Refining Future Potential Competition: The doctrine allowing courts to protect innovation

Abstract

In their new Merger Guidelines the DOJ and FTC acknowledge that when they protect competition to innovate they actually protect competition in Future Markets, markets for products which do not yet exist. And in Illumina v. FTC the Fifth Circuit held that Section 7 of the Clayton Act allows the enforcers to protect competition in Future Markets.

Both the Merger Guidelines and Illumina v. FTC implicitly incorporate in their analysis of Future Markets the Future Markets Model, the analytical tool the author derived after reviewing the cases in which both the American and European competition authorities claimed they protected competition to innovate. While all competition authorities apply the Future Markets Models, they could do so more or less aggressively. The American enforcers imply not only in their new Merger Guidelines, but also by announcing other policies such as requiring firms, in their proposed, expansive, Hart-Scott-Rodino rules to provide extensive information regarding their pipeline products, that they will enforce the Model aggressively.

• American courts must also decide what legal doctrine allows them to protect competition in Future Markets. Many commentators, and the court in Meta/Within, say that this doctrine is actual potential competition. But actual potential competition only applies to markets for existing products. It therefore does not help courts decide how and when they should act to protect competition in markets for products which do not exist yet.

• The author has therefore proposed a new doctrine, one he calls Future Potential Competition. This doctrine requires courts to balance all appropriate variables when they decide how aggressively they will act to protect competition in Future Markets.

In this article the author further refines this doctrine. He shows that in Illumina v. FTC the Fifth Circuit implicitly endorsed Future Potential Competition. He also shows, among other things, that the new Merger Guidelines implicitly say that for a Future Market to be competitive at least five firms must compete in that market.

Keywords: Future Markets Model, Future Markets, competition to innovate, Clayton Act, innovation, DOJ, FTC, Hart-Scott-Rodino, Merger Guidelines, Illumina v. FTC, Future Potential Competition

JEL Classification: K21