A recent report from the Information Technology and Innovation Foundation (ITIF), “Antitrust Undone: How Competition Enforcers Are Undermining Competition,” highlights the risks of unnecessarily aggressive antitrust enforcement in innovative industries. The report cautions that such policies could, “adversely impact U.S. global competitiveness and innovative dynamism.”
This is especially true in the U.S. life sciences industry, where mergers and acquisitions (M&A) and other collaborations play a critical, differentiated role in enabling companies of all sizes to partner and bring new medicines to patients. Policymakers must avoid needlessly restricting these partnerships, or they otherwise risk America’s leadership in life sciences innovation.
Key takeaways from ITIF’s report include:
- M&A and other collaborations advance innovation by allowing companies of all sizes to combine complementary resources and expertise.
- “There is extensive evidence showing that these transactions typically involve the efficient combination of complementary technologies, which are then distributed by the acquiror more rapidly and efficiently than the start-up could have done independently.”
- “…Market power up to a certain threshold can promote innovation by providing the incentives and revenue streams necessary to support R&D investments that may only yield new products after a considerable time lag and at a high risk of technical or commercial failure.”
- Misguided approaches to merger enforcement risk undermining innovation, competition and growth in R&D-intensive industries, such as the life sciences.
- “Structuralist merger challenges, including ‘killer acquisition’ theories, can chill start-up exits, deter venture capital, and delay technology diffusion.”
- “By condemning conduct without balancing efficiencies, [these approaches] suppress scale and scope-driven business models central to modern innovation. Scale and scope can lower costs, enable ecosystems, and fund risky R&D.”
- Policymakers must pursue a balanced approach to M&A enforcement that acknowledges the unique market dynamics in innovative industries.
- “…Only a case-specific approach to antitrust enforcement can allow competitive forces to adapt organizational forms in response to changing economic and technological conditions.”
- “There should be significant hesitation in adopting antitrust models that seek to impact the outcomes of the competitive process to favor certain market structures, rather than simply preserving the free play of competitive forces.”
The report underscores why policymakers must avoid misguided antitrust policies in innovative industries, especially ones as differentiated as the life sciences industry. Predictable, balanced antitrust policy will strengthen America’s global leadership in life sciences innovation.
To read the full report, click here.