Dynamic Competition in Dynamic Markets: Exploring the Future of Digital Mergers and Innovation

CPI’s European conference on “Dynamic Competition in Dynamic Markets: Charting the Path Forward?” at SDA Bocconi School of Management on March 22, 2024, offered insights into recent merger cases examined by the European Commission and the underlying shifts in enforcement strategies.

The discussion moderated by Mario Todino, Partner at Jones Day, featured Lorenzo Coppi, Co-Head of EMEA practice, Compass Lexecon, Andrea Venanzetti, Director of the Italian Antitrust Authority, Michele Polo, Professor of Economics at Bocconi University, and Marc Zedler, Deputy Head of Unit, Mergers, DG COMP.

Do we have the impression that it is really business as usual? Are we seeing a shift in enforcement? Is there something there? To be more precise, are we actually applying more refined assessment tools?”

Todino started off by highlighting the surge in interventions by leading competition agencies worldwide, particularly focusing on recent cases such as Adobe Figma, Booking, and potential challenges with Amazon iRobot. These cases, he noted, deviate from traditional models of direct competition, often involving complementary businesses and products. The underlying concerns voiced by authorities revolve around the entrenchment of market positions within digital ecosystems post-merger.

When we are extending the assessment mergers or acquisitions also to the dimension of impact on innovation, we are entering into a that economic analysis is exploring in these years with a lot of insights and interest in interesting and important results.”

Marc Zedler, offering insights in his personal capacity, emphasized the dynamic nature of markets and practices, particularly within the digital sphere. He noted that while the enforcement standards remain consistent, there’s a refined understanding of digital markets, allowing for more nuanced analyses. Zedler highlighted the importance of exploring the impact of mergers on innovation, an area where economic analysis is still evolving.

We shouldn’t have a different analysis when we deal with digital mergers or with anti-competitive behavior in digital markets.”

Andrea Venanzetti echoed Zedler’s views, emphasizing the need for a comprehensive economic analysis in merger control. He stressed the importance of adapting assessment tools to understand the dynamics of digital markets accurately. Venanzetti cited Professor Victoria Robertson’s report for DG Comp, underscoring the complexities of digital mergers that defy traditional categorizations.

The distinction with these new merger cases, compared to more traditional ones, lies in envisioning what competition would resemble in the absence of the merger in the future. This task is inherently more challenging, particularly when considering the unpredictable timeline of innovation.”

Lorenzo Coppi delved into the challenges posed by digital mergers, particularly in predicting future competition dynamics. He highlighted the significance of global regulatory alignment, given the multipolar nature of competition authorities. Coppi stressed the need for cautious decision-making, considering the potential repercussions of false positives in merger assessments.

I hope that this compliance and dialogue phase can help restore consideration for the diverse ways in which various gatekeepers utilize product combinations within an ecosystem. Through this perspective, enforcement efforts can potentially become more effective.”

Michele Polo emphasized the challenge of defining digital ecosystems within traditional antitrust frameworks, suggesting a definition based on a set of complementary or independent products anchored by a core platform service. He highlighted the added value of being part of an ecosystem and the unique contributions platforms make, like data aggregation. Polo also discussed concerns over platform dominance and data sharing, proposing remedies to address antitrust issues. On the topic of innovation and acquisitions, he acknowledged “killer acquisitions” as a possible but not standard effect, pointing out the positive aspects of startups innovating for buyouts. However, he expressed long-term concerns that systematic acquisitions by incumbents could stifle innovation incentives.

The panel’s discussion shed light on the evolving landscape of digital mergers and innovation, underscoring the necessity for a nuanced understanding of market dynamics and robust economic analysis in enforcement strategies. As digital ecosystems continue to evolve, regulatory frameworks must adapt to ensure effective competition and innovation in dynamic markets. Towards the end of the discussion Todino brought up a few questions to consider moving forward, “Do we have the impression that it is really business as usual? Are we seeing a shift in enforcement? Is there something there? To be more precise, are we actually applying more refined assessment tools?”