Seminar 1 notes (concepts of competition)

Just a follow-up on the discussion on the first seminar – feel free to supply comments.

The point I think I wanted to get out of the Mueller paper is that there seem to be two ways of reading the impact of mergers. The present approach, which is what underpins the contemporary approach is to ask if the merger risks leading to a reduction in output as a result of the merged entity having enough market power to be able to do this. A merger that creates a monopoly is a paradigmatic example of this.

What Mueller appears to suggest is that most of the economic evidence shows that many mergers fail to yield the efficient outcomes that economic theory predicts. On the contrary, they tend to be inefficient. This explains why he suggests that mergers are prima facie blocked unless the parties can convince the regulator of an efficient outcome. The difficulty I see with this approach is that the inefficiency results not from market power but from the unhappy results of the merger. Then this is not an antitrust issue as such, because while there is an inefficiency, but not the result of an anticompetitive act. Hence, this is a very different reading of competition law intervention.