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Competition and Innovation - The Role of Innovation in Enforcement Cases – VEZZOSO – December 2023 OECD discussion

This presentation by Simonetta VEZZOSO, Associate Professor, Economics Department, University of Trento, was made during the discussion “Competition and Innovation - The Role of Innovation in Enforcement Cases” held at the 141st meeting of the OECD Competition Committee on 5 December 2023. More papers and presentations on the topic can be found out at oe.cd/rbci. This presentation was uploaded with the author’s consent.

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Competition and Innovation:
Incorporating a More Dynamic
Perspective into Enforcement
Simonetta Vezzoso, Trento University
OECD Meeting of the Competition Committee
Paris, 5 December 2023
Competition and Innovation - The Role of Innovation in Enforcement Cases – VEZZOSO – December 2023 OECD discussion
INCENTIVES/IMPACT BASED PERSPECTIVES ON INNOVATION:
3 COMMON INSIGHTS
 There are situations in which innovation is an important
dimension of rivalry between companies
 A long(er)-term perspective is necessary to apprehend innovation
 A long(er)-term perspective needs to deal with uncertainty
INCENTIVES-BASED IMPACT(EFFECTS)-BASED
rivalry in the product market driven by product or
process innovation
companies are competing through own innovation efforts
and innovation “management” (e.g., ecosystem)
Innovation concerns: reduction or a delay in the
introduction of new features of the products
Innovation concerns: changes to innovation levels and
intensity
incentives to innovate capabilities to innovate
Future product markets can be identified in a traditional
way (demand and supply substituability)
No clear outcomes from innovation (e.g., R&D) efforts
(e.g., SSNIP test unhelpful)
innovation mostly of incremental nature (more static
perspective)
Innovation mostly of disruptive nature (more dynamic
perspective)
Uncertainty: products have not yet entered the market
or potential outcomes from innovation are not clearly
identifiable
Uncertainty regarding future outcomes of innovation
efforts is very high
Theories of harm: profit –cannibalization narrative
(analogous to unilateral price effects); traditional
foreclosure theories “adapted” – innovation a variable
Theories of harm: direct impact on innovation of a
behaviour or a transaction (not as a consequence of a
reduction in competition)
ENFORCEMENT
EXAMPLES OF ENFORCEMENT CASES DEALING
WITH INNOVATION IN A PREDOMINANTY STATIC WAY
EU General Electric/Alstom (merger)
EU Pfizer/Hospira (merger)
US Mallinckrodt (unilateral conduct)
US Meta/Within (merger)
EU Illumina/Grail (merger)
Italy Google/Enel X (unilateral conduct)
EU Intel (unilateral conduct)
EU Novartis/GlaxoSmithKline (merger)
UK/EU Google/Waze (merger)
Brazil Bayer/Monsanto (merger)
US Bayer/Monsanto (merger)
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Competition and Innovation - The Role of Innovation in Enforcement Cases – VEZZOSO – December 2023 OECD discussion

  • 1. Competition and Innovation: Incorporating a More Dynamic Perspective into Enforcement Simonetta Vezzoso, Trento University OECD Meeting of the Competition Committee Paris, 5 December 2023
  • 3. INCENTIVES/IMPACT BASED PERSPECTIVES ON INNOVATION: 3 COMMON INSIGHTS  There are situations in which innovation is an important dimension of rivalry between companies  A long(er)-term perspective is necessary to apprehend innovation  A long(er)-term perspective needs to deal with uncertainty
  • 4. INCENTIVES-BASED IMPACT(EFFECTS)-BASED rivalry in the product market driven by product or process innovation companies are competing through own innovation efforts and innovation “management” (e.g., ecosystem) Innovation concerns: reduction or a delay in the introduction of new features of the products Innovation concerns: changes to innovation levels and intensity incentives to innovate capabilities to innovate Future product markets can be identified in a traditional way (demand and supply substituability) No clear outcomes from innovation (e.g., R&D) efforts (e.g., SSNIP test unhelpful) innovation mostly of incremental nature (more static perspective) Innovation mostly of disruptive nature (more dynamic perspective) Uncertainty: products have not yet entered the market or potential outcomes from innovation are not clearly identifiable Uncertainty regarding future outcomes of innovation efforts is very high Theories of harm: profit –cannibalization narrative (analogous to unilateral price effects); traditional foreclosure theories “adapted” – innovation a variable Theories of harm: direct impact on innovation of a behaviour or a transaction (not as a consequence of a reduction in competition)
  • 6. EXAMPLES OF ENFORCEMENT CASES DEALING WITH INNOVATION IN A PREDOMINANTY STATIC WAY EU General Electric/Alstom (merger) EU Pfizer/Hospira (merger) US Mallinckrodt (unilateral conduct) US Meta/Within (merger) EU Illumina/Grail (merger) Italy Google/Enel X (unilateral conduct) EU Intel (unilateral conduct) EU Novartis/GlaxoSmithKline (merger) UK/EU Google/Waze (merger) Brazil Bayer/Monsanto (merger) US Bayer/Monsanto (merger)
  • 7. EXAMPLES OF ENFORCEMENT CASES DEALING WITH INNOVATION IN A MORE DYNAMIC WAY EU Bayer Monsanto (merger) EU Dow/DuPont (merger) US Halliburton/Baker Hughes (merger) US UnitedHealth Group/Change Healthcare (merger) UK Illumina/Pacific Biosciences (merger) US Plaid/Visa (merger) EU Google Android (unilateral conduct)
  • 8. MORE DYNAMIC APPROACH TO INNOVATION: CHALLENGES AHEAD Better conceptualize the relevant rivalry between companies as a process of innovation and knowledge creation Develop a better understanding of innovation capabilities: type of technology/knowledge production, specific skills (e.g., AI talent), specialized assets, etc. Better understand Innovation factors beyond capabilities: dynamic patterns, technological trajectories, etc. Better assess the impact of innovation efforts on multiple sectors (e.g., digital) – cross-market Make clear in the law that «market definition» is not necessary/can be done radically differently Better understand innovation processes within ecosystems: production and appropriation mechanisms (both incremental and disruptive innovation) Need to consider concerns on the «quality» of the innovation - not only on innovation levels and intensity (e.g., cooperation with data protection authorities, AI regulators, etc.) Identify the types of evidence that capture the relevant innovation dimensions: portfolios of R&D activities, commercial and licensing agreements with other companies, links to universities, participation to scientific conferences, etc.
  • 9. VERY PRACTICAL SUGGESTION ON HOW TO FACE THE CHALLENGES POSED BY THE MORE DYNAMIC APPROACH TO INNOVATION Competition regulators could facilitate the organisation of symposia, seminars, and workshops that bring together economists (also from non-orthodox economic Schools), management experts, behavioural scientists, and technologists. These gatherings would provide a platform for cross-disciplinary collaboration, offering diverse perspectives, approaches, and knowledge to enhance the understanding of innovation processes within particular industries and sectors, as well as providing new assessment tools and methodologies.