Future Forecasting in Potential Competition: Stormy Days or Clear Visibility – Summary of ABA Brown Bag Program
The potential competition doctrine provides a mechanism for antitrust enforcers to challenge transactions that are likely to impact competition and/or innovation in the future. Potential competition issues generally arise when a transaction results in the combination of two companies that have either significantly invested or are otherwise particularly well positioned to compete in a relevant product market. Unlike actual competition cases, future competition cases focus on effects down the road – these cases are unique in that at least one of the merging parties is not presently competing within the relevant market. The antitrust enforcers frequently employ the potential competition doctrine in pharmaceutical and medical device transactions due to the overarching regulatory framework for product approval and generic entry.
Potential competition cases can be further delineated between “perceived” and “actual” potential competition cases. Perceived potential competition cases arise where a merging party’s behavior is constrained by the credible threat that the target company may enter the relevant market. The antitrust agencies are concerned that these transactions eliminate the constraints that the perceived potential competitor exhibits on the market participant’s conduct: eliminating the potential competitor may empower a company to price at supra-competitive levels, or to otherwise harm competition, via conduct that was unavailable prior to the transaction. The actual potential competition doctrine, on the other hand, deals with cases where at least one of the combining parties has made plans to, but has not formally, entered the relevant market. The antitrust theory of harm focuses on the proposed transaction preempting a forthcoming competitor from entering the market. Actual potential competition cases may involve nascent markets where competition is still in its incipiency.
The full article provides an overview of the potential competition doctrine and discusses a recent panel by the antitrust enforcers, along with private practitioners, analyzing recent potential competition investigations. The article is available in its entirety in the Spring 2014 issue of The Threshold, a publication by the American Bar Association’s Antitrust M&A Committee. Please contact the author with any questions or for assistance obtaining a full copy of the article.