‘Splain Me

Can anyone give me a credible explanation for why the Federal Trade Commission moved to block the reconsolidation of Illumnina and Grail? This article by Joe Lonsdale at STAT provides a little background:

Illumina’s acquisition of Grail would be a vertical merger. Rather than removing a direct competitor, as in a horizontal merger — think GM buying Ford — a vertical merger brings together two firms at different stages in the same supply chain, allowing for greater financial and operational efficiency.

Illumina has an effective monopoly on genomic sequencing, a critical input for the liquid biopsy products offered by Grail and its competitors. The FTC argues that if this vertical merger is approved, Illumina could underprice Grail’s products, giving the company an unfair advantage over its competitors.

That argument is wrong. First, low prices are a healthy form of competition that would make Grail’s liquid biopsies cheaper for consumers. Second, decades of economic analysis have shown that most vertical mergers increase competition, especially in fields that rely heavily on R&D.

Vertical mergers such as Illumina’s acquisition of Grail accelerate the pace at which innovations reach the marketplace. The reason is simple: Startups need to focus on one big problem at a time. Research startups like Grail take on tremendous risk as they develop new biotechnologies. Most fail, and even fewer would succeed if they also had to bear the risk of bringing their innovations to market.

A “diverse array of American innovators” has put together a petition (PDF) protesting the FTC’s action:

We fear the FTC’s new challenge will not only slow the deployment of GRAIL’s screening tools, but also have repercussions undermining innovation broadly. Mergers and acquisitions are vital for innovation, providing many start-ups with investment needed to scale, market, or even fully develop their product—which, in turn, attracts investment in future products and companies. In the United States, mergers and acquisitions are a $1.6 trillion market, and if the FTC takes an overzealous approach to antitrust enforcement, it will have a chilling effect on the deployment of new technologies across the economy.

The FTC should drop its challenge to the Illumina-GRAIL merger and take a targeted approach to antitrust enforcement, intervening only where there is clear evidence a deal will harm consumers. If the FTC pursues that prudent course, it can help unleash innovations key to meeting the great challenges of our time.

I find it puzzling. Over the last decade or so the FTC has allowed quite a few much more threatening acquisitions than this. They’re giving me the impression that the only form of innovation the Biden Administration is interested in is government innovation.