Earlier today the UK’s Competition and Markets Authority (CMA), German Bundeskartellamt (BKartA) and the Australian Competition and Consumer Commission (ACCC) released a joint statement on “the need for rigorous merger control”. The statement – which covers merger control across all sectors but has a particular focus on the tech sector – heralds what the ACCC’s Chairman himself described this morning as a “paradigm shift” in the way the authorities approach mergers.

While the aggressive attitude of merger control authorities (especially the CMA and ACCC) towards tech mergers is well known, the statement is significant in both the signal it sends about international cooperation, and in how explicit it is about the anti-merger attitude held within the three authorities. The BKartA's participation is particularly striking: while Germany has brought in reforms to its competition law and launched antitrust cases targeting Big Tech, its merger control practice has thus far been more measured. 

For practical purposes, the joint statement underscores the increasingly hostile regulatory environment for merging parties in the tech sector in particular, and the need for careful analysis of all potential competition concerns in transaction feasibility analysis.

Tech sector a key focus

The statement was launched at a webinar where the heads of the three authorities discussed perceived historical underenforcement against mergers, and the consequent impact on overall levels of “concentration” (i.e. lack of competition) across the economy.

The tech sector was a key focus of the discussion, with the head of the BKartA citing the oft-quoted statistic of GAFAM’s 400+ acquisitions between 2008-2019, and highlighting numerous historical merger clearances – namely Google / Doubleclick and Facebook / Instagram – as having facilitated “tipping” of tech markets in favour of the now dominant platforms.

Addressing uncertainty about the future

A theme of the statement – and the webinar discussion – was how merger control authorities approach uncertainty about the future. This is a particular issue in the tech sector, especially where larger platforms buy smaller or more nascent businesses (so called “killer” or “reverse killer” acquisitions).

The joint statement says explicitly that “uncertainty about the future should not necessarily mean that potentially anticompetitive mergers are cleared… an acquisition of a small start-up could in reality be the acquisition of what would have been a major competitive threat to the purchaser in the long-term”. It calls on merger control authorities to challenge the presumption that mergers should only be restrained where there is certainty about possible competitive detriment. 

On one level the joint statement is attacking a strawman (there is currently no legal requirement that harm is established “with certainty” – that it is more likely than not will generally suffice), but it signals a warning that merging parties should expect uncertainty to be interpreted against their interests.

Rejecting behavioural remedies

The joint statement also puts on a more formal and multilateral footing statements previously made by the CMA’s CEO eschewing behavioural remedies for tech mergers, such as those accepted by the European Commission in Google / Fitbit.

Neither the CMA nor the BKartA were able to review Google / Fitbit, but the ACCC rejected the remedies proposal and its review is ongoing (and the CMA’s CEO has said previously that the CMA would have blocked the deal).

A challenge for the regulators going forward

The elephant in the room is that for all the tough talk, and despite various proposals for reform, the legal test for blocking mergers has not changed for any of the three authorities (or indeed, any other major merger control authority globally). For now at least, the burden of proof in establishing a merger as anticompetitive remains with the authority. And the authorities have mixed track-records in court: while the ACCC hasn’t won a merger case in court in 20 years, the CMA has rarely lost (albeit to a judicial review rather than merits standard), and no outcome of the handful of successfully challenged mergers has ever been reversed. 

How the more aggressive approach heralded this morning squares with the existing legal tests will doubtless prove a challenge for the authorities. But the message is clear: merging parties should expect assertions that their mergers are procompetitive or even benign to be robustly challenged.