Antitrust Chronicle^® – (Disruptive) Innovation

Dear Readers,

In this edition of the Chronicle, we address innovation. Fostering innovation to the benefit of consumers is widely accepted to be one of the key goals of antitrust rules. But innovation as a parameter of competition is difficult to assess.

Unlike price, which can be directly quantified, innovation is by its nature speculative, and its potential effects are probabilistic at best. This is all the more so for so-called “disruptive” technological innovation that has the potential to undermine incumbents, or even redefine entire sectors of the economy.

The questions are manifold: Would permitting a merger between two innovative rivals end up in the mothballing of one or both of their innovations? Or would it pooling their innovative capacity lead to even greater innovation? Would condemning a dominant firm’s innovative business practices stifle innovation to the benefit of less innovative competitors? Or would allowing it prevent the emergence of competitors that could in turn rival the incumbent?

As discussed in the timely contributions to this Chronicle, answering these questions requires the competition community to understand how competition plays out in innovative industries, develop appropriate tools to assess it, and develop optimum rules and remedies to ensure good outcomes for consumers and society at large.

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