In his recent article Understanding Dynamic Competition: New Perspectives on Potential Competition, “Monopoly,” and Market Power, David Teece insists, as he has on many occasions, that both the American and European competition authorities, when evaluating firms’ competition to innovate, can and should evaluate firms’ capabilities. Yet, inconsistently, he also acknowledges that the competition authorities have never actually evaluated firms’ capabilities.
As I will show, competition authorities have not evaluated firms’ capabilities because they are in fact not able to do so. They lack the information, and the ability, to do this. Their analysis of any such capabilities would be speculative at best. But in both the United States and Europe competition authorities, when evaluating firms’ competition to innovate, can only block the relevant transaction if their claim that they must do so is more than “speculative.” Competition authorities can therefore not use their analysis of firms’ capabilities when deciding if they should act to block the relevant transaction; such analysis would be too speculative. Teece wrote in response to my article Refining Future Potential Competition: The Doctrine Allowing Courts to Protect Innovation.
We both presented our articles at the Inaugural Conference of the GW Innovation and Competition Lab at George Washington University. In his article Teece not only claimed that competition authorities can and should evaluate firms’ capabilities, but, he said, these authorities should do so as they analyze firms’ competition to innovate. As this implies, Teece believes the authorities can directly analyze firms’ competition to innovate. Yet, inconsistently, Teece also accepts as correct my claim in Refining Future Potential Competition that the American authorities, in their 2023 Merger Guidelines, acknowledge that they cannot directly protect competition to innovate. All they can do, as I have said in that and many other articles, is protect competition in a Future Market. A Future Market is a market for products at least some of which do not exist yet.
