National merger reviews under the microscope: insights from digital and tech mergers assessed by competition authorities in the EU

Earlier this year, the European Commission published a report that provides an overview of how national competition authorities (NCAs) across the EU have approached mergers in digital and technology markets in recent years. The report sets out the findings of an independent expert study on the merger reviews conducted by NCAs from selected EU Member States and the UK (as a former Member State) from 1 January 2015 to 31 December 2021.

The report identifies the key ‘theories of harm’ that are relied upon in the national decisional practice in relation to tech mergers. It also considers the types of remedies that are most frequently adopted to address competition authorities’ concerns regarding tech and digital concentrations.

What does the report tell us about the landscape for national merger reviews in digital markets? A few key themes emerge:

1. Most digital and tech mergers are cleared on an unconditional basis

The report provides quantitative insights from the analysis of 97 national cases across 19 EU Member States and the UK. It concludes that, at the national level, the vast majority of digital and tech mergers are seen as unproblematic by competition authorities across Europe, with 67% of cases cleared unconditionally at Phase 1 in the merger review process (65 cases) and a further 9% obtaining unconditional clearance at Phase 2 (9 cases).

Of the 97 cases identified, 15 cases were cleared subject to conditions (10 in phase 1, 5 in phase 2), 6 concentrations were prohibited, and one was withdrawn following the NCA voicing serious competition concerns.

2. Competition authorities continue to rely on ‘traditional’ theories of harm 

On the qualitative front, the study examined a further 69 national merger cases in depth, drawn from 17 different jurisdictions. It found that the assessment of tech mergers by NCAs continues, for the most part, to be based on traditional theories of harm, namely:

• ‘horizontal’ effects – such as the loss of an actual competitor or of a potential competitor;
• ‘vertical’ effects - input foreclosure, customer foreclosure, and other vertical effects; and
• (more rarely) ‘conglomerate’ effects – including foreclosure and other conglomerate effects.

Interestingly, the report notes that most NCAs have not considered in detail the impact of mergers on digital ecosystems as part of their merger reviews, nor have they frequently considered the impact of mergers on so-called "data advantages" and possible interactions with abuse of dominance issues. These issues, the report notes, “remained largely absent” from the theories of harm examined in the cases that were analysed in-depth in the study.

According to the report, almost all of the in-scope merger reviews that brought up the 'loss of a potential competitor' as a theory of harm originated from the UK. The report notes that the loss of an actual or potential competitor (in some cases supplemented by vertical input foreclosure) was the theory of harm that featured most frequently in the prohibition decisions examined by the study.

3. Types of remedies and commitments deployed in digital and tech merger reviews 

Of the 15 national cases that involved remedies, only a small number of cases included structural remedies, namely the divestiture of parts of a business as a condition to clearance. The report notes that so-called behavioural remedies were much more frequent. This included, for example:

• access and interoperability-related remedies;
• commitments not to impose exclusivity obligations on trading partners;
• commitments not to gather “excessive data”; and
• commitments not to discriminate between trading partners.

It is worth noting that the findings from the study appear to confirm a divide in the approach to remedies in the UK, where the CMA has tended to favour structural remedies, and in other jurisdictions where NCAs have generally been more willing to embrace behavioural remedies.

Conclusion 

The report suggests that another study, focusing this time on the European Commission’s assessment of tech and digital mergers and comparing it to the decisional practice at EU Member State level, would be helpful to complete the picture. While the report only provides a snapshot of the NCAs’ decisional practice during the years covered by the study, some clear trends emerge from its findings:

• Many NCAs in the EU have favoured behavioural (rather than structural) remedies for the mergers falling within their jurisdiction, and they have tended to rely on traditional theories of harm (mainly the loss of an actual competitor) when carrying out their assessment.
• However, the UK Competition and Markets Authority appears to be more reluctant than most EU NCAs to rely on behavioural remedies in the context of tech mergers, and is also more inclined to assess vertical effects as well as horizontal effects attached to the loss of a potential competitor.

As mergers in digital and technology markets continue to attract scrutiny from competition authorities, it remains to be seen how the trends observed in the report will evolve and whether NCAs will make greater use of less traditional theories of harm as part of their merger reviews. As discussed in a previous blog post, competition authorities across the world are increasingly considering how novel theories of harm and a cross-disciplinary approach might be used to promote competition in digital markets.