Innovation is a key driver of competition. So, high-tech industries shouldn't have to worry about running afoul of the antitrust laws – right? Well, it's not that easy. Although the antitrust laws are designed to protect competition and innovation often enhances a company's competitiveness, high-tech companies sometimes engage in conduct that stifles competition or misuses market power. The Department of Justice (DOJ) and Federal Trade Commission (FTC) vigorously enforce the antitrust laws using fact-specific analysis to balance potentially anticompetitive conduct against the procompetitive factors often present in high-tech industries.

Mergers

A DOJ official recently stated that when evaluating mergers in high-tech industries, “protecting innovation is often a decisive factor” in the enforcement decisions. However, as the antitrust agencies' Merger Guidelines emphasize, mergers that combine close competitors may lessen competition and reduce incentives to develop new products. Therefore, even in high-tech industries, the government's investigation begins by assessing whether a merger is likely to result in higher prices or reduced output. Recent mergers successfully challenged by government – Bazaarvoice/Power Reviews and H&R Block/TaxAct – are prime examples of where a merger threatened to eliminate competition that was fueled by innovation. Other factors that frequently are present in high-tech industries are network effects, switching costs and other barriers to entry. The agencies' fact-intensive review of mergers analyzes whether these factors could cause a merger to result in anticompetitive effects.