A Capability Approach to Merger Review
Merger analysis typically focuses on possible strategic price effects in markets where there is existing competition between the merging firms. We refer to this as the product based approach. This paper proposes a complementary approach based on an assessment of the merging firms’ capabilities that can provide insights on potential merger effects, including in circumstances where the product based approach offers little practical guidance to antitrust authorities. Our approach is rooted in the resource-based view of business strategy that starts from the premise that it is a firm’s capabilities (sometimes called core competencies), which drive its competitive advantage across markets. We argue that mergers in which firms’ capabilities are less overlapping are more pro-competitive on several dimensions: immediate competition in overlapping markets, immediate competition in other markets, long-run competition and innovation.