Hazlett in Financial Times: Perversion of Antitrust
When anti-competitive strategies sabotage consumer interests, they pervert the enterprise of antitrust, says Professor Thomas Hazlett in a Financial Times op-ed.
Pointing out that the impetus for an antitrust complaint from a competitor can occur out of fear that the acquisition will lead to lower prices, Hazlett illustrates that that very thing would benefit consumers. "Antitrust laws are meant to encourage efficient mergers and disrupt the rest," says Hazlett, acknowledging that there is real challenge involved in determining the efficiency of a proposed merger.
Google, Yahoo, Microsoft: antitrust confusion, Financial Times, May 26, 2008. By Thomas Hazlett.
"The standard approach begins – and, some would say, ends – by defining the relevant antitrust market. If a Yahoo merger is seen as involving two advertising businesses, then market shares are modest and competitive concerns evaporate.
"Framing the market as online search advertising, however, upsets this conclusion. In that case, Google accounts for about 62 per cent of US sales, Yahoo 20 per cent and Microsoft 9 per cent. This level of concentration generally leads authorities to oppose intra-industry mergers – 'three to two' combinations.
"Yet, online search adverts compete with television commercials, newspaper classified ads and other marketing media. The question is, to what degree? This is an arduous, fact-intensive inquiry. There are multiple ways to botch the mission. The first is that the inquiry can drag. A potential 1995 IBM acquisition of Apple, which might have created a powerful rival to challenge Microsoft’s PC dominance, crumbled under the one-year delay that US antitrust approval was expected to take.
"The second is that the government’s analysis may get the economics wrong. The proper policy aims to deter only anti-competitive deals. But the balancing act is a tough exercise.
"Hence, a third problem surfaces when a delicate consumer welfare analysis is roughed up by hard-ball politics. Interests opposed to mergers routinely lobby regulators and legislators to thwart their foes. Google has blasted Microsoft as a monopoly that should be prevented from buying Yahoo – but it is only returning Microsoft’s fire in the Google-DoubleClick merger, when the software giant failed to convince US or EU authorities that the deal was anti-competitive. In breaking off its effort to buy Yahoo, Steve Ballmer, Microsoft’s chief executive, admitted that a “host of regulatory and legal problems 'pushed it to walk.'"