2 Nov 2016

See all articles by Jeffrey A. Eisenach

Jeffrey A. Eisenach

NERA Economic Consulting; American Enterprise Institute

Date Written: October 2016

Abstract

U.S. merger policy seeks to prevent transactions that would result in a substantial lessening of competition in a relevant product market. Competition is harmed when a transaction results in a significant increase in market power, defined as the ability of a firm, or group of firms, to set and maintain prices above (or reduce quality below) the competitive level, thereby harming consumer welfare; or, in an increase in the incentive and ability of a dominant firm to engage in anticompetitive activities, such as raising rivals’ costs. Under prevailing jurisprudence, transactions which significantly increase concentration in a relevant market above certain levels are presumed to increase market power and substantially lessen competition. However, merging parties seeking to win approval of transactions that significantly increase concentration may rebut the presumption of illegality by demonstrating through other evidence that the transaction will not actually harm competition, or that any harms are offset by increases in transaction-specific efficiencies.

The application of these concepts to transactions in information technology (IT) markets is complicated by the fact that such markets have distinct economic characteristics. Specifically, IT markets typically exhibit dynamism, modularity, and demand- and supply-side economies of scale and scope (Eisenach 2012, Eisenach and Gotts 2015a). Each of these characteristics introduces challenges and complexities into the assessment of the competitive effects of mergers.

Keywords: Merger policy, merger enforcement, Information Technology Sector

Suggested Citation

Eisenach, Jeffrey A., US Merger Enforcement in the Information Technology Sector (October 2016). Forthcoming in Roger Blair and Daniel Sokol, Eds., Handbook of Antitrust, Intellectual Property and High Tech, Cambridge University Press (2017 Forthcoming), Available at SSRN: https://ssrn.com/abstract=2860331

Jeffrey A. Eisenach (Contact Author)

NERA Economic Consulting

1255 23rd Street, NW, Suite 600
Washington, DC 20037
United States
202-448-9029 (Phone)
202-466-3605 (Fax)

HOME PAGE: http://www.nera.com

American Enterprise Institute ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States

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