The ACCC, the UK’s Competition and Markets Authority and Germany’s Bundeskartellamt have today issued a joint statement highlighting the importance of rigorous and effective merger enforcement.
The statement will be launched at a virtual event today by the heads of each of the agencies.
“Competition can only be maintained by ensuring anticompetitive mergers do not happen. This is even more so in a fast-developing digital world impacted by the Coronavirus (Covid-19) pandemic,” the statement reads.
“We believe that in the world today there is a real need for strong merger enforcement from competition agencies globally to ensure that high concentration levels do not become the accepted norm, and to maintain and promote competition for the benefit of consumers.”
Effective merger control is always essential for competitive economies and is in the interests of consumers, but is even more crucial as some economies emerge and rebuild following the pandemic, the statement notes.
Merger controls are the first line of defence; if a merger is approved, and the new entity develops market dominance, there is often little competition agencies can do to address the situation retrospectively with the tools available.
The joint statement highlights that market power can be easily established and entrenched in dynamic and highly concentrated markets such as technology, where a seemingly small transaction of a start-up or mid-tier business by a dominant player can cause a competitive market to tip in an anticompetitive direction.
This doesn’t mean that all such transactions raise concerns but they require careful scrutiny and, if appropriate, competition agencies will take action to block problematic mergers. Protecting competition is often only achievable by opposing a transaction outright or via divestiture remedies rather than via behavioural remedies.
While only a very small number of the mergers that take place each year raise competition concerns, the statement points to the challenges competition agencies face proving to the courts that a merger is likely to substantially lessen competition.
The forward-looking nature of merger control reviews involves inherent uncertainty given the need for competition agencies to assess and, in contested merger cases, prove in court the likely effect of a merger on competition in the future. The statement makes clear that the focus of competition agencies, courts and tribunals must be on the importance of protecting competition and preventing anticompetitive mergers.
Uncertainty should not be a reason for clearing a merger when economic principles point to the potential harm to competition and consumers. Otherwise there is a risk that merger control instead skews towards merger clearance. This would not be a good outcome for consumers or the economy, the statement says.
The joint statement can be read in full here: Joint statement on merger control enforcement
Quotes to be attributed to heads of agencies:
ACCC Chair Rod Sims:
“I am delighted to be releasing this joint statement with our UK and German counterpart authorities. We all recognise that competition is fundamental to the success of a market economy. Competition crucially depends on effective merger control.”
“Companies have a clear incentive to merge with or acquire their competitors to increase their market power and raise prices. This is why effective merger control is so important, and why some mergers must be blocked by competition authorities.”
“We know that once market power is gained from a merger, it is very difficult to restore competition with our other competition enforcement tools, making it crucial for us to use merger control more effectively. “
“The focus of competition agencies, courts and tribunals must be on the importance of protecting competition and preventing anticompetitive mergers, otherwise there is a risk that merger control instead skews towards merger clearance and so damages our economy.”
Competition and Markets Authority CEO, Andrea Coscelli:
“As our countries emerge from the coronavirus pandemic, competition will have a crucial role to play in helping our economies grow. That’s why I am delighted to be standing with our counterparts in Australia and Germany on this timely statement.”
“The economic evidence consistently shows that competition is vital for innovation, productivity and sustainable long-term growth and jobs. I also hear directly from UK businesses who have found themselves in very difficult positions after problematic deals are cleared; some unable to survive because they can no longer compete. It’s important that we continue to thoroughly examine mergers on behalf of business and consumers – especially in dynamic markets like digital – and take strong action where needed.”
Bundeskartellamt President, Andreas Mundt:
“Effective merger control is the most powerful instrument we have to prevent too much market power falling into the hands of only a few companies. We see particularly strong market concentration in the digital economy. Further, takeovers and mergers can cause tipping in the market or create ecosystems which are almost incontestable for competitors.
“Stringent merger control is therefore indispensable. Where possible, imminent competition problems can be solved by imposing conditions. In this case structural remedies are clearly preferable since they permanently safeguard the competitive framework. There are good reasons why, under German merger control, it is not possible to impose conditions that subject the behaviour of the undertakings involved to continued control.
“Abuse proceedings are difficult, lengthy, involve many economic and legal issues when it comes to Big Tech, and are merely aimed at a company’s specific conduct. If we do not rigorously apply merger control and prohibit anti-competitive mergers, the post-merger road that we subsequently have to take is a very difficult one.”
The ACCC, the UK’s Competition and Markets Authority and Germany’s Bundeskartellamt will accompany the publication of the joint statement with an online launch event, which will include a question and answer session.
The Competition and Markets Authority is the competition regulator in the United Kingdom and is responsible for strengthening business competition and preventing and reducing anti-competitive activities.
The Bundeskartellamt is the key competition authority in Germany responsible for protecting competition and consumer rights.The ‘failing firm’ argument occurs when parties argue that the state of competition at the time of a merger will overstate the future state of competition without the merger in situations where one of the merger parties is likely to exit the market in the foreseeable future (generally within one to two years).