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Antitrust policymakers in the United States and the European Union have announced that certain mergers should be blocked because of the presumed harm to innovation. Companies increasingly engage in innovation as a primary means of competing with rivals. This article considers the implications of innovation competition for antitrust merger policy. We argue that the presumption of innovative harm risks diminishing competition and reducing innovation. We propose an approach to evaluating whether mergers may lead to innovative efficiencies or harm. Furthermore, we suggest that the application of advances in the economics of technology and innovation can help determine the effects of mergers on welfare. We find that horizontal mergers can promote innovation competition by increasing innovative investment and expanding the benefits of innovation. We also find that vertical mergers can promote innovation competition by increasing innovative investment and improving commercialization. We further find that acquisition of entrants can increase entrepreneurship and innovation. We recommend that the Department of Justice and Federal Trade Commission Merger Guidelines should apply economic analysis to evaluate the effects of mergers on innovation competition. [ABSTRACT FROM AUTHOR]

Innovation competition presents challenges for antitrust law and enforcement policy. Innovation has generated changes in the nature of competition as firms introduce new transaction techniques, product designs, and production processes. Innovation competition is driving the 'Business Revolution' in retail, wholesale, manufacturing, services, and financial technology. Transaction innovation in online platforms and multi-sided markets has raised antitrust concerns about anticompetitive conduct, vertical restraints, consumer privacy, and barriers to entrepreneurship. The article argues that although antitrust policy makers recognize the importance of innovation competition, they need to update their economic frameworks. Antitrust policy makers need to move beyond traditional analysis based on the twin frameworks of perfect competition and imperfect competition. The article provides an introduction to the emerging Economics of Technology & Innovation and examines some implications for antitrust policy. First, antitrust policy should shift its focus from price competition without technological change to address non-price aspects of innovation competition. Secondly, antitrust policy should apply economic analysis that recognizes the critical role of Intellectual Property and technology standards in innovation competition. Thirdly, antitrust policy toward horizontal and vertical mergers should consider developments in the economic analysis of innovation competition. [ABSTRACT FROM AUTHOR]