The Long and Successful History of Nascent Acquisitions Suggests Caution in Rethinking Antitrust Enforcement

18 Pages Posted: 30 Jan 2021

See all articles by Asheesh Agarwal

Asheesh Agarwal

TechFreedom

Andy Jung

George Mason University, Antonin Scalia Law School

Date Written: November 20, 2020

Abstract

Policymakers and antitrust enforcers are debating whether to increase scrutiny of “nascent” acquisitions, in which an established company purchases a smaller firm in a related market, out of a concern that such acquisitions may stifle competition by nipping in the bud a potential rival. Despite such concerns, America’s corporate history teaches that these types of acquisitions have served the interests of both competition and consumers. In their early years, many iconic companies in critical industries grew in part through acquisitions of smaller firms. In many cases, nascent purchases provided critical financing that allowed smaller firms to survive and innovate, and helped larger companies bring new products to more consumers, more cheaply, and more quickly via their existing distribution chains and marketing expertise. The empirical economic analysis confirms that vertical acquisitions usually lead to lower prices and greater innovation. Accordingly, policymakers should exercise restraint before they discourage such acquisitions, whether through rules changes or through lawsuits that seek to unwind such purchases years later.

Keywords: antitrust, mergers, technology, incipient, nascent, economic history

JEL Classification: K21

Suggested Citation

Agarwal, Asheesh and Jung, Andy, The Long and Successful History of Nascent Acquisitions Suggests Caution in Rethinking Antitrust Enforcement (November 20, 2020). Available at SSRN: https://ssrn.com/abstract=3734429 or http://dx.doi.org/10.2139/ssrn.3734429

Asheesh Agarwal (Contact Author)

TechFreedom ( email )

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Andy Jung

George Mason University, Antonin Scalia Law School ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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