Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: FTC Commissioner McSweeny addresses international conference on competition, (Mar 17, 2017)

By Jody Coultas, J.D.

At the 18th International Conference on Competition in Berlin, Germany, on March 16, FTC Commissioner Terrell McSweeny highlighted the need for any merger review to look not just at the effects on price and harm to consumers, but also to the potential negative impact on innovation. In her remarks titled "Understanding Innovation and its Role in U.S. Merger Review," McSweeny also discussed the importance of antitrust enforcers carefully considering innovation effects in merger review in order to foster competitive and innovative markets.

FTC challenges to mergers in the market of research and development of new drugs and treatments focus on protecting incentives for incremental innovation along a fairly well-defined path. Innovation can also be a key factor when a merger might eliminate an independent disruptive innovator, especially when a firm is planning to enter a market with a new technology.

McSweeny highlighted two recent cases in which protecting innovation was a key factor in the FTC’s merger challenges. In late 2014, the FTC challenged the proposed acquisition of EagleView Technology by Verisk Analytics. While the FTC did not define an "innovation" market, innovation nonetheless played a crucial role in staff’s analysis and in the decision to challenge the merger. A challenge of the merger between the second and third-largest sterilization companies in the world, Steris and Synergy, highlighted the FTC’s willingness to take innovation and quality competition seriously by considering the potentially disruptive effects of new technologies in merger analysis and showed the challenges associated with proving the likelihood of disruptive entry.

The Department of Justice has also focused on innovation in recent merger enforcement actions, according to McSweeny. In its challenge to AT&T’s proposed acquisition of T-Mobile, the Justice Department found that consumers would face not only higher prices and less variety, but also less innovation given T-Mobile’s history of innovation in the cell phone plan market.

According to the Commissioner, innovation can play an important role in the analysis of mergers in digital markets, particularly in two-sided markets where a traditional price-based approach to competition analysis may be ineffective. In its analysis of the Zillow-Trulia merger in 2015, the FTC staff investigated whether the merger would reduce competition on the paying side of the market and whether the merger would reduce the combined entity’s incentives to innovate by developing new features attractive to consumers on the free side of the market. "Although staff did not find reason for concern in that matter, the investigation is an example of how we look at these issues under the Guidelines," said McSweeny.

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