Meeting with Director General Olivier Guersent and colleagues on 26 September 2023
ECLF raised the issue of predictability, certainty, and legitimate expectations in conglomerate mergers. The concern is the Commission’s (the ‘EC’) does not appear to apply the nonhorizontal merger guidelines with the same rigour as it's used to. This gives the impression that those guidelines do not have the same importance as they had when they were drafted.
The EC informed us that the aim of EU guidelines is to consolidate practice. When markets evolve, guidelines become less relevant until they are being renewed and redrafted. That is different from the US where guidelines are in place to inform judges what to do. EU guidelines are not declarative guidelines – so when decisional practice develops guidelines may seem less relevant. Policy intentions may or may not come true. This is in particular so when there is a rapid and profound evolution such as the one which we have witnessed – in parts – in relation to the assessment of non-horizontal mergers. The decisional practice is currently being made in this area and there is case law (most recently the CK Telecoms judgment) allowing the Commission to depart from its guidelines provided it justifies such departure. If at any point in time the decision is made to review the guidelines, the EC will consult on any draft guidelines, in line with its established practice.
In terms of guidelines in other areas, the EC is not planning at this point in time to issue guidelines on digital mergers. It needs to carefully prioritise its resources.
Article 102 TFEU exclusionary guidelines
The timing on Article 102 TFEU guidelines is not yet decided. There has been a lot of questions on the ‘as efficient competitor’ test (‘AEC’), which is a very resource intensive test. Determining whether an AEC test should be used may be linked mainly to the type of the abuse but also to the market at hand. Thus, there is generally speaking no need to apply an AEC test if it is relatively obvious that the abuse has a foreclosure effect. For example, if a monopolist is engaging in fidelity rebates or if a firm benefits from great network effects.
Article 22 EUMR
ECLF asked about the coordination of national competition authorities (‘NCAs’). Unless the EC takes an active coordinating role, there is a fear of fragmentation.
The EC emphasized that it is all in favour of coordination as it is always better to have a joint view, so parties know where they stand. Sometimes however the EC disagrees internally and/or with the NCAs. It is for the parties to drive the Article 22 process forward and to contact the EC to get guidance and to coordinate with NCAs. The EC indeed coordinates with NCAs on all potential Article 22 candidate cases for referral although it is acknowledged that the parties may not always be aware of it. At the same time, sometimes NCAs might feel pressured to request the referral as there is some uncertainty as to when a transaction was made known to the NCA, and the 15-working-day deadline for NCAs to make a referral request started running. These dynamics are not always within the EC’s control.
The European Competition Network was established as a forum for discussion and cooperation for European competition authorities in cases where Articles 101 and 102 TFEU are applied. Even though it does not formally cover cooperation on merger control, similarly close coordination takes place in mergers. Some NCAs are reluctant to use the referral mechanism e.g., Germany. Depending on the outcome, this may change after a final ruling of the ECJ on Illumina’s appeal of the General Court’s judgment on the Commission’s revised approach to Article 22. In the meantime, the EC will continue applying the Article 22 Guidance, in particular in the tech, biotech and pharma sectors, but possibly also in other sectors.
ECLF has the impression (rightly or wrongly) that the EC does not encourage merger filings in August and sometimes also in June and July or at Christmas.
According to the EC, parties can always file a case no matter the time a year. However, some parts of the year it is not easy for the EC to seriously run a market investigation for the transaction. Parties run the risk of a phase 2 investigation if the EC cannot investigate a transaction due to lack of information in phase 1. For example, if the EC can't get information from 3rd parties due to summer holidays. During this period, experience shows that market investigation results might be biased as only those who are concerned about a given transaction may bother to reply to the Commission’s market investigation, while those who view the transaction neutrally or positively will refrain from replying. If the notifying parties have a choice, it may be better for them to not file during the holiday periods. If the investigation in phase 1 is not satisfactory then the case will end up in phase 2.
ECLF was interested in understanding more about the corporation between DG COMP and DG Connect under the DMA.
The EC has deliberately formed one taskforce and there is no distinction between the various DGs. The work being carried out by that taskforce is a matter of internal coordination. One policy line, one recommendation. DG Connect does lack the investigative experience compared to DG COMP, so the latter will be more in the lead on this. DG Connect, however, knows better about interoperability and the technical background to this, so will be in the lead on these topics. There are mixed teams across DG COMP and DG Connect. Every decision is one decision. If there is a disagreement within the taskforce between DG Comp and DG Connect and a decision needs to be taken, this will be escalated to the two Director Generals (Olivier Guersent and Robert Viola) and a decision will be taken at this level.
ECLF was interested in understanding how the EC is going to measure contestability.
There is already good engagement (with the EC) from most of the designated gatekeepers as they work towards the March 2024 deadline for formal compliance. Most of them have understood they have a lot to do technically on the engineering side to achieve compliance. Amendments and rewriting of contracts will also be required. To assess whether
contestability has been achieved, the EC will rely on third party feedback and market intelligence. The obligations are on the gatekeepers to demonstrate compliance, but they will be tested by the market and the EC will listen to the market and to the gatekeepers. If necessary, the EC has the power to investigate.
It is the choice of gatekeepers whether to change their business model globally to comply with the DMA. The goal of the DMA is not to be applied extraterritorially, but if the gatekeepers decide to have a single offer worldwide to comply with the DMA, then it is their choice.
The EC will continue its dialogue with the Digital Markets Unit in the UK. The EC also has a very good dialogue with the US and organised for two US secondees (one from the FTC and one from the DOJ) to work in the DMA taskforce for a period of time.
On 18 September, the CMA issued a very good report on AI Foundation Models. Given the high quality of the CMA’ report, the EC is considering whether there is a need to set aside resources to do a similar work. Now when we have the CMA report, the EC can build on that to progress further with their thinking on AI. The EC and the CMA have a shared understanding of competition issues. Foreign subsidy regulation (FSR) Since the FSR came into force, the ECLF has seen a deterrent effect in terms of a decreased desire to acquire anything in the EU. Perhaps this is the intention with the regulation, but it is a regulation which may also be difficult for EU firms to comply with.
Now that the FSR is in force, the EC lacks resources, and will for the time being have less of a focus on complaints and more focus on the notifications that need to be dealt with. Notifications are less resource intensive as no decision is needed for notifications.