Let's talk antitrust – UK merger control – getting digital mergers right?
United Kingdom | Video | 7月 2019 | 6:01
Video Details
| Caroline Thomas | Hi Richard, so we’re here today to talk about digital mergers and, in particular, the CMA’s current focus on digital mergers and their call for information that they issued quite recently on this topic. So I thought perhaps we could begin, if I ask you why there’s such an interest in digital mergers and what’s led to this call for information on the part of the CMA? |
| Richard Whish QC | Well yes, indeed, and you’re right, there is a lot of interest in this subject at the moment and various initiatives are underway in various jurisdictions. This was specifically the CMA saying that it thought it would be useful to review digital mergers in recent cases and to see what learnings could be obtained from them and so they commissioned Lear (economic consultancy in Italy) to conduct a review and, I think, it’s a very interesting document and they’ve come up with a review of the literature on the subject, on matters such as big data and so on. Interestingly, they also did some statistical research and I thought this is quite an interesting thing to point out, that they looked at mergers from a period from 2008 to 2018 and they say during that period Google acquired 168 companies, Facebook 71 and Amazon 60, I mean, that is quite a large number of acquisitions and I can see how and why a competition authority would want to say to itself, well, what was going on there and what were those cases and what theories of harm were there? And, of course, that’s what Lear then goes on to analyse. |
| Caroline Thomas |
Very interesting. What has been the CMA’s reaction to the Lear report? Do we know what they think of these statistics and the findings and even some of the suggestions made in the report? |
| Richard Whish QC |
Yes, it’s very interesting, actually, because when one reads the summary of Lear’s conclusions, they say various things that might alarm, I think, some clients. For example, they say that maybe there’s an imbalance between the number of type 1 errors and the number of type 2 errors. That is to say, they’re suggesting that maybe competition authorities have been too cautious in the past and they should be less cautious in the future. I can imagine some people would be a little bit perturbed by that. They also say that a lot of this is trying to understand the strategy behind these acquisitions and so they propose that perhaps there should be more dawn raids in merger control. I can’t imagine somehow that people would be hugely happy with that proposition, and they also say that maybe we need to accept more uncertainty over counterfactuals and maybe we should be looking further ahead than the usual two years. So that was Lear but then what we subsequently had was a speech from Andrea Coscelli, the CEO of the CMA, and I thought that was a very measured and a very sensible response, and, of course, it’s obtainable on the CMA website, 3 June of this year. I mean, what he says – things that I very much agree with – on the question of jurisdiction, for example, “killer acquisitions” – is it possible for us in the CMA to investigate killer acquisitions? Well, we have the benefit of our “share of supply” test, so I don’t think there’s a jurisdictional gap in the UK in the way that there is in the EU. Coscelli makes the point that when we’re looking at digital markets, we can’t obsess with the price effects of mergers because very often it’s not about price, it’s about privacy or quality or innovation and I think that’s very sensible. There’s a very sensible sentence from Coscelli where he says there is a risk that reinventing our entire approach leads to more harm than good and I think that’s obviously correct. He then goes on to say later that what we need is evolution, not revolution, so I think it’s a very measured and sensible response. |
| Caroline Thomas |
And so this evolutionary rather than revolutionary change on the part of the CMA, that feeds into the call for information that was issued a couple of weeks ago? |
| Richard Whish QC | Exactly. |
| Caroline Thomas |
And that requests, you know, people in the market to give their views on various, kind of, quite specific points? |
| Richard Whish QC |
Yes. |
| Caroline Thomas |
All with a view to potentially changing the CMA’s guidance on how it will deal with these issues? |
| Richard Whish QC |
Well, I think that’s exactly it and it’s a very lean and it’s a very nicely focused document, if I might say so. It’s called Call for Information, it’s four pages long and it’s two of those pages that are key where they say, we would like to get views from people on what are the features of these kind of markets that require investigation and analysis, what are the sort of theories of harm that might be applicable in cases such as this? They talk about the significance of complementary markets, because we get all this issue over leveraging and product preferencing etc. What about the counterfactuals? I mean, that is a tricky issue here. I mean, counterfactuals are always difficult, but I think they’re particularly difficult in markets that don’t yet exist or that are evolving before one’s very eyes, and there is this question of evidence and what kind of evidence can we use in cases of this nature, what is the burden when it comes to the production of evidence etc? So it’s a very focused document. Yes, people are invited to respond and I assume that in due course the merger assessment guidelines will be revised and a lot of the learning from this exercise will go into them. |
| Caroline Thomas |
And we’ll look forward to seeing those in due course. Thank you very much, Richard. |
Head of Antitrust and Competition, London; Partner
Email
caroline.thomas@nortonrosefulbright.com