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TOTM In January a Food and Drug Administration advisory panel, the Tobacco Products Scientific Advisory Committee (TPSAC), voted 8-1 that the weight of scientific evidence shows that switching from . . .
In January a Food and Drug Administration advisory panel, the Tobacco Products Scientific Advisory Committee (TPSAC), voted 8-1 that the weight of scientific evidence shows that switching from cigarettes to an innovative, non-combustible tobacco product such as Philip Morris International’s (PMI’s) IQOS system significantly reduces a user’s exposure to harmful or potentially harmful chemicals.
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ICLE White Paper This paper looks at whether the standard unilateral effects model can be applied to non-price competition parameters such as innovation. This question arises because competition authorities are intervening in horizontal mergers that are found to give rise to a “significant impediment to effective innovation competition” (“SIEIC”) as a result of a reduction in post-merger R&D efforts (including lower expenditure).
This paper looks at whether the standard unilateral effects model can be applied to non-price competition parameters such as innovation. This question arises because competition authorities are intervening in horizontal mergers that are found to give rise to a “significant impediment to effective innovation competition” (“SIEIC”) as a result of a reduction in post-merger R&D efforts (including lower expenditure). SIEIC is distinct from the mainstream unilateral effects theory of harm that predicts a “significant impediment to effective competition” (“SIEC”) as a result of increased prices. Most recently, the European Commission (“Commission”) used its powers under the EU Merger Regulation (“EUMR”) to impose remedies in the Dow/DuPont merger. This was in part because of concerns that that the transaction “would be likely to significantly impede effective competition as regards innovation both in innovation spaces where the Parties’ lines of research and early pipeline products overlap and overall in innovation in the crop protection industry.” At the heart of the development of SIEIC analysis lies a fundamental question of competition theory: under what conditions can variations of existing economic models be applied in merger cases?
This paper is divided into three sections. In Section I, the SIEIC theory of harm is described and put into perspective against past competition policy on innovation competition. Section I concludes that SIEIC constitutes a small but significant change in merger policy. In Section II, the economics of SIEIC are discussed. In particular, it will be seen that SIEIC is an application of the standard unilateral effects analysis where the focus is shifted from price to innovation effects. Section II demonstrates that this variant of the model can only deliver sound and robust empirical predictions if three critical innovation-specific questions are addressed. Section III discusses the economic methodology of merger control policy. This Section shows that agencies should remain free to rely on new or adapted pre-existing economic models in merger control reviews, provided they are able to discharge the “burden of persuasion”. With this, the paper hopes to contribute to the ongoing development of optimal merger control policy in innovative and R&D-driven markets.
ICLE White Paper The agriculture sector has seen significant technological innovation and organizational change over the last two decades, leading to increases in both farm productivity and profitability.
The agriculture sector has seen significant technological innovation and organizational change over the last two decades, leading to increases in both farm productivity and profitability. These scientific breakthroughs, most notably in crop protection science biotech seed traits and precision farming, were the result of substantial research and development (“R&D”) investment. Further, these technological breakthroughs were accompanied by organizational changes — e.g., increasing vertical and horizontal collaboration — that have enabled an increasingly complex industry to productively implement them.
In recent years the need to innovate has only increased. As technology in the sector continues to evolve, companies are increasingly adapting with structural changes to enable more effective R&D. These adaptations include increased collaboration between companies and, at times, integration of firms through mergers and acquisitions (“M&A”). This M&A activity has harmed neither competition, innovation, or investment by new entrants. In fact, combining businesses with complementary R&D has spurred innovation and accelerated the development and deployment of new products, one of the primary goals of the antitrust laws. Advances in biotechnology, crop protection science, and AgTech have provided farmers with increasingly sophisticated tools to meet the challenges of increasing demand for food and diminishing natural resources. Far from harming innovation, M&A activity in the agriculture industry has been accompanied by tremendous increases in R&D spending by existing and new companies and enhanced agricultural productivity.
Criticisms of agricultural industry M&A activity — and to the current, proposed Bayer-Monsanto and Dow-DuPont mergers in particular — are based on one or more of several common misconceptions about the industry, innovation, competition, and the deals themselves. This paper identifies and responds to several of those misconceptions, focusing in particular on the claims raised in a 2016 working paper produced by the Agricultural and Food Policy Center at Texas A&M University, entitled Effects of Proposed Mergers and Acquisitions Among Biotechnology Firms on Seed Prices (“Texas A&M Report” or “Report”).1 Fundamentally, the Texas A&M Report incorporates flawed or incomplete antitrust law and economics in its condemnation of the pending mergers by alleging likely harms without considering their likely countervailing and procompetitive benefits. Further, the potential harms alleged are premised on unsound or outdated economic theory, or rooted in inconsistent or inaccurate characterizations of the deals, the industry, and its competitive dynamics. The Report’s substantial flaws make it an unsuitable guide to proper antitrust policy regarding the proposed deals.
Regulatory Comments "On behalf of the R Street Institute, the Competitive Enterprise Institute, TechFreedom, and the International Center for Law & Economics, we respectfully submit these comments in response to the California Department of Motor Vehicles’ proposed Driverless Testing and Deployment Regulations released on March 10, 2017..."
“On behalf of the R Street Institute, the Competitive Enterprise Institute, TechFreedom, and the International Center for Law & Economics, we respectfully submit these comments in response to the California Department of Motor Vehicles’ proposed Driverless Testing and Deployment Regulations released on March 10, 2017. We believe the proposed regulations better serve the people of California—not only in terms of safety, but in terms of consumer welfare more generally. We are particularly cognizant of the DMV’s demonstrable commitment to an iterative approach to this rulemaking. On that basis and in that spirit, we believe that further revisions are necessary.”
TOTM On Thursday, March 30, Friday March 31, and Monday April 3, Truth on the Market and the International Center for Law and Economics presented a blog symposium . . .
On Thursday, March 30, Friday March 31, and Monday April 3, Truth on the Market and the International Center for Law and Economics presented a blog symposium — Agricultural and Biotech Mergers: Implications for Antitrust Law and Economics in Innovative Industries — discussing three proposed agricultural/biotech industry mergers awaiting judgment by antitrust authorities around the globe. These proposed mergers — Bayer/Monsanto, Dow/DuPont and ChemChina/Syngenta — present a host of fascinating issues, many of which go to the core of merger enforcement in innovative industries — and antitrust law and economics more broadly.
TOTM People need to eat. All else equal, the more food that can be produced from an acre of land, the better off they’ll be. Of . . .
People need to eat. All else equal, the more food that can be produced from an acre of land, the better off they’ll be. Of course, people want to pay as little as possible for their food to boot. At heart, the antitrust analysis of the pending agribusiness mergers requires a simple assessment of their effects on food production and price. But making that assessment raises difficult questions about institutional competence.
TOTM The recently notified mergers in the seed and agro-chem industry raise difficult questions that competition authorities around the world would need to tackle in the . . .
The recently notified mergers in the seed and agro-chem industry raise difficult questions that competition authorities around the world would need to tackle in the following months. Because of the importance of their markets’ size, the decision reached by US and EU competition authorities would be particularly significant for the merging parties, but the perspective of a number of other competition authorities in emerging and developing economies, in particular the BRICS, will also play an important role if the transactions are to move forward.
TOTM Innovation is more and more in the spotlight as questions grow about concentration and declining competition in the U.S. economy. These questions come not only . . .
Innovation is more and more in the spotlight as questions grow about concentration and declining competition in the U.S. economy. These questions come not only from advocates for more vigorous competition enforcement but also, increasingly, from those who adhere to the school of thought that consolidation tends to generate procompetitive efficiencies. On March 27th, the European Commission issued its decision approving the Dow-DuPont merger, subject to divestitures of DuPont’s global R&D agrichemical assets to preserve price and innovation competition.
TOTM The US agriculture sector has been experiencing consolidation at all levels for decades, even as the global ag economy has been growing and becoming more . . .
The US agriculture sector has been experiencing consolidation at all levels for decades, even as the global ag economy has been growing and becoming more diverse. Much of this consolidation has been driven by technological changes that created economies of scale, both at the farm level and beyond.
