Vertical Mergers and Input Foreclosure: Lessons from the AT&T/Time Warner Case

Vertical Mergers and Input Foreclosure Lessons from the AT&T/Time Warner Case

Review of Industrial Organization ◽

10.1007/s11151-021-09826-x ◽

2021 ◽

Author(s):

Carl Shapiro

Keyword(s):

Economic Analysis ◽

Federal Trade Commission ◽

Department Of Justice ◽

Merger Guidelines ◽

Vertical Merger ◽

Practical Guide ◽

Economic Expert ◽

Time Warner ◽

Vertical Mergers ◽

The U.S

AbstractThis article offers a practical guide to analyzing vertical mergers using the general approach to input foreclosure and raising rivals’ costs that is described in the 2020 Vertical Merger Guidelines that were issued by the U.S. Department of Justice and the Federal Trade Commission. The step-by-step analysis described here draws lessons from how that theory of harm played out in the lone vertical merger case that has been litigated by the antitrust agencies in recent decades: the 2018 challenge by the Department of Justice to the merger between AT&T and Time Warner. I testified in court as the DOJ’s economic expert in that case. I explain here how to quantify the increase in rivals’ costs and the elimination of double marginalization that are caused by a vertical merger and how to evaluate their net effect on downstream customers. I also explain how this economic analysis fits into the three-step burden-shifting approach that the courts apply to mergers under Section 7 of the Clayton Act. Based on my experience in the AT&T/Time Warner case, I identify a number of shortcomings of the 2020 Vertical Merger Guidelines.

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Vertikale Integration im Mediensektor und Fusionskontrolle

10.5771/9783748925187 ◽

2021 ◽

Author(s):

Jakob Rüder

Keyword(s):

Comparative Law ◽

Practical Relevance ◽

Interesting Problem ◽

The Us ◽

The Face ◽

Time Warner ◽

Vertical Mergers ◽

Economic Foundations ◽

Vertikale Integration ◽

The Eu

The antitrust assessment of vertical media mergers between content providers and distributeurs has until now unjustifiably led a shadowy existence in Germany. Yet there is a considerable practical relevance in view of the success of OVDs such as Netflix and causally related controversial vertical mergers such as AT&T/Time Warner. Hence, this dissertation sharpens the view for the numerous interesting problem areas. With an interdisciplinary and comparative law approach, the causes of vertical media mergers in the face of OVD disruption as well as the economic foundations are first examined. Building on the economic findings and taking into account the important aspects sector regulation, the lex lata and the current antitrust practice in the US, the EU and Germany are then discussed and evaluated.

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Vertical Mergers, The Coase Theorem, And The Burden of Proof

Journal of Competition Law & Economics ◽

10.1093/joclec/nhaa015 ◽

2020 ◽

Vol 16 (4) ◽

pp. 488-510

Author(s):

Timothy J Brennan

Keyword(s):

Vertical Integration ◽

Burden Of Proof ◽

Federal Communications Commission ◽

Coase Theorem ◽

Horizontal Mergers ◽

Department Of Justice ◽

Vertical Merger ◽

First Order ◽

Time Warner ◽

Vertical Mergers

Abstract The challenge by the Department of Justice (DOJ) to AT&T’s acquisition of Time Warner, and a prior challenge by DOJ and Federal Communications Commission to Comcast’s acquisition of NBC-Universal, has increased attention on vertical mergers. The standard approach identifies a tactic that the merged firm would employ that is both profitable and harms consumers. This approach misses the target; a profitable but anticompetitive tactic may be necessary but is not sufficient. The “Coase theorem” implies that courts and enforcement agencies should instead focus on why vertical integration is necessary to achieve an outcome that would be profitable to the merging firms. The focus on the tactic rather than why ownership matters presumes that vertical merger is necessary, without supporting theory or evidence. The same proposition should hold for horizontal mergers, but the required strength of evidence is greater for vertical mergers because mergers between complement providers are first-order beneficial and the conduct facilitated by horizontal mergers but not vertical mergers is typically illegal.

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