Mergers are bad for innovation

Posted by Pro Market

Mergers Are Bad for Innovation

By Asher Schechter

As competition authorities and economists worry about the competitive implications of increasingly concentrated markets, horizontal merger reviews should be broadened to include their potential implications for future innovation. So said Tommaso Valletti, the European Commission’s Chief Competition Economist, during a keynote lecture at an antitrust conference at Northwestern University last week.

Valletti, an Economics professor at Imperial College Business School and at the University of Rome Tor Vergata, joined the European Commission a year ago. During this time, the European Commission made a number of high-profile decisions, such as leveling a record €2.42 billion antitrust fine on Google, vetoing the proposed merger between Deutsche Boerse and the London Stock Exchange, clearing the now-completed US$130 billion merger between Dow Chemical and DuPont (now known as DowDuPont), and launching an investigation of the proposed merger between Bayer and Monsanto.

Most of Valletti’s talk during the Searle Center’s 10th Annual Conference on Antitrust Economics and Competition Policy was devoted to the subject of horizontal mergers and their impact on innovation, through the prism of the Dupont-Dow merger, which the EC cleared under the condition that DuPont divest of its global R&D pesticide facilities. It is the first to be cleared of the three mega-mergers that will reduce the number of top firms in the industry from five to three. The other two pending mergers are the Bayer’s planned purchase of Monsanto and ChemChina’s plan to buy Syngenta.

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