New DOJ merger guidelines and innovation

The US DOJ has released its new proposed merger guidelines. While it is far less comprehensive than the ACCC’s 2008 Australian guidelines, it did contain some interesting statements on innovation:

Competition often spurs firms to innovate. The Agencies may consider whether a merger is likely to diminish innovation competition by encouraging the merged firm to curtail its innovative efforts below the level that would prevail in the absence of the merger. That curtailment of innovation could take the form of reduced incentive to continue with an existing product-development effort or reduced incentive to initiate development of new products.

The first of these effects is most likely to occur if at least one of the merging firms is engaging in efforts to introduce new products that would capture substantial revenues from the other merging firm. The second, longer-run effect is most likely to occur if at least one of the merging firms has capabilities that are likely to lead it to develop new products in the future that would capture substantial revenues from the other merging firm. The Agencies therefore also consider whether a merger will diminish innovation competition by combining two of a very small number of firms with the strongest capabilities to successfully innovate in a specific direction.

The emphasis on capabilities is definitely new and I know of only one paper that deals with the issue of mergers, capabilities and innovation; and these statements are well in-line with that. There are no footnotes to the guidelines but this suggests that perhaps they have been reading comprehensively.