Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Deputy AAG Nevo discusses bargaining theory in analyzing mergers, (Jan 23, 2014)

In remarks delivered yesterday before the Stanford Institute for Economic Policy Research and Cornerstone Research Conference on Antitrust in Highly Innovative Industries, Aviv Nevo, Deputy Assistant Attorney General for Economics at the Department of Justice Antitrust Division, discussed the role of bargaining theory in analyzing mergers. Bargaining leverage is a source of market power, and a merger that involves an increase in bargaining leverage is a form of lessening of competition, Nevo explained.

In his speech, entitled “Mergers that Increase Bargaining Leverage,” Nevo focused on mergers that increase bargaining leverage. He explained that competition exists in the interplay between different providers—such as patent holders who produce content or provide services—as they separately bargain with distributors—such as Smartphone producers who sell the products or services to final consumers as part of a bundle. Therefore, a merger between these providers is a loss of competition.

Nevo noted that the application of bargaining theory in antitrust was not new and had been employed by both the Antitrust Division and the FTC in analyzing hospital mergers. In a hospital merger case, the legal theory might be that a merger should be enjoined because it would provide the incentive and opportunity for the hospitals to adopt a negotiating tactic that would result in higher prices.

The speaker suggested that the bargaining model should be added to the “toolkit” in order to promote competition and benefit consumers in a dynamic marketplace.

News: Antitrust AntitrustDivisionNews