Legacy of Vestager’s First Term, Episode 5: Merger control policy

This post focuses on the merger control developments during Commissioner Vestager’s first term which, in our view, most concretely impact businesses when deal planning. These are: tougher enforcement; the evolution of innovation as a theory of harm; the resurgence of conglomerate concerns; common ownership and a rejection of calls for a less interventionist approach on industrial policy grounds. We conclude by considering the challenges to EU merger control, caused by digitalisation, that lie ahead.

With the Commissioner about to begin her second term, we expect all of these enforcement trends to continue. Companies must have a robust strategy for their deals early on to avoid big surprises.

Tougher enforcement

Earlier this year we wrote about rising merger control enforcement. It is worth a quick recap, particularly as this trend will no doubt continue.

  • More prohibitions: Six mergers were blocked in six different sectors (telecoms, financial services, cement, railways, steel and copper) during Vestager’s term. This frequency has not been seen since Mario Monti’s mandate, fifteen years ago.
  • Higher intervention rates: More remedies have been imposed, despite claims that rates remain fairly stable. Our calculations show that nowadays remedies are imposed in 20%-25% of non-simplified filings.
  • Tougher remedies: There is a stronger focus on the suitability of the divestment buyer and the viability of the divestment business. The European Commission increasingly requires an up-front buyer condition for the divestment remedy.
  • Stricter on procedure: Canon and Altice were fined for gun jumping and GE and Facebook for providing misleading information. There are a number of ongoing investigations by the EC, including one for breaching merger commitments and another one for supplying misleading information.

Traditional merger control assessment of innovation concerns focussed on overlaps between pipeline products and established products. The key question was often whether the merged entity would abandon the pipeline product development, if it was to challenge the incumbent position of the established product. In Novartis/GSK, Novartis bought a line of cancer medicines from GSK. Some of those worked in a similar way to drugs Novartis was developing. The EC required the divestment of Novartis’ pipeline products as a condition to clearance, on innovation grounds.

Under Commissioner Vestager, the EC started to focus on a reduction in innovation. And to expand to scenarios where innovation might not have raised a concern before, because the overlap was too speculative or not product specific enough. As a result, more attention is now paid to early innovation efforts and to broader R&D capabilities and programs. In Dow/Dupont, the EC referred to “innovation spaces” rather than identified product markets. The EC took a similar approach in Bayer/Monsanto.

Conglomerate concerns

After ten years without challenging conglomerate effects during its merger review and following some high-profile court defeats over conglomerate mergers in the early 2000’s, the EC has shown a renewed willingness to intervene on these grounds. It has not gone so far as prohibiting any recent transactions on conglomerate grounds, but some have led to binding commitments and/or Phase II reviews.

Mergers such as Dentsply/Sirona, Worldline/Equens/Paysquare, Microsoft/LinkedIn and Broadcom/Brocade all gave rise to conglomerate concerns which required commitments. Bayer/Monsanto and Essilor/Luxottica caused the EC concern because of conglomerate issues. Both cases underwent Phase II investigations but ultimately no conglomerate concerns were pursued against the mergers. In Bayer/Monsanto, the EC was worried the merged entity would bundle or tie sales of pesticides and seeds, foreclosing competitors’ access to distributors and farmers. In Essilor/Luxottica, the EC investigated whether or not Luxottica would use its powerful brands to force opticians to buy Essilor’s lenses and foreclose other suppliers.

Common ownership

The EC has regularly investigated whether common shareholdings brought about or strengthened by a merger can have a negative effect on effective competition. Dow/DuPont and Bayer/Monsanto are just two examples, but the issue has been reviewed in other cases.

A call for less merger control?

The most controversial prohibition decision of Vestager’s first term was Siemens/Alstom. This merger made the headlines because it was arguably driven by the ambition to create a “European champion”, more capable of competing with its state-owned Chinese rival, particularly in markets outside Europe. The French and German governments (where Alstom and Siemens are headquartered) supported an approach where competition concerns in Europe would be traded off against the increased competitiveness of a larger scale competitor outside Europe. Ultimately, they called for a less interventionist approach by the EC. The ensuing debate was about where to draw the line between competition law and the EU’s industrial policy. 

During Vestager’s recent hearing before the European Parliament to confirm her second term, there were plenty of references to a European industrial strategy to support European firms. And indeed France, Germany and Poland put joint proposals on the table (see here and here).

However, it is clear that Vestager’s vision does not align with the Franco-German proposals following Siemens/Alstom. Instead, she considers that the key principles underpinning any industrial policy are that it must be (i) green, (ii) for all, and (iii) based on “fair competition”. Her position is that competition at home will make European companies better placed to compete outside of Europe.

And finally, the challenges of digitalisation

The biggest issues that Vestager will continue to face concern digitalisation and the growth of online platforms. And whether an approach heavily focused on short term competition effects is suitable to capture the longer-term challenges posed to competition by digital platforms and their business models. In April, the EC published a report on Competition Policy for the Digital Era, which considers this very question. The report is advisory, and the EC is currently mulling over its recommendations. Regarding merger control, there are two main issues.


The EC has assessed data-related issues, on occasion, in merger cases over a number of years. But, to date, there are no cases where accumulation of data by the merger was found by the EC to give rise to competition concerns.

Microsoft/LinkedIn provides guidance on the framework for the assessment of data issues both in relation to horizontal effects (the big data effect) and vertical effects (data as an input). In Apple/Shazam, the EC focused on two questions relating to data. First, whether the merger would provide Apple with access to data which would allow it to directly target competitors customers. Second, whether competing music stream apps would be harmed if Apple discontinued referrals from the Shazam app to them. The EC did not find that access to the data would materially impact competition.

In 2020, the EC will likely investigate Google’s proposed acquisition of Fitbit. Lately, Commissioner Vestager has expressed increasing concerns about companies that merge because of data and accumulation of data as a barrier to entry or expansion for new or smaller competitors. Google/Fitbit also raises important privacy concerns: how will Google use Fitbit’s data? There is an ongoing discussion about what competition law can do/should do to protect privacy – and merger control in particular.

Killer acquisitions

This refers to a situation where an incumbent company acquires a smaller target before it becomes a significant competitor, preventing competition before it starts. There has been increasing concern about killer acquisitions in tech and pharma markets. There is a perception that the EC (and competition authorities in general) may have missed opportunities to block transactions, because the potential competition was not immediate or certain enough. Facebook/Instagram is often cited in this regard – a case not reviewed by the EC. There is also concern that even where such transactions fall under the EC’s jurisdiction for merger review, the EC may not be sufficiently equipped to properly assess future competitive impact, resulting in underenforcement.

There is an ongoing debate whether the EC should change the jurisdictional rules under the EU Merger Regulation to capture killer acquisitions which may nowadays escape a review by the EC. But, for now, it is reported that Commissioner Vestager does not have plans to do so.