Is Antitrust in Need of Disruption: What Is Disruptive Innovation and What, if Anything, Does Competition Policy Need To Do to React to It?

Abstract

This article discusses the concept of disruptive innovation and its implications for competition policy. Given “disruption” is not a formal term of art in the economic literature we provide a working definition which focuses on those technologies which both have drastic implications for existing business models and leverage new technologies rather than building upon existing investments. We then discuss implications for antitrust policy of such innovations. First, we discuss the challenges facing policy makers when policing mergers between dominant firms and smaller players and the evidence that might be used to distinguish between transactions harnessing pro-competitive synergies and those involving anticompetitive purchase of “tomorrow’s disruptor”. Second, we discuss antitrust enforcement and explain why we think it is unnecessarily constrained by a desire to fit within existing paradigms based on tying and leveraging; and why some standard presumptions in conduct cases (e.g. that dominant firms must necessarily be operating “at scale” when applying tests for predation) need to be revisited when looking at disrupted industries.