Innovating Antitrust Law: How Innovation Really Happens and How Antitrust Law Should Adapt

Innovation is widely held as a key driver of economic growth, and is central to improving people’s lives. As such, the quest to promote innovation has become a guiding principle for economic policy, and in particular in antitrust law.

The assumptions driving competition policy today primarily see innovation as a product of individual firms responding to specific financial incentives. Many US courts have adopted and simplified this incentive-oriented view of innovation, arguing that monopoly prices and the high returns to corporate consolidation are necessary for producing innovation. This dominant worldview reduces innovation to individual incentives alone, limiting the ability of antitrust policymakers, enforcers, and judges to fully understand and promote innovation. 

In Innovating Antitrust Law: How Innovation Really Happens and How Antitrust Law Should Adapt, Ketan Ahuja finds that in practice, innovation emerges from the interactions between individuals, firms, and research institutions, as well as other market, governmental, and nongovernmental actors. Economic incentives alone won’t bring innovation into fruition: Structures, networks, and relationships across the public and private domains must also be present to foster innovation. 

Using this perspective, Ahuja draws out a series of concrete policy implications for antitrust law to promote innovation in the 21st century, including:

• Scrutinize vertical and conglomerate mergers more closely and assertively to examine whether they remove a set of capabilities from open market access.
• Mandate a strong essential facilities doctrine, which separates key capabilities of dominant firms and makes them accessible to the market as a whole, while controlling key technological interfaces to make technology, like Electric Vehicle charging networks, interoperable.
• Prohibit or refuse to enforce employee noncompetes in order to promote the type of free flow of workers’ tacit knowledge and capabilities that is essential to innovation.