To Block or Not to Block Mergers
Debate over mergers and acquisitions has long existed in the corporate world. While some people think that “horizontal mergers,” or company combinations that include comparable firms, should be studied because they could lessen competition, others think that “vertical mergers,” or business combinations that involve suppliers and customers, are less troublesome.
More scrutiny is being given to non-horizontal mergers
However, the number of non-horizontal mergers that are being contested by antitrust authorities has increased recently. For instance, the Federal Trade Commission’s legal challenge to the combination of Illumina and Grail was rejected in September 2021. Similar to how the British Competition and Markets Authority compelled Facebook to back out of its acquisition of Giphy, the CMA recently made an early conclusion that Microsoft’s acquisition of Activision Blizzard will lessen competition in the gaming sector.
The Functions of Big Tech and Antitrust Law
Concerns about the quick ascent and hegemonic domination of major tech firms like Facebook, Google, and Microsoft frequently serve as the driving force behind the heightened antitrust investigation. Due to the strength of networks, these businesses have taken the lead in the market, and as more people use their products, the quality of those items improves. Some people, though, think that these corporations shouldn’t have been permitted to pick up more companies along the road.
Los Angeles School of Economics
Going back to the 1970s, when a group of antitrust experts affiliated with the University of Chicago questioned the possibility that vertical mergers may be detrimental, is crucial to understanding the present regulatory landscape. They made use of the “one monopoly profit” idea, which holds that a monopolist cannot expand their market dominance up or down the supply chain.
Changing Trustbusters’ Focus
However, trustbusters’ attention has switched away from price and toward the prospect that a vertically integrated corporation may use its influence in one area of the supply chain to drive out competitors in another. Regulators need to foresee potential market developments and show that implementing such limits will be worthwhile. This leads us back to large tech firms and the winner-takes-all nature of networks, which tends to weed out rivals for the large tech oligopolies.
In Support of Large Corporations
It is important to remember that the Chicago School was a reaction to passionate trustbusters who held the view that small firms should be shielded from competition and that large company was always bad. Non-horizontal mergers are allowed, according to decades of legal doctrine created by the Chicago School. However, the prospect of a legal dispute might dissuade some businesses.
The dreaded Trustbusters of Britain
Notably, the CMA has taken the lead in preventing mergers involving powerful tech companies like Facebook and Microsoft. Instead than being litigated in court as they are in America, competition cases are pursued through an administrative system in Britain and Europe. One of the most dreaded trustbusters in the world, the CMA updated its regulations in 2020 to give greater weight to post-merger market dynamics.