Business Model Innovation and Antitrust Law

Abstract

Modern antitrust enforcement is premised on maximizing consumer welfare through an examination of two variables: unit price and total output. That inquiry suffices for static markets for relatively interchangeable goods, but it is ill-suited for more dynamic markets. While typically associated with technological innovation, dynamic markets can take many forms. A firm's business model, for instance, can exhibit all the same indicia of innovation and fluidity as the technological intricacy of its product. But by treating firms with innovative business models as though they inhabit a separate market from their more traditional competitors, antitrust law places those firms at a comparative disadvantage. Rather than reward firms for the increased consumer surplus that results from business model innovation, the enforcers of antitrust law have instead discouraged growth in innovative sectors. The result is economically harmful and doctrinally incoherent. This Article seeks to remedy that flaw. We examine the unique benefits provided by business model innovators, conclude that mergers between such firms yield underappreciated returns to consumer surplus, and offer some recommendations for policy reform.