Interview with Simon Genevaz, Autorité de la concurrence (Global Merger Control Conference - Paris, 2 December 2016)
Friday, December 2, 2016 at 8:30 AM - Wednesday, December 2, 2020 at 1:00 PM (CET)
4th Edition of the Global Merger Control Conference
MARKETS, REMEDIES AND SURVIVAL:
CUTTING EDGE ISSUES IN GLOBAL MERGER CONTROL
Interview with Simon Genevaz
(Autorité de la concurrence)
Simon Genevaz (Autorité de la concurrence) has been interviewed by Mélanie Thill-Tayara (Dechert) in anticipation of the 4th edition of the Global Merger Control Conference, to be held in Paris the 2 Decembre 2016. He will participate in the panel "On-line Market Mergers: Views from both Sides of the Atlantic ".
To see the full program, please visit the event website.
With the emergence of the digital economy, some competition authorities consider being faced with a sort of legal loophole for the analysis of concentrations between online players where at least one of them does not generate an important turnover but yet is considered as very valuable, which can be reflected in the price of the transaction. Some consider that such transactions should be reviewed by competition authorities as they can have a non-negligible impact on the market. The Commission has recently launched a public consultation on the procedural and jurisdictional aspects of EU competition law and may adjust the EU thresholds in the near future with a view to attract under its jurisdiction the review of these operations. Could / should a similar change be envisaged under French law?
The Authority is aware of the concern that an enforcement gap may exist due to the current notification thresholds. In practice, unlike other jurisdictions, I do not know of any case affecting French markets specifically that may have escaped a merger review due to the target’s low turnover. Nevertheless, it will be interesting to see what comes out of the Commission’s public consultation. In the current context, the Authority contributes to tackling the competitive issues raised by mergers and certain conduct in digital markets. The Authority and the Bunderkartelamt recently issued a joint report on Competition Law and Data. The Authority will also host roundtable discussions on Nexus and Thresholds for the International Competition Network on December 3 which will specifically address challenges of the digital economy and low turnover transactions.
What are the lessons learnt by the FCA’s merger unit from the past merger control cases involving the very specific sector of online markets, in particular the Fnac/Darty decision of 16 July 2016 where the FCA considered that the competitive pressure exerted by online sale has become significant enough to be integrated in the concerned market, whether it comes from pure players (such as Amazon or Cdiscount) or from the stores' own websites which complete in-store physical sales?
With Fnac/Darty, the Authority’s Mergers Unit experimented with methods it had not used extensively before. For example, in order to gather behavioral evidence useful to assess online/offline substitution, we commissioned a customer survey that we designed building on British precedents in retail markets. This greatly contributed to the review, on many levels. Behavioral data helped form the Authority’s assessment of the merger’s unilateral effects on prices, by confirming economic evidence showing that demand would divert significantly to online services in case of price increases. It also contributed to showing that non-price theories of harm, like the merged entity competing less on quality aspects of in-store services after the merger, were relevant.
Inevitably, Fnac/Darty will be interpreted by merging companies as a roadmap in future retail cases for how to extend market definition to include online players. However, in many ways, the Fnac/Darty decision cannot be generalized. Market conditions in the retail distribution of consumer electronics that were relevant to the outcome in Fnac/Darty displayed multiple characteristics, including aggressive competition from pure players, price decreases and diminishing profit margins, market exit by both online and physical retailers and the generalization of a new business model in the form of omnichannel retailing, that may not be prevalent in other sectors. So it remains to be seen whether the conclusion that the Authority reached in electronics retailing will hold in other retail markets.
On the other hand, the methods that we used in Fnac/Darty are already being used in other cases. Very much in the same way that UPP-type quantitative tests were gradually generalized since 2010, customer behavior data gathering and analysis will probably become increasingly routine in horizontal cases. However, like quantitative tests, behavioral data will not determine the outcome of merger matters alone. I know of no merger case in which economic or behavioral evidence supported an outcome which would have been at odds with what is commonly called “qualitative analysis,” i.e., the assessment of other types of evidence, the Authority’s understanding of the way the relevant markets actually function and how companies actually compete. Companies involved in certain recent cases sorely realized that numbers cannot tell a convincing story when the results of our investigations tell another. In matters of evidence, coherence matters more than the value of each piece of evidence taken separately. If anything, Fnac/Darty taught us that profound changes in market definition require a large body of diverse and convergent evidence.
What are the initiatives or hot topics currently being considered in the framework of the International Competition Network (ICN) to allow merger proceedings on both sides of the Atlantic to achieve a workable level of convergence and therefore ensure sufficient predictability for companies when transactions are reportable in various jurisdictions?
The ICN’s Merger Working Group, which the Authority is currently co-chairing, has undergone an extensive assessment of its work product. It is now in the process of updating key parts of its Recommended Practices to reflect current practice. That work has recently focused on remedies, with the adoption of a new Remedies Guide (http://www.internationalcompetitionnetwork.org/uploads/library/doc1082.pdf). We are currently working on updating the Recommended Practices on Merger Notification and Review, focusing on notification thresholds. As I mentioned earlier, the Authority will host ICN roundtable discussions on notification thresholds and challenges posed by deals in the digital sector on December 3, 2016. We are also working on updating ICN work product on investigative techniques, a subject which will be explored at the next ICN Merger Working Group Seminar in February 2017.
The theme of this fourth annual Global Merger Control conference focuses on the recent proliferation of merger control regulation and enforcers. Such a proliferation leads to the inevitable question of whether, in this new regulatory environment, mergers and acquisitions have been made subject to undue obstacles. Indeed, of more that 200 sovereign states in the world, some 125 now apply merger control rules to transactions meeting thresholds of various intensity. This event is organized by Concurrences Review, with the support of Dechert, McKinsey & Company and Advolis.
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