Potential and Nascent Competition in Merger Review: Global Antitrust Institute Comment on the DOJ-FTC Request for Information on Merger Enforcement

Abstract

This Comment focuses on Section 7: Potential and Nascent Competition of the Department of Justice and Federal Trade Commission's January 18, 2022, Request for Information on Merger Enforcement. Despite information and uncertainty problems with assessing potential and nascent competition, the agencies may still address theories of harm involving potential and nascent competitors. This Comment reviews potential guidance that would facilitate the examination of potential/nascent competition cases by the agencies and courts. In particular, what are the characteristics that agencies and courts should look for in the “nature” of the acquired and acquiring firms? First, there should be greater clarity as to meaning of the terms potential competition and nascent competition—as the law and economics treat these concepts quite differently. Second, the counterfactual exercise involved in potential/nascent competition cases should differ from a standard merger review. Third, analysis of several considerations, including the uniqueness of the acquired assets and business, the innovation pipelines, recent acquisitions by the merging parties, and capabilities, could better forecast the likely competitive environment. This Comment addresses that the strength and quality of the evidence about potential/nascent competition in a relevant market should determine the level of scrutiny of an acquisition.

Keywords: antitrust, competition policy, horizontal mergers, vertical mergers, Merger Guidelines, Federal Trade Commission, Department of Justice, Clayton Act, Sherman Act, FTC Act, market power, market concentration, nascent competition, potential competition, killer acquisitions, counterfactuals

JEL Classification: K2, K21, L1, L2, L22, L4, L40, L41