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    Antitrust Paradigms

    When the proposed 1998 merger between Reed Elsevier and Wolters Kluwer collapsed, opposition from antitrust authorities in Europe and the U.S. was cited as a primary cause. Although no formal complaints were filed by agencies on either side of the Atlantic, regulators had sent a variety of signals indicating their serious concerns. Negotiations with the European Union had progressed the farthest and it appeared that the proposed deal would proceed only if the parties agreed to significant divestitures. It was widely reported at the time that the EU's preferred set of divestitures upset the financial logic of the merger and resulted in its demise.

    What is interesting here is that the EU's main focus was not on academic journals, but rather legal publishing (in Europe), and that its theory of anti-competitive harm was based on a user-based approach to publishing mergers: excessive overlap in content (and therefore similar to the DOJ's approach to the 1996 merger of legal publishers Thomson and West). The U.S. focus was far different, in part because European legal publishing was not germane and because the model of harm relied upon was novel.

    Though one can only speculate on how a U.S. antitrust case might have proceeded, it is clear that the combined Reed-Elsevier/Wolters-Kluwer entity would have controlled large journal portfolios in a number of broad fields, including biomedicine. Assuming that these broad fields constituted antitrust markets, some of these portfolios would have crossed the U.S. government's concentration threshold (based on the Antitrust Guidelines) with shares in excess of 30-35%. Based on the results discussed here, such a merger may have resulted in substantial price increases over time. If the U.S. had filed a complaint and had been successful with this market definition, an important legal precedent would have been set, one that would have made it easier to employ a portfolio theory in mergers involving combined market shares less than the threshold, e.g. the subsequent merger of Wolters-Kluwer and Waverly, and/or a large firm buying a relatively small portfolio of journals. The recent reluctance of the Antitrust Division to oppose several mergers in the publishing industry can be partially attributed to insufficient market shares. However, since many future deals are likely to be relatively small in scope, opposition to journal mergers will need to adopt novel approaches in the definition of both markets and concentration thresholds.[23]