Internet Ready : Agency Enforcement of Online Mergers

Antitrust enforcement in technology industries can be challenging: historical market information may have limited relevance, market shares may be unstable, and new entrants can be highly disruptive. Both the Federal Trade Commission and the Department of Justice have acknowledged the rigors of monitoring dynamic industries, such as those involving the Internet, but have rejected suggestions they are not up to the task. In this article, we provide an overview of the analytical considerations discussed publicly by the antitrust agencies in the most recent mergers involving Internet-based products and services. We structure our discussion around the fundamentals of merger analysis: market definition, competitive effects, entry, and efficiencies. While the business dynamics of the Internet environment are often different than traditional “bricks-and-mortar” businesses, we find that many of the standard analytical tools used historically by the agencies continue to apply. The agencies pay careful attention to network effects, scale, the pervasive vertical relationships between online businesses, and the potentially transformational role of new technologies. With these considerations in mind, the agencies have tended to focus on potential competition, unilateral effects, and vertical foreclosure concerns. We also find that conventional presumptions and tools may not always be accurate predictors of agency enforcement decisions. The agencies have, on occaison, allowed mergers in highly concentrated industries to proceed in light of the presence of scale and network effects or disruptive entrants