Cross-market integration and sabotage
Vakharia, Asoo J.
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"Sabotage" includes a set of firm-specific, non-price related actions negatively influencing competitor's outcomes. There are a large number of potential sabotage options available to integrated firms in direct competition with their non-integrated rivals. For example, When Google acquired YouTube in 2006, a key word search for YouTube videos provided better results when using Google Chrome as compared to Microsoft Bing. In addition, within its own search process, Google favors YouTube video links over Vimeo links. The 2011 merger of Comcast and NBCUniversal resulted in some exclusive content on NBC Universal only being offered to Comcast subscribers. Further, these same subscribers not only experienced higher download speeds for content hosted by NBCUniversal as compared to content hosted by CBS, but they also did not face a reduction in monthly quotas for data packets for streamed content from NBCUniversal while this was not the case for data packets for streamed content from CBS. After Microsoft's acquisition of LinkedIn in 2016, it was observed that LinkedIn’s app integrated directly with Windows 10 while this was not the case with other OS, and Microsoft’s mobile operating system did not support Facebook integration while that was not the case for LinkedIn. Since some or all of these actions could be anti-competitive, mergers/acquisitions are subject to approval by the FTC (which is currently evaluating the merger of AT&T and TimeWarner). The standards and criteria used by the FTC to evaluate the anti-competitive impact of mergers and/or acquisitions have evolved over time and best illustrated for the case of Regional Bell Operating Carriers (RBOC’s). Prior to 1996, Regional Bell Operating Carriers (RBOC's) could not offer long-distance services in direct competition with independent operators (such as Sprint and MCI). This prohibition stemmed from concerns that if allowed to do so, the RBOC’s would engage in sabotage actions. For example, they could delay access to carrying (competitor) unaffiliated independent carrier signals resulting in decreases in competitor service quality, increase costs for customers wanting to switch services, withhold competitor information from consumers, and/or marketing of their long-distance services using methods not available to the competitors (Chikhladze, 2001). The passage of the 1996 Telecommunications Act, however, allowed RBOC’s to enter this market and compete with the independent carriers implying that the potential sabotage actions outlined earlier were not viewed as resulting in anti-competitive effects.
- R & P Seminar