VESTAGER’S SECOND TERM: COMPETITION PRIORITIES

European Commission President Ursula von der Leyen’s commission was finally sworn in on December 1, 2019. Margrethe Vestager began her second term as Commissioner for Competition, a role she will combine with that of Executive Vice-President for a Europe Fit for the Digital Age for the next five years, despite the concerns raised about possible conflicts of interest when holding both posts. In her new role, Vestager will be simultaneously responsible for applying competition law and drafting EU rules on digital policies. Vestager–whose name was floated for President of the Commission–begins her second term facing plenty of challenges.  

As the EU institutions and Vestager herself announced in recent months, the EU competition agenda has placed priority on the following actions:

• Revising regulations on mergers

One of the priorities will be to revise EU regulations on mergers to cover any mergers that may negatively impact and harm competition in the market.

In some recent operations, the current thresholds based on business volume have proven to be ineffective in the case of mergers of technology companies, which may have very low turnover figures despite having high acquisition values and real or potential increased impact on the market. For example, in Facebook’s acquisition of Whatsapp, the Commission concluded that the transaction did not reach the turnover threshold required in the EU market, even though the purchase price was almost €14 million. It was only because the market share thresholds that were reached in three Member States (including Spain) that the Commission was able to rule on the case. Also, the Apple/Shazam transaction would have been beyond the European Commission’s control if the authorities from several Member States had not requested the case be submitted  to it because, once again, it did not meet the turnover thresholds under EU legislation.

In the Public Consultation on Merger Control that ended in January 2017, the Commission raised the possibility of instituting additional notification thresholds based on other criteria, such as transaction value. At present, this is already a reality in Austria and Germany, where, in addition to turnover-based thresholds, an additional transaction value-based threshold was introduced in the second half of 2017. In September 2018, the Commission committed to publish a reform proposal, but there is no news to date in this regard.

• Definition of  elevant market

Another objective announced by Vestager and Commission President Ursula von der Leyen is to revise the analytical framework and method for defining a relevant market, for the purpose of improving enforcement of the right to competition. Taking into consideration the advent of global players, especially tech companies, that base their business models on offering free services in exchange for data and advertising and are present in multi-sided markets, the criteria used thus far for defining a relevant market based on price (such as the SSNIP test and applying the hypothetical monopolist test) may not be adequate for these cases.

Even though the Commission has yet to announce specific proposals in this regard, the German competition authority (the Bundeskartellamt) already revised its rules in 2017 to adapt its legal framework to multi-sided markets, introducing a change in the prohibition against abuse of dominant position. This change recognizes that the free products and services offered by platforms may be a market in and of themselves.  

• Improving cooperation with national competition authorities

In line with the ECN+ Directive, the Commissioner has insisted on improving cooperation with national competition authorities and on homogenizing the criteria of the clemency program to ensure uniform application throughout the EU. Member States would have to modernize their systems and complete the transposition by February 2021. For further information on the objectives of the ECN+ Directive, please see the following post on our blog.

• Use of interim measures

On a procedural level, one of the most controversial points last year, and one that was the focus of Vestager’s speech before the European Parliament, was the proposal to restore the use of interim measures. They were used for the first and only time in the IMS Health case (2001), and they are now back on the scene due to their recent application in the Broadcom case in October 2019 to prevent Broadcom from using certain exclusivity clauses in its agreements with its main customers. In Vestager’s words, these measures need to be used more frequently in cases that could cause serious and irreparable harm. This opens the door to greater application of these measures in future cases.

• Focusing on the regulations on government subsidies in the field of tax rulings

According to Vestager,the European Commission will continue to review aggressive tax planning measures that may translate into unlawful tax breaks, as it has done in the Starbucks, Fiat and Apple cases. The Commission recently opened investigations into Nike, Ikea, Huhtamäki and 39 multi-national corporations in relation to tax rulings by the Belgian government.

• Streamlining case investigation

The Commissioner has also emphasized the need to do everything possible to reduce case investigations and to address the rapid evolution and constant changes in the technology sector.

• Digital agenda

Lastly, in relation to her role as Vice-President for a Europe Fit for the Digital Age, in 2017 the White Book on the future of the EU already stressed the challenges of new technologies and automation for consumers and workers. In this regard, three pillars have been defined as the basis for the digital agenda: (i) consideration of the human and ethical implications of artificial intelligence; (ii) creating an EU digital strategy, with a focus on SMEs; and (ii) homogenizing how Member States tax tech companies, to prevent tax evasion and the awarding of state tax breaks for global technology companies.

Further information on the priorities and challenges for competition and digital economy policies can be found on this sheet on Marghrethe Vestager’s testimony before the European Parliament when she was appointed, and the expert report on competition policy in the digital era, published by the European Commission in April 2019.