Recapturing the Business Side of Innovation in Antitrust Merger Analysis

The antitrust laws were not passed as an academic exercise. They were passed to break up the great Trusts, and to preserve competition. These were and are business issues. Our current debate over the impact of mergers on innovation seems to have left that business purpose and dimension out of the discussion. It is time to bring business reality back into the antitrust analysis. Innovation drives progress, and is a key factor in determining the success or failure of a business, an industry, and society overall. Innovation also is a concept with a rich heritage in business and social science. But our current legal discussions focus on only a part of what makes innovation important. We have set up a distinction between the idea of an innovation and the development of that idea into a successful product, and then downgraded or ignored that second part. But the transition from idea to product is a critical step in the process. After reviewing the ways in which innovation has been defined in the legal literature, we propose a definition arising out of the business world that captures the full meaning of innovation. It turns out that the current approach to evaluating the impact of mergers on innovation doesn’t really have much to do with innovation at all.

By Kent Bernard¹

I. INTELLECTUAL ANTITRUST MEETS BUSINESS REALITY

The antitrust laws were not passed as an academic exercise. They were passed to break up the great Trusts, and to preserve competition. These were and ar