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Threats from Google, Microsoft and Mighty Trust Busters

T.here that is A Worrying Merger and a Welcome Merger. The first category is alliances between large companies in the same line of business. These “horizontal” mergers remove competitors from the market and remove price constraints. In such cases, competition authorities may investigate and block the merger. Other mergers have historically been considered less onerous. When a company acquires another company in an adjacent business unit (conglomerate merger), or when a supplier acquires a customer (vertical merger), the impact on competition has been seen as moderate.

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But that has changed in recent years. A growing number of non-horizontal mergers are being challenged by antitrust authorities. In September, the U.S. Federal Trade Commission (ftc) lost a challenge in court to partnering with Illumina to offer ‘next generation’ DNA-Grail, developer of sequencing tools and early cancer detection tests that rely on Illumina technology.of ftc I am appealing against the judgment. In October, the UK Competition and Markets Authority (cma) on Facebook, gifsSend s to social media platforms. On February 8th cma The acquisition of game studio Activision Blizzard by Microsoft, maker of Xbox game consoles, has released the first study to reduce competition in the industry.

Strong antitrust policies are often motivated by fears of big tech. Facebook, Google, and Microsoft have rapidly come to dominate the market through the power of networks. The more people used the product, the better it became and the more attractive it was to other customers. It’s hard to fault organic growth like this for competitive reasons, but there’s a conviction in trustbuster circles that big tech shouldn’t have been allowed to buy other businesses along the way. Recent regulatory activity is therefore fueled by regrets about the past. But it comes with its own risks. In fact, mergers often benefit consumers. The danger now is that the pendulum will swing towards over-enforcement.

To understand how regulators got to this point, it’s worth going back to the 1970s. A group of antitrust thinkers orbiting the University of Chicago have questioned the idea that vertical mergers can be harmful by adopting the theory of “one monopoly interest”. states that it cannot extend its market power up or down the vertical chain of production. To understand it, imagine an airport operator leasing space for two coffee shops. Operators own exclusive resources. It’s a property around the exclusive market for passengers who need their morning caffeine. To maximize profits, set rents high enough so that the store earns only competitive returns. But even if the operator bought his one of the coffee retailers, the profit-maximizing rent would not change (hence, one monopoly profit).

Viewed this way, vertical integration does no harm to consumers. they might help them. A related theory hypothesizes that vertical consolidation in an industry with some degree of market power at each stage of production will lead to lower prices as one of the uncompetitive markups is eliminated. In this situation, one monopoly profit cannot be gouged twice.

Trustbuster these days doesn’t focus too much on pricing. They are more concerned about vertically integrated companies using their power in one part of the chain to freeze rivals in another. is to be denied. DNA– Sequencing tools needed to develop competitive cancer tests. In Microsoft’s case, Sony, the maker of Xbox rival PlayStation, has been denied games made by Activision, fearing it will hurt competition. For charging to take hold, Trustbuster would have to prove that such a restriction would be beneficial, but not in the short term as it would mean selling fewer products, at least initially. Not so. Therefore, regulators need to anticipate how the market will evolve. This is the economic equivalent of long-term weather forecasting.

Back to Big Tech. The winner-take-all aspect of the network tends to eliminate competitors to the giant tech giants. There is little competition policy can do against such an advantage. Theoretically, countless startups are racing to oust the tech giants who must act as a check on their business conduct. But so-called “shootout” acquisitions (acquisitions of startups that could be rivals to big tech companies) tend to neutralize threats from this corner. For many trustbuster, Facebook’s acquisition of his fledgling Instagram in 2012 fell into this category. It’s also disappointing that Google’s acquisition of his DoubleClick ad server in 2008 reinforced its dominance in the digital advertising market. This market is currently the subject of a major antitrust investigation.

Celebrate big business

There have undoubtedly been times when we needed more vigilance. But it’s easy to forget that the Chicago Revolution was a response to the mighty trust buster, who believed that big business was always evil and that small businesses should be protected from competition, no matter how bad it was. . In America, courts are checks against over-execution. There is decades of jurisprudence formed by the Chicago School that say non-horizontal mergers are harmless. Nevertheless, the prospect of a legal battle is enough to keep some companies at bay: Last year, chipmaker Nvidia abandoned a proposed merger with the company. armchip designers facing antitrust scrutiny.

that is, cma It leads the way by blocking mergers involving tech giants such as Facebook and Microsoft. He may be one of the most feared British trustbuster right now.freed from EUcompetition policy, cma In 2020, we revised our guidelines to focus more on how the combined market will evolve. In the UK and Europe, competitive litigation takes place in the administrative system rather than in the courts as in the US.that all cma considerable power. A rare example of a Brexit dividend? Trustbuster might say so. Not everyone agrees.

Read more about our column on economics, Free Exchange.
The AI ​​Boom: Lessons from History (February 2)
Are Economists Misunderstanding Inflation? (January 26th)
Could Europe face a worse inflation problem than America? (January 19th)

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https://www.economist.com/finance-and-economics/2023/02/09/google-microsoft-and-the-threat-from-overmighty-trustbusters Threats from Google, Microsoft and Mighty Trust Busters

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