Merger Enforcement in Dynamic and Innovative Markets

By Pedro Gonzaga, OECD on the Level

Modern competition dynamics are challenging the work of competition authorities all around the world. Merger enforcement, in particular, increasingly requires case handlers to predict the effects of complex mergers in dynamic markets where unprecedented levels of innovation lead to constant change. If the review of mergers in traditional industries was already a daunting task, the growing number of merger cases in rapidly evolving industries, such as high technology, consumer services and online retail, is now putting enforcers to the test.

When facing the challenges of reviewing mergers in dynamic markets, existing literature does not always provide useful answers to enforcers. It often focuses on the relationship between market concentration and innovation, giving few insights on how to differentiate pro-competitive mergers from anti-competitive mergers. Some literature puts forward practical proposals for adapting merger enforcement but many of these proposals are contentious and have not been widely adopted. The proposals to define “innovation markets” are a case in point.

In light of the importance of preserving accurate and predictable merger enforcement when innovation is at stake, this post looks at two questions. Should authorities expand the timeframe of merger review with a view to capturing longer-term effects on investment and innovation? Can simple practical options to adapt merger enforcement in the context of dynamic markets be identified without having to significantly depart from the use of traditional merger enforcement tools?

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