Appunti International Competition Law

What is merger control?

Forward-looking approval process allowing government authorities ...

Why is merger control important?

Companies have to take is seriously and if they satisfy the threshold have to notify the authorities, because

competition authorities can:

• →

require notification – timing/information burden otherwise fine;

• block deals;

• require undertakings to be given, i.e., unwind deal, disinvestment;

i.e., gun-jumping

EU system

The Commission has the duty to assess mergers and acquisition...

Mergers are welcome to the extend the do not impede competition. The objective of examining ...

Things are changing...

• CMA orders Meta to sell Giphy

The UK system is different

• Amazon’s acquisition of Roomba Maker iRobot is under FTC

• EU Commission

Commission vs Amazon acquisition of iRobot

From July until now the commission has been investigating

→

Final decision not there yet

• Unconditional clear the merger; or

• Approve the merger subject to the remedies, or

• Prohibit the merger if no adequate remedies to the competition concerns have been proposed by the

merging parties

All fine decisions – in both phase I and phase II –

Reasons for approval 62

Conditional approvals

Most problematic are nevertheless

Competitive advantage because of data for Amazon, with this merger Amazon could get more data and

increasing its power

Substantive analysis – theory of harm

• Unilateral effect:

Merger of horizontal competitors

o Reduction of direct competition between firms

o Quality or innovation reduction

• Coordinated effect

Merger of horizontal competitors

o Structural change in the market enabling/reinforcing tacit coordination between competitors;

o Coordination between competitors

o

• Vertical effect

Merger of horizontal competitors

o Structural change in the market enabling meagered firm to foreclose/lock-out rivals

o

• Substantive analysis may involve economists

Conglomerate effect/ecosystem theory

Conglomerate effect arises when the products of the merging 63

Digital Markets Act

Why the digital markets act (DMA) is necessary: economic drivers

• Entry barriers to markets in which there are gatekeeper (i.e., Google, Amazon)

• Economic dependence and imbalances bargaining power

While markets typically feature self-correcting mechanisms, there can be obstacles that prevent these

mechanisms from operating, leading to non-transitory losses of economic value.

→ For instance, abnormally high profits should in principle not be sustainable in the long run because they

would attract new entry into this market. As the new competitors start offering the same or very similar

products as the incumbent(s), they will steal market share, and hence profits, from them, until the

abnormally high profits will gradually be competed away.

However, this self-correcting mechanism may be impaired when there are barriers to entry.

Digital platforms (gatekeepers): digital players that have the ability to

a) create and shape new markets or they are able to challenge traditional ones

b) they organize new forms of participation or contacting business

c) they collect, process and edit large amount of data.

• They operate in multi-sided markets with different degrees of control over direct/indirect groups of users

(i.e., Amazon Marketplace);

• They benefit from network effects;

• They rely on ICTs to reach their users instantly and effortlessly;

• →

They play a key role in digital value creation by capturing significant value they are enough powerful

→

to decide how economic value is distributed among chain market-makers, deal-makers.

Huge barriers to entry in digital markets, do not allow entrants:

→

• →

to be cost effective because of scale and scope economies gatekeepers have more data

• →

to replicate the incumbent’s products or services because of data dependency or vertical integration

→ (conglomerates – ecosystem)

• →

to induce consumers to switch away from the incumbent(s) because of network effects, switching costs,

→

or asymmetric information i.e., using WhatsApp: everybody we know is using it so it’s difficult to switch

Such barriers to entry therefore allow incumbents to sustain market power, which in turn leads to longer-term

societal losses in terms of:

a) higher prices

b) less product variety for consumers

c) less dynamic innovation →

DMA created also to make it faster for competition authorities to act i.e., taking hundreds of pages just to

decide about the relevant market

Feedback loop

These entry barriers are gradually reinforcing each other due to the ‘winner– take-all’ dynamics in digital

→

markets if you are not quick enough, once the market has sat is very difficult to go back to the initial

→

situation short window of opportunity if you want to preserve competitive markets.

The bigger the platform, the stronger the indirect network effects, the larger the amount of data and the higher

its quality. 64

This leads to increased insight into user profiles and preferences, allowing gatekeepers to offer them more

personalized services and advertisements, thus attracting even more users and reinforcing consumer lock-in,

favoring single-homing and rendering switching to alternative platforms more difficult.

→

Try to reestablish competition in these markets where there are gatekeepers DMA huge remedy package:

→

all the things they weren’t able to achieve with single cases (and even more) has been put in the DMA do

and don’ts based on quite of lot of learning (starting from 2018) thanks to competition enforcements that didn’t

go very well.

Examples of market failures in digital markets taken from traditional competition law enforcement

Regulations – regulation (EU) 2022/1925 of the European Parliament and of the Council of 14/09/2022

→

Filomena Chirico

Objective of DMA: achieve fair and contestable

digital markets 65

• →

Designation criteria to find gatekeepers no need to define the relevant market (takes too long).

We have two ways to define gatekeepers: qualitative and quantitative.

• →

Once the gatekeepers are defined there are ex-ante obligation to be applied usually competition

commission worked ex-post, i.e., fines.

• →

Then, we have remedies and structural remedies (i.e., sell some services) relatively easy to enforce

• This new piece of legislation is complementary to other legislation that we already have (i.e., traditional

competition policy)

Timeline of DMA rd

Quantitative way: notify users number to the Commission by 3 of July→ if the number are there you have

→

to notify the commission that you might fall into this case not the Commission running after you.

As there isn’t a relevant market, the European legislation identify core platform services:

• Highly concentrated platform services (i.e., Google search)

• One or very few large digital platforms set the commercial conditions irrespective of their competitors,

→

customers or consumers similar to definition of dominant position

• Few large digital platforms that act as gateways for business users to reach their consumers and vice-versa

(i.e., Amazon Marketplace, Appstore)

• Gatekeeper power often measured by means of unfair behavior

Core platform services (CPS)

Identified in order to provide legal certainty but

→

might be not flexible enough no AI as a

service

Mechanisms to add new ones to them without

asking the legislator and taking too much time.

Criteria for the designation of gatekeepers

→

Quantitative + qualitative qualitative is an ongoing process (might be a gatekeeper without having the

numbers)

Qualitative criteria Quantitative criteria (rebuttable presumption)

Significant impact Average market capitalization or A least e

Annual turnover of €7.5

≤

on the internal Member States

equivalent fair market value €75

billion in each of last 3 financial ≤

market years billion in the last financial year

Important gateway > 45 million monthly active end > 10.000 yearly active business

for business users to users (MAU) in the Union users in the EU in the last financial

reach end users year

Entrenched and Gateway threshold (see above,

durable position i.e., < 45 million MAU + > 10k 66

business users) met in the last

three financial years

Rebuttal – exceptional mechanism

Timeline for market investigations

Designated gatekeepers with regard to different core-platform services

• →

Alphabet regard to Google Search, Google Shopping, Google Maps, Play store, YouTube...

• →

Amazon Amazon Marketplace, Amazon Advertising

• →

Apple not happy with some part of the designation regarding the AppStore and iMessage, they had the

numbers, but they provide the Commission with evidences and arguments that raised some doubts based

on DMA, so the Commission is conducting a market investigation to find whether those arguments are

convincing.

• →

ByteDance (TikTok) announced they are challenging the designation

• →

Meta also challenging the designation

• →

Microsoft non-designation for outlook, they had the numbers but they had also sufficient arguments

→

demonstrating that does not meet the criteria. also, third parties may challenge the non-designation

• →

Samsung trying to convince the Commission they are not gatekeepers based on qualitative criteria. 67

And now what? There could be also new notifications by

gatekeepers and perhaps new designations and

market investigations and legal challenges (i.e.,

for Cloud-computing).

Gatekeepers have to:

a) Allow third parties to intern-operate with the gatekeeper’s own services in certain specific situations

b) Allow their business users to access the data that they generate in their use of gatekeeper’s platforms

c) Provide companies advertising on their platform with the tools and information necessary for advertising

→

and publishers to carry out their own independent verification of their advertisement i.e., you use the

online advertising service provided by Meta and you can see how many people have seen them.

Gatekeepers may not (obligations)

a) Treat their own services and product more favorably in ranking than similar services or product offered by

→ st

third parties on the gatekeeper’s platform exactly the Google Shopping case (always in the 1 page)

b) Prevent consumers from linking to business outside their platforms (i.e., Skoosh vs Booking)

c) Prevent users from un-installing any pre-installed software/app

d) Track end