Introduction to the Analysis of Technological Progress in Merger Control
37 Pages Posted: 8 Oct 2013
Date Written: October 7, 2013
The economics of merger-related dynamic efficiencies is in embryonic stages. Still, one can easily find numerous articles and reports that deplore the reluctance of enforcement agencies and courts to incorporate dynamic considerations in merger analysis. The alleged reason for that reluctance is the difficulty of a prospective analysis thereof. Even though the latter is not ignored in itself, criticisms that agencies and courts focus on static efficiencies and disregard dynamic efficiencies, which are vital to economic growth and likely to have much more impact in the long-run on consumer welfare, are far from being rare and easily find new propagators. Under these heavy pressures, the tone of discourse of the European Commission has significantly changed and its officials forcefully underline the importance of promoting dynamic efficiency.
By contrast, what has not significantly changed is not only the merger analysis by the latter, but also and foremost, our knowledge of how to perform a dynamic analysis and what economic impact concentrations actually have on dynamic market changes in terms of pro and anticompetitive effects.
Our current approach to dynamic efficiencies resembles, therefore, offering diagnoses and medicines without having made a deeper examination. As a result, those diagnoses are more often than not vague and speculative, and remedies for the problems related to the analysis of dynamic efficiencies are generally of the type “cure-all” and do not change anything substantially. Legal certainty, decisional transparency, and the principle of legitimate confidence are becoming more and more, at least in the EU, abstract textbooks concepts that miss on a regular basis the chance to be exhibited in real-world merger decisions.
In order to put the analysis of innovation merger decisions into a larger perspective, part I of this paper analyzes the nature of innovative activities and makes a simple typology of dynamic efficiencies whereas part II studies various determinants of innovation and effects of concentrations. There is little that is fundamentally new in these two parts of our paper as they are primarily based on the existing economic literature. However, it seems useful to make a comprehensive and concise overview of the essentials of dynamic efficiency economics in order to reach a sharper and clearer understanding of its nature and potential sources, and see clearly where research lacks or is insufficient, not least from a legal perspective.
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