By Gregory S. Crawford, Robin S. Lee, Michael D. Whinston & Ali Yurukoglu
The AT&T/Time Warner merger offers a unique opportunity to assess the criteria that in practice may be applied to vertical merger cases when litigated, and also to consider appropriate policy toward such mergers. We first discuss economic theory and evidence regarding vertical mergers, and describe a recent empirical study of ours examining the effects of vertical integration between regional sports networks and multichannel cable distributors. We next consider the lessons to be gleaned from the AT&T/Time Warner decision for future litigation of vertical mergers. Finally, we offer our views regarding appropriate policy toward vertical mergers given current economic understanding, concluding that antitrust policy objectives are at present best served through fact specific inquiries that carefully consider both pro- and anti-competitive effects of proposed vertical mergers.
