ICLE White Paper Recounts ‘Doomsday’ Merger Predictions that Never Came True
PORTLAND, Ore. (March 22, 2023) – As the Federal Trade Commission (FTC) and the U.S. Justice Department’s (DOJ) Antitrust Division prepare to release updated federal merger guidelines that the agencies say will better detect and prevent illegal and anticompetitive deals, a new research paper from the International Center for Law & Economics (ICLE) looks back at several recent high-profile mergers that drew apocalyptic warnings about potential harm to competition and consumers.
Authors Brian C. Albrecht, Dirk Auer, Eric Fruits, and Geoffrey A. Manne note that a retrospective look at these past mergers finds that the critics—some of whom have since taken positions in the upper echelons of U.S. antitrust agencies—were frequently off-base in their dire predictions. For example:
- Amazon’s 2017 deal to purchase Whole Foods would, we were told, allow the company to dominate the grocery business, much as it had online retail. Lina Khan, now chair of the FTC, even warned that it “would allow Amazon to potentially thwart future innovations.” Five years after the deal, the stocks of many rival retail companies significantly outperformed Amazon’s, while Whole Foods’ market share has not meaningfully increased since its acquisition by Amazon.
- ABI’s 2016 deal to acquire SABMiller would, we were told, “eliminate competition” in the brewing industry and that “the effects on the craft-brewing industry would be devastating.” In fact, in the four years following the merger, the average U.S. market saw an 11% increase in the number of craft brewers, and the market concentration enjoyed by the four largest breweries has seen a long-term drop from 90.8% to 68.6%.
- Bayer’s 2018 merger with Monsanto would, Sen. Amy Klobuchar (D-Minn.) warned at the time, “significantly reduce competition, limit seed options for farmers, and raise prices for both farmers and consumers.” In fact, corn and soybean prices actually fell in real inflation-adjusted terms. And rather than enjoying monopoly profits, Bayer’s stock is down more than 50% over the past five years.
- Google’s 2019 purchase of Fitbit raised the hackles of both consumer privacy and antitrust advocates, with seven Democratic senators warning that adding “Fitbit’s consumer data to Google’s could further diminish the ability of companies to compete with Google in… ad technology markets.” In fact, Google’s share of online advertising spending has declined from 34.7% to 28.8%. Moreover, Fitbit’s share of the smartwatch market has actually fallen from 5.7% to 3.8%. And contrary to warnings from privacy advocates, Google does not use Fitbit data to target Google Ads.
The authors also examine a pair of deals that have drawn significantly more interest in recent years than they did at the time they were consummated.
- Facebook’s 2012 deal to purchase Instagram was largely ignored as insignificant at the time, or even derided as a poor business decision on Facebook’s part. In more recent years, it has been described as a “killer acquisition” that locked in Meta’s social-media monopoly, making it “the one that got away” from antitrust regulators. But, in fact, Meta’s stock has lost more than half its value since its peak in 2021, as the company has had to contend with the rise of TikTok.
- Ticketmaster’s 2010 merger with Live Nation has come under increased scrutiny in the wake of the company’s technical difficulties in rolling out sales for Taylor Swift’s 2023 tour. While the merger did draw objections at the time, the reality is that Ticketmaster has actually lost market share in the years since, partly due to the structural remedies it agreed to as part of the deal. Moreover, the technical problems it encountered in the Taylor Swift fiasco don’t appear to be related in any way to the Live Nation merger.
“Most mergers, even the ones we picked as noteworthy, are largely benign but pose a set of tradeoffs,” the authors write. “These ambiguous effects are precisely why evidence-based antitrust enforcement—along with remedies that can separate the wheat from the chaff—is as important today as it has ever been.”