Antitrust Treatment of Mergers Involving Future Goods
31 December 2004
By Richard T. Rapp with Ilene Knable Gotts, Partner at Wachtell, Lipton Rosen & Katz
The Federal Trade Commission (FTC) and, to a lesser extent, the U.S. Department of Justice (DOJ) have challenged a number of mergers partly on grounds that the combination of the parties' research and development projects would reduce competition in markets for products that do not yet exist. The FTC and DOJ argue that these mergers would reduce innovation competition in the present and therefore reduce consumer choice in the future.
In this article published in Antitrust, NERA Special Consultant Dr. Richard Rapp and Wachtell, Lipton, Rosen & Katz partner Ilene Knable Gotts acknowledge that, given its forward-looking perspective, any antitrust merger analysis requires predictive judgments. However, in discussing challenged pharmaceutical mergers, the authors question how such predictions can be relied upon, considering that the R&D products neither exist in the present nor can be anticipated within a foreseeable time horizon.
To help gauge the success rate of this evolving enforcement policy, Dr. Rapp and Ms. Knable Gotts review the outcomes of ten enforcement actions against pharmaceutical mergers involving future goods that occurred from 1995 to 2001. The authors suggest that the results do not foster enthusiasm for antitrust intervention as a means of making future goods more competitive. They propose modifying enforcement policy to hew to the traditional market analysis in the 1992 Merger Enforcement Guidelines, under which entry and potential competitors can be considered in goods markets that are reasonably likely to exist within a foreseeable time frame.
This article was reprinted with permission from Antitrust, Fall 2004, a publication of the American Bar Association Section of Antitrust Law. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. Copyright 2004. All rights reserved.
