Keynote address at Studienvereinigung Kartellrecht
Brussels 12.03.2015



EU merger policy celebrates its 25th anniversary this year, and we can think of our meeting today as a bit of a celebration. Looking at what has been achieved, I think there is reason to celebrate because the system hums along nicely.

Of course, there is no room for complacency, but it is good once in a while to stop and take stock of past achievements. This is important, because – like the other instruments of competition policy – I see merger control as a lever to promote growth in the Single Market. And Europe has to use all the tools in the toolbox to boost growth and create jobs.

Therefore, I am happy to talk about merger control before you today. I would like to make a few remarks on the debate that started last year when the Commission announced that we would think about reforming merger rules and published the White Paper. Then, I will turn to the definition of geographic markets. Market definition is quite central to merger control and the debate on the definition of markets is a very important part of EU competition policy.


Merger White Paper


Simplification package

We have already done a number of things to make the merger control process easier. At the end of 2013, the Commission changed some procedures to cut red-tape. The objective was to make our control more business-friendly. It’s called the simplification package – and for a reason.

Now companies can follow the so-called ‘simplified procedure’ more often and have to provide less market information when their deals are not problematic. Around 10% of cases have moved from the normal procedure to the simplified procedure. Also, the pre-notification stage has become shorter for both normal and simplified cases. These are steps in the right direction.

White Paper proper

So, that package fine-tuned the procedure. Now the work continues on the rules themselves. The White Paper that was published in July 2014 set out our initial ideas for updating parts of the EU Merger Regulation. There are two main reasons for this reform drive:

  • One is improving the system that we use to decide if a deal should be reviewed by the Commission or by the national competition authorities in the EU countries. This comes with proposals to streamline, to refine, and to further simplify other procedural aspects.
  • The other is about closing an enforcement gap related to minority shareholdings.  

A company does not need to acquire control of another firm to gain significant influence; that is relatively obvious. Sometimes, it is enough to buy a minority stake – and the purchase can be done jointly with other shareholders. These arrangements can create competition problems. However, they escape our review under the Merger Regulation.

The clearest example we have seen in our practice is probably the Ryanair/Aer Lingus case. We could not, on a European scale, prevent Ryanair from buying close to a third of Aer Lingus’ shares, even though we found that the combination could result in price increases and less competition. Eventually, our UK colleagues required Ryanair to sell most of its stake. This is because the UK authorities can review the acquisition of non-controlling minority shareholdings. These deals are also within the remit of the German Bundeskartellamt, Austria’s Bundeswettbewerbsbehörde, and our sister agencies in the US and Japan.

What can we do to close this enforcement gap? This was one of the various issues that we put out to consultation in the White Paper last summer. For me it is crucial that before we take steps to change regulation, we listen to experts, business, the public, and to those who take an interest. We listen before we carry out the review. It is also important that we do not listen passively but that we also take on board the views we collect. I know that the Studienvereinigung Kartellrecht has sent us its comments – as have many of you sitting in this room. I wish to thank you for helping us improve our way of thinking and decision-making.

What have we learned from the replies? While many acknowledge that there may be an enforcement gap, there is widespread concern regarding the proportionality of the White Paper's approach to closing that gap. Is it balanced? Will it work well? Against this background, my conclusion is that that the balance between the concerns that this issue raise and the procedural burden of the proposal in the White Paper may not be the right one and that the issues need to be examined further.

Any system for the control of minority shareholdings at EU level would need to be carefully designed. Otherwise we risk adding too much red-tape that would not be justified by the number of cases that we could take on. To design such a system takes time and we need to discuss the modalities of any such system again internally, with Member States, and other stakeholders. There is no need to rush. What counts is that the new rules – when they are introduced – work well and are proportionate to the problem.

More issues

Other issues have emerged during the debate; I will mention a couple of them. One is about reforming the notification thresholds so that the Commission can also review deals when the target does not have a large turnover but the transaction value is high. Another is about pushing for more convergence of national and European regimes. Let me put it to you as an open question because I do not know the answer yet. Is the time ripe for common merger-control rules in the internal market like the system that was introduced for antitrust just over ten years ago? I really would like to take your comments on board.

Definition of geographic markets

Since November we have seen quite an M&A boom, so our plate is quite full. We have taken close to 90 decisions since November 1st; there are eight cases in Second Phase sitting on my desk; and we have more complex cases in the pipeline.

During these months, I’ve also met many stakeholders – national governments, national competition authorities, journalists, experts and business representatives. When the conversation turns to merger control, some of them tell me that the Commission should change the way it defines the geographic scope of the markets affected by the deals. I understand this is a very old debate and that critics have become louder since the economic crisis hit our continent.

The argument often goes like this: “We need to protect our companies. We need to help them become bigger otherwise they cannot take on their international rivals. And since they compete with these rivals on a global scale, you should look at markets as world-wide rather than European or national”. I am not convinced by these arguments and I believe that – in fact – we’re doing the right thing.

Defending competition, not competitors

First of all, I think that some of the critics respond to an ideological urge – as if merger control were a ploy against Europe’s companies in the first place; as if we wanted to keep companies small. Well, it is not. Our task is very simple. We defend competition in the Single Market, not the competitors that do business in it.

I believe that companies should be absolutely free to adopt any business strategy they like to become stronger and thrive. But this should not happen at the expense of end-consumers and business partners. Ideological debates tend to lose sight of this. What really counts is the impact that a proposed merger can have on consumers' choices, on how our economies work, and ultimately on people’s lives.

In the same vein, we make sure that the company resulting from a merger will not make life difficult for its business customers. They too have rivals from outside Europe. And they too need access to high-quality inputs at competitive prices.

We take markets as they come

Secondly, I think that the phrase ‘definition of geographic markets’ can be misleading. When I first came here and started preparing for my hearing, I wondered who the people are who make these definitions. I wanted to meet them and see the special pencil they use to draw boundaries – I have not found them yet. What I found instead is a very dedicated team who looks at how markets work in a competent and flexible way.

Sometimes the exercise is straightforward, sometimes more complex. In all cases, it is centred on customers. Our task is to understand where customers can turn to in case prices rise after a merger. If they cannot realistically rely on suppliers located outside the area, then we have a first indication of where the boundaries lie. In one sense, this means that we don’t define markets – markets define themselves.

Evolving analysis

Another aspect critics tend to overlook is that geographic markets evolve. When market conditions change, then our review changes. For instance, going back a few years, the Commission has traditionally considered the market for recorded music to be national. We remember those days; I still keep my vinyl records and turntable. But technology has changed the music industry beyond recognition. Now, digital music distributors offer pan-European services and strike Europe-wide agreements with record companies.

As a consequence, we have changed our analysis. We first spotted the trend back in 2004. When, in 2012, we assessed Sony’s takeover of the music-publishing business of EMI, we concluded that the digital distribution of music was evolving towards Europe-wide markets. In fact, in the last years, in the majority of decisions EEA-wide or global markets were among those assessed. For those of you who like figures: The number of decisions where at least one of the markets at stake was considered to be at least EEA-wide or wider was over 60% in the time period of 2012-13. This was up from almost 50% of cases ten years ago.

Similarly, in the sector of telecommunications equipment, the Commission's decisions over time found wider and wider geographic markets. The Commission had considered them to be national in scope back in 1991. Driven by the harmonisation of international standards of equipment first at European level and then globally, these markets have been opening up to global competition over time.

The Commission recognised this trend. In 2003 it considered some of the telecommunications system markets as having become wider than national and at least EEA wide. Three years later – in the Nokia/Siemens case – the Commission concluded that telecoms equipment markets were becoming at least EEA-wide, if not global. So when market conditions change, this is reflected in our practice.

One final remark on market definition: We see a wave of deals in the telecoms industry and the market definition debate is quite lively in that context. At present, I have three cases on my desk – and more are likely to come. Each of these deals is different and we will review them on a case-by-case basis. As we do so, we will never turn our eyes off the customers and the need to keep a fast-changing industry open, innovative and contestable.

Champions League

Before I close, let me make a more general point. Merger control is not an obstacle to European competitiveness. Our work does not stand in the way of the plans that EU firms make to reach the size they need to compete globally. Over the past ten years, the Commission has cleared unconditionally over 2,800 mergers and blocked only five. We prohibit a deal when there is no other way to keep a market competitive.

Generally, when we find that a merger can thwart competition, we accept remedies from the companies and then we give the green light. On average, we clear with remedies about 6% of the deals we review. I approved the acquisition of France’s Lafarge by Holcim of Switzerland – a global leader in the cement industry – last December on condition that the companies sell most of the operations where their activities overlap.

I think this is a very good example on how to solve the dispute over European or national champions. Rather than defending national champions, merger control promotes a competitive environment in which Europe’s firms can become world leaders.

This talk of national and European champions reminds me that ‘competition’ has two meanings in the dictionary – and the other one has to do with sports. Now, I’m not much into football but there’s one thing even I know well: Nobody would watch a match where the goalposts for one team are closer together just because they are national champions.

That would not be fair, not much fun, and would be really, really bad for the sport. Those pampered players would never win the World Cup – where the goalposts are standard for everyone. In plain language, it is not a good idea to pamper national champions. It is the task of merger control – and of competition policy in general – to give everyone the same conditions to do business in the Single Market.

Thank you.