Long & geeky thread on yesterday @EUCourtPress judgment that annuls the @EUCommission decision that blocked the merger between Telefónica UK & Hutchison 3G merger (T-399/16) 1/n.
In a nutshell, this is a judgment on the *substantiality* of the market power effects required to enjoin a merger 2/n.
Today's reading confirms the main take from yest: not all market power effects from mergers give rise to merger liability 3/n
@EUCourtPress Court repeatedly stresses it does not invent this idea. The law contains threshold rules of *appreciable* anticompetitive effects. Law talks of "significant" harm, elimination of "important" competitive force, and elimination of "particularly" close competitors 4/n
Sure @EUCourt accepts that losing one firm means lessening of competition (“decline in the competitive pressure” at §171). But losing one firm means not *unlawful* lessening of competition. This would entail lowering “legal criterion” of significance in EUMR (§173) 5/n
In its review of the decision, the Court finds that the Commission’s *empirical* and *causal* evidence often fails to establish substantiality, appreciability, or significance of competitive harm due to the disappearance of one firm 6/n
In other words, @EUCourtPress Court does not disagree so much w/ @EUCommission on legal tests nominally applicable to review of mergers in oligopolistic markets. It mostly says the case evidence shows trivial levels of harm. That's why I don’t believe in an appeal on the law 7/n
There are some pretty harsh statements that fault @EUCommission 's overconfidence, as when the @EUcourt points out EC used a “relatively small sample” of … 100 users (§243) 8/n
Or when it says that the decision makes “improbable assumptions concerning the absence of any reaction” by competitors, which would … “simply cease to invest” following an increase in costs (§372) 9/n
But what I find truly remarkable is are the several dicta which clearly shows the slow but steady progression of the more economic mindset in the jurisprudence of the @EUCourtPress 10/n
This is in clear display when the @EUCourtPress says that almost all horizontal concentration leads *automatically* to price increase (§276), and then immediately moves on to say that it leads to efficiency – though it “depends” on external pressure (§277) 11/n
IMHO it is nonsense to read here a “presumption of efficiency” in fav of horizontal mergers. What the @EUCourtPress says is harm to competition is empirical question, not a rhetorical one => judgment expressly talks of *automatic* price effect and *depen[dent]* efficiencies 12/n
The judgment also carves out new space for discussion of efficiency gains from mergers within assessment of harm to competition. By so doing, @EUCourtPress Court dismisses the weird substantive and procedural logic of separating discussion of anti and procompetitive effects 13/n
Note on efficiency: the Court seems to consider as valid efficiencies the elimination of duplicate structures in production and distribution, which the @EUCommission has in other instruments typically considered less relevant than immediate variable cost reductions (§277) 14/n
Standard of proof (§119) is set somewhere between “more likely than not” (50/50) and “beyond reasonable doubt”. Not clear how this strays from past case law. Seems to fit with CJEU Tetra Laval “in all likelihood” std. Or w/ US antitrust notion of “dangerous probability” 15/n
The judgment conveys a number of other subliminal messages w/ important policy consequences in current convo on rising market power or with respect to ongoing cases under 101 & 102 TFEU 16/n
Message number 1: “many oligopolistic markets exhibit a degree of competition which can be described as healthy” (§434). Or how to reverse the great reversal :)? cc @Philippon 17/n
Message number 2: agency statements in Guidelines are not w/o consequence on margin of maneuver in subsequent cases. See §452 about the @EUCommission not establishing “the criteria which it imposed on itself” in soft law instrument 18/n
Message number 3: incentives to invest (aka dynamic efficiency) matter. And though investments do not lead automatically to better quality, common sense suggest they are more likely than not to improve than to degrade quality (§281) 19/n
I like the judgment, but I also have very significant problems with two ideas that now appear in the case-law. 20/n
I don’t agree with the proposition that unilateral effects (UE) from mergers are unlawful provided they affect the market to “an extent equivalent” to a dominant position (§90). I have always thought of dominance as an extreme form of UE. 21/n
I would prefer to read in §90 the idea that unilateral effects and dominance are, and should be, equivalent ‘in nature’, not as an issue of quantification. Otherwise, the idea of extending the EUMR to gap cases in differentiated markets falls apart 22/n
Two, I disagree with the idea that merger analysis “requires account to be taken … of effects over a relatively long period of time in the future” 23/n
If this is the case (i) merger review risks being totally ineffective; (ii) ex post control under single firm conduct rule can provide a timely substitute; and (iii) the future is too uncertain 24/n
To close: happy to be wrong as ever. + the above remarks have nothing to do about the specifics of 4-3 telco mergers, and the possibility that the particular case had been appropriately decided by @EUCommission. I actually prefer being a mobile consumer in FR (4) than BE (3) END
