Merger Analysis in High Technology Markets
A Conference of the Information Economy Project - Friday, February 1, 2008, Arlington, Virginia
The IEP conference on high tech mergers focused on how to evaluate antitrust issues in dynamic markets, where product boundaries and competitive rivalries are characterized more by tumult than by stability. Plenary speakers presented a rich array of analysis of Information Economy mergers, including DirecTV-Dish, Google-DoubleClick, and XM-Sirius.
Conference Agenda:
8:15 a.m. - Welcome: Thomas Hazlett (GMU)
8:20 a.m. - Morning Keynote: Ken Heyer (DOJ)
8:45 a.m. - Panel 1
Joshua Wright, Moderator (GMU/FTC)
Howard Shelanski (UC Berkeley) - Technological Innovation and Merger Policy's Third Era
Michael Baye (FTC) - Market Definition in Online Markets
Richard Gilbert (UC Berkeley) - Sky Wars: The Attempted Merger of Dish/ DirecTV
10:00 a.m. - Break
10:15 a.m. - Panel 2
Michael Vita, Moderator (FTC)
Hal Singer (Criterion) and Robert Hahn (AEI) - An Antitrust Analysis of Google's Proposed Acquisition of DoubleClick
Mary Coleman (LECG) - Nice Theory But Where's the Evidence?: The Use of Economic Evidence to Evaluate Vertical and Conglomerate Mergers in the US and EU
Luke Froeb (Vanderbilt) - Mergers Among Firms that License Common Intellectual Property
11:30 a.m. - Break
11:45 a.m. - Panel 3
Jonathan Baker, Moderator (American U)
Bruce Abramson (CRAI) - Are "Online Markets - Real and Relevant?
Thomas Hazlett (GMU) - Antitrust in Orbit: Some Dynamics of Horizontal Merger Analysis in the Case of XM-Sirius
J. Greg Sidak (Georgetown) - Evaluating Market Power With Two-Sided Demand and Preemptive Offers to Dissipate Monopoly Rent: Lessons for High-Technology Industries from the Proposed Merger of XM and Sirius Satellite Radio
1:00 p.m. - Luncheon Keynote: Luke Froeb (Vanderbilt)
2:30 p.m. - Adjourn
The Information Economy Project is proud to present articles that have been published in the Journal of Competition Law and Economics from the Merger Analysis in High Technology Markets Conference held on February 2, 2008:
"Technological Change and Merger Policy's Third Era" by Howard Shelanski (Feb. 1, 2008). Excerpt: Changes in Merger Policy Over the Last Century. Evolutionary Changes: Antimonopoly Era (1904-1973), Consumer Welfare Era (1973-2004), Dynamic Efficiency Era (2004-). Cyclical Changes: Merger review has varied in the scope of its objectives: from narrow anti-bigness, a broader balance of efficiency and small-business protection, narrow consumer welfare focus, a broader balance of static efficiency and innovation.
"Market Definition in Online Markets" by Michael Baye, Journal of Competition Law & Economics, 4(3), 639-653 (Sept. 2008). Excerpt: Although the basic principles used to define a relevant market or to analyze unilateral competitive effects in traditional retail settings also apply in online retail markets, several features of the online environment add complexities to the analysis. This paper examines some of the results in the economics and marketing literature that can influence market definition and competitive effects analysis in online retail settings. I argue that a failure to account properly for certain aspects of online markets can lead to erroneous definitions of the relevant market and, more importantly, erroneous conclusions regarding the unilateral competitive effects of horizontal mergers.
"Sky Wars: The Attempted Merger of Dish/DirecTV" by Richard Gilbert (Feb. 1, 2008). Excerpt: A High Tech Merger? Relatively new product: High Power Direct Broadcast Satellite TV. DirecTV launched 1994. EchoStar/Dish launched 1996. Large claimed efficiencies. Platform issues. Incompatible encryption formats. Dynamic platform competition. Installed base pricing incentives.
"Defining the Relevant Product Market for the Google-DoubleClick Merger" by Hal Singer and Robert W. Hahn (Feb. 1, 2008). Excerpt: Industry Background: In 2007, U.S. advertisers were expected for the first time to spend more on online advertising than on radio advertising. Source: eMarketer. U.S. online advertising revenues in 2007: were roughly $17 billion, an increase of 35 percent over 2005 revenues. Source: Interactive Advertising Bureau.
"Nice Theory, But Where's the Evidence?: The Use of Economic Evidence to Evaluate Vertical and Conglomerate Mergers in the U.S. and E.U." by Mary T. Coleman (Feb. 1, 2008). Excerpt: Overview: Brief description of primary vertical theories of potential competitive concern from a merger. Input foreclosure. Customer foreclosure. Elements for a vertical theory to be plausible. Ability to foreclose. Incentive to foreclose. Foreclosure is likely to harm competition. Efficiencies do not offset. Evidence related to each element.
"Horizontal Mergers Among IP Licensors and IP Licensees" by Luke Froeb (Feb. 1, 2008). Excerpt: Joint Work: Mike Shor, Steven Tschantz. Disclaimer: Exploratory Analysis. Outline: Motivation: merger analysis. Question 1: Are horizontal merger effects affected by upstream/downstream vertical relationships? Question 2: What Happens when you ignore upstream and/or downstream vertical relationships?
"Are 'Online Markets' Real and Relevant? From Monster/HotJobs to Google/DoubleClick" by Bruce D. Abramson, Journal of Competition, Law and Economics (Feb. 1, 2008). Excerpt: Key Conclusions: As the novelty of the Internet wears off, on-line merger analysis looks increasingly like off-line merger analysis. Most of the things that make interesting on-line mergers interesting have little to do with competition. A Blast from (My) Past: During the summer of 2001, HotJobs retained my services to support its proposed acquisition by Monster.com. One of the first "major" mergers of Internet "pure plays." Basic points of interest stemmed from a shift in understanding of Internet economics between 2000 (documents) and 2001 (facts). See, From Investor Fantasy to Regulatory Nightmare: Bad Network Economics and the Internet's Inevitable Monopolists 16 Harv. J. L. Tech. 159 (2002).
"Antitrust in Orbit: Some Dynamics of Horizontal Merger Analysis in General and with Respect to XM-Sirius" by Thomas W. Hazlett, Journal of Competition Law & Economics, 4(3), 753-773 (Sept. 2008). Excerpt: Horizontal merger evaluation is heavily reliant on market definition. An SSNIP framework formats the analysis, and demand elasticity evidence used to apply the test is often sparse, as is often found in high-technology industries. This paper examines other sources of evidence that reveal the dynamics of market structure, data that are also probative in the evaluation of competitive effects. These sources include capital valuations of firms, financial event studies, and the public positions taken with respect to the merger by interested parties. Such evidence is examined in the XM-Sirius merger (2007-08) and shown - in two of the three instances - to be relatively informative in merger welfare analysis.
"Evaluating Market Power with Two-Sided Demand and Preemptive Offers to Dissipate Monopoly Rent: Lessons for High-Technology Industries from the Proposed Merger of XM and Sirius Satellite Radio" by J. Greg Sidak and Hal J. Singer, Journal of Competition Law & Economics, 4(3), 697-751 (Sept. 2008). Excerpt: Can the standard merger analysis of the Department of Justice's and Federal Trade Commission's Horizontal Merger Guidelines accommodate mergers in high-technology industries? In its April 2007 report to Congress, the Antitrust Modernization Commission (AMC) answered that question in the affirmative. Still, some antitrust lawyers and economists advocate exceptions to the rules for particular transactions. In the proposed XM-Sirius merger, for example, proponents argue that the Merger Guidelines be relaxed to accommodate their transaction because satellite radio is a nascent, high-technology industry characterized by "dynamic demand."
