Vertical Mergers and Input Foreclosure: Lessons from the AT&T/Time Warner Case

37 Pages Posted: 16 Mar 2021

See all articles by Carl Shapiro

Carl Shapiro

University of California, Berkeley - Haas School of Business

Date Written: January 27, 2021

Abstract

This article offers a practical guide to analyzing vertical mergers using the general approach to input foreclosure and raising rivals’ costs described in the 2020 Vertical Merger Guidelines issued by the Department of Justice and the Federal Trade Commission. The step-by-step analysis described here draws lessons from how that theory of harm played out in the lone vertical merger case litigated by the antitrust agencies in recent decades, namely the 2018 challenge by the Department of Justice to the merger between AT&T and Time Warner. I testified in court as the DOJ’s economic expert in that case, giving me a unique perspective. I explain here how to quantify the increase in rivals’ costs and the elimination of double marginalization caused by a vertical merger and how to evaluate their net effect on downstream customers. I also explain how this economic analysis fits into the three-step burden-shifting approach that the courts apply to mergers under Section 7 of the Clayton Act. Based on my experience in the AT&T/Time Warner case, I identify a number of shortcomings of the 2020 Vertical Merger Guidelines.

Keywords: vertical mergers, antitrust, foreclosure

Suggested Citation

Shapiro, Carl, Vertical Mergers and Input Foreclosure: Lessons from the AT&T/Time Warner Case (January 27, 2021). Available at SSRN: https://ssrn.com/abstract=3774605 or http://dx.doi.org/10.2139/ssrn.3774605

Carl Shapiro (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-642-5905 (Phone)

HOME PAGE: http://faculty.haas.berkeley.edu

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
191
Abstract Views
402
rank
192,359
PlumX Metrics