Acquisitions of Potential Competitors: The U.S. Approach and Calls for Reform

Lawmakers and antitrust enforcement agencies around the world are considering whether existing laws and enforcement tools are sufficient to address acquisitions of potential competitors. Advocates of reform contend that existing standards are deficient; they have proposed a number of reforms ranging from shifting burdens of proof for all acquisitions of nascent firms to imposing special rules for acquisitions by dominant platforms.

This Article begins with a discussion of the U.S. approach to analyzing acquisitions of potential competitors. We explain the need for exacting standards, including due to the increased difficulties of predicting the future world without the acquisition. Unlike with actual competition, with potential competition there is no history of competition with price and other historical data, which makes the counterfactual analysis all the more difficult. We then consider the evidence that existing laws have resulted in systematic underenforcement and substantial harm to competition, finding no reliable evidence to this effect. We conclude with a discussion of the risks posed by various reform proposals, including the potential for harm to competition and innovation. We also explain how the various proposals would introduce significant uncertainty in antitrust enforcement, which can serve as a tax on transactions.

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