Thursday, September 3, 2009

Antitrust Policy and Uncertainty

One negative of antitrust policy is increased uncertainty and delay for relevant market participants. The pending purchase of Sun Microsystems by Oracle provides a good example:


The European Commission Thursday opened an in-depth antitrust investigation into Oracle Corp.'s planned $7.4 billion purchase of Sun Microsystems Inc.

The commission said it has "serious concerns" that the deal between Oracle, the world's second-largest software maker, and Sun Microsystems might lead to reduced competition in the market for computer databases.

This comes on the heels of a different outcome here. On August 25th


Oracle Corp. said antirust regulators at the U.S. Department of Justice have cleared its $7.4 billion deal to buy Sun Microsystems Inc., removing a major hurdle for the transaction.

The Justice Department's decision occurred five months after the deal was announced.

Meanwhile, competitors like HP and IBM have been trying to profit from the ill-defined status of the deal. The EU's investigation

could put the world's No. 3 software maker, Oracle, months behind its original plan for closing the deal, giving rivals -- including Hewlett-Packard Co and International Business Machines Corp -- more time to poach hardware customers from Sun, the No. 4 maker of computer servers.

HP and IBM have been offering discounts and other incentives to woo Sun customers since Oracle agreed to buy Sun in April, playing up concerns that software maker Oracle might have trouble running a hardware maker.

Reasonable people can make a case for some degree of antitrust enforcement. This case should recognize, however, that some beneficial mergers and acquisitions do not occur because of the costs imposed by antitrust investigations.

5 comments:

Mike Huben said...

"Reasonable people can make a case for some degree of antitrust enforcement."

Is professor Miron one of these reasonable people? If so, he's a rare libertarian indeed to endorse any antitrust. I'd love to see a list of big-name libertarians who endorse antitrust, or see which libertarian books endorse antitrust.

"This case should recognize, however, that some beneficial mergers and acquisitions do not occur because of the costs imposed by antitrust investigations."

Now that's fatuous. Anything that imposes costs, any minor change of fortunes, any delay can be partially responsible for halting a merger or acquisition. They are hardly "inevitable except fer when gubermint gits involvupated!" Stockholder lawsuits, poison pills, and tons of other non-accidents are common.

And I presume that when he talks about "costs", he doesn't mean monetary costs because in a 7.4 billion dollar deal, defense before an antitrust investigation is chicken feed.

The "costs" might also deter more bad deals than good: Miron probably has no numbers to say one way or the other. He just wants to present one side to make government look like a bad guy.

Gordon Hutton said...

It would seem that the EUs action to protect the market for databases could be compressing the market for hardware. Ah, unintended consequences...no one is so knowledgeable as to be immune to them.

While this deal will probably be approved, the investigation could have more to do with the SAP vs. Oracle enterprise and supply chain software struggles, than the DBMS market. A little slow down on the merger, much to Oracle's surprise, seems like a less than subtle signal for them to tread lightly with the cheap acquisitions.

Anyone who thinks that government is only trying to preserve and protect consumers with this antitrust power doesn't get out much. It's not beneath either Leo or Larry (the respective CEOs) to involve regulatory powers in their struggles with each other.

TGGP said...

Mike, it doesn't sound like you actually disagree much with Jeffrey. I'm one of the unreasonable ones (though whether I qualify as a libertarian is another story). His statement that some beneficial deals don't go through because of government doesn't exclude the possibility that others don't because of stockholder lawsuits, poison pills and so on. He is saying we should acknowledge that cost. Not saying whether the costs outweighed the benefits is just being intellectually honest in the absence of other information.

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