I take it from your e-mail (and, of course, we all know from your provocative book The Antitrust Paradox) that you don’t like government regulation of mergers. You point to mergers that create monopolies as the only proper subject of an antitrust (merger) inquiry. If you were writing the law, would you have any merger law at all?
Let me mention two cases, so we can talk about your proposal in the concrete.
A few weeks ago the Justice Department brought suit to challenge Lockheed’s acquisition of Northrup Grumman. Both are huge military contractors. The companies are competitors in some markets. Several of these markets are three-firm markets–Lockheed and Grumman face Boeing in some markets and ITT in others. In other words, at least two big firms will remain in these markets even if the merger proceeds. You say there is little to fear from oligopolies, but are you concerned in this case?
Moreover, the Justice Department has expressed special concern with the vertical aspects of this merger. Northrup is a major supplier of military electronic systems and Lockheed is a big user. Raytheon is Northrup’s major competitor. The Justice Department believes that the military electronics systems market ought to be left “open.” I do too. Apparently the Pentagon (the buyer) agrees. What do you think?
The second example concerns Microsoft. (Incidentally, I was interested to read in the press today that you believe that certain of Microsoft’s current practices seem to be exclusionary and harmful to competition.) A few years ago Microsoft wanted to buy Intuit. Microsoft has some 80 percent of the operating system software market (and profits from network externalities) and Intuit’s Quicken is the leading money management applications software. The Department of Justice worried that the acquisition would foreclose competition in the applications market. Faced with the suit, Microsoft backed down. I thought that the Justice Department was right. What do you think?
I look forward to hearing from you.