The tentative recommendations of the Antitrust Modernization Committee are out, and include Commissioner vote counts for various propositions. The recommendations largely take the form of propositions that the AMC Commissioners joined, did not join, or were undetermined. Here are a few that caught my eye on an initial read-through (note that 2-5 apply to merger analysis).
- A price above marginal cost, by itself, does not suggest market power in a
relevant antitrust market. Firms with low marginal costs but large fixed
costs, particularly for research and development and other innovative
activity, may need to price significantly above marginal costs simply to
earn a competitive return in the long run.
- No substantial changes to merger enforcement policy are necessary to account for
industries in which innovation, intellectual property, and technological change are
central features (Commissioner Delrahim did not join, Commissioner Valentine undetermined).
- The agencies should increase the weight they place on certain types of
efficiencies. For example, the agencies and courts should give greater
credit for fixed-cost efficiencies, particularly in dynamic, innovation driven
industries where marginal costs are low relative to typical prices (five commissioners did not join).
- The agencies should update the Merger Guidelines to explain more
extensively how they evaluate the potential impact of a merger on
innovation (five commissioners do not join)
- The agencies should update the Merger Guidelines to include an
explanation of how the agencies evaluate non-horizontal mergers (two commissioners do not join).
- In particular, the existing standards regarding bundling, as expressed in cases such
as LePageâ€™s, may prohibit conduct that is procompetitive or competitively neutral
and thus these standards may actually harm long-term consumer welfare (Commissioner Shenefield does not join).
- Congress should repeal the Robinson-Patman Act in its entirety (two commissioners do not join).
- Congress should not legislatively amend Section 2 of the Sherman Act. Standards
currently employed by U.S. courts for determining whether single-firm conduct is
unlawfully exclusionary are generally appropriate. Although it is possible to
disagree with the decisions of particular cases, in general, the courts have
appropriately recognized that vigorous competition, the aggressive pursuit of
business objectives, and the realization of efficiencies not available to competitors
are generally not improper, even for a â€œdominantâ€ firm and even where
competitors might be disadvantaged.
There is a lot to digest in the AMC recommendations. My overall impression is that the recommendations are quite sensible all the way around. I am particularly interested in the support for guidelines on innovation and non-horizontal mergers, though there is apparently less support for the former. The 1984 Merger Guidelines may provide a hint as to what non-horizontal merger guidelines might look like, though there have been a number of developments in the economic analysis of vertical contractual restraints and mergers since then (both theoretically and empirically) and so a new set of guidelines might look very different. Guidelines for innovation mergers might be very useful in terms of transparency, but my first reaction is that I don’t know quite what they would say. While it is clear that the AMC believes that innovation effects should “count” for merger analysis, and I agree, it seems like there is still much to learn about the basic economic forces at work with mergers involving innovation effects both theoretically and empirically. All of this is putting aside issues associated with how one might engage in the necessary welfare tradeoffs that might arise between say, higher prices and greater innovation from a particular merger. It seems like there is a threshhold level of knowledge that is necessary prior to drafting a set of Guidelines committing to a particular analytical approach that is sure to influence how federal courts handle these issues.
In any event, the AMC recommendations are well worth reading and are likely to spark a good deal of discussion in antitrust circles in the coming months and years. Looking forward, it will also be interesting to compare and contrast the AMC recommendations regarding monopolization and vertical conduct (see, e.g., 6-8 above) with any consensus that emerges from the FTC/DOJ Section 2 hearings.