Let's talk antitrust

Reboot required? Digital mergers, big data and predicting the future

Video | October 2018 | 00:05:59
Transcript

Caroline Thomas: Hi Richard, so we’re here today to talk about the European Commission’s recent decision to approve Apple’s acquisition of the music recognition app, Shazam. And this is an interesting case. It’s one of the first big data cases that the Commission has managed to get its teeth into. I wondered if we could start by talking about how the Commission came to take jurisdiction over this case because it’s quite an unusual route.

Richard Whish QC: We know the definitions in the Merger Regulation of when a concentration has an EU dimension. Of course, when we enter the digital world and especially the acquisition of start-ups, there may be some fantastically attractive and exciting start-up, but precisely because it is a start-up, it does not yet have any turnover or it may not have very much turnover, and so almost by definition a lot of these transactions do not fall within the scope of the EU Merger Regulation. They’re immensely important acquisitions that might have a huge effect on the future development of the market, but the Commission lacks jurisdiction according to those thresholds. But then, of course, there are these two alternative ways in which concentrations that don’t have an EU dimension can reach the Commission. One is where the parties themselves voluntarily go to the Commission and say would you like to take jurisdiction over this? That’s under Article 4, paragraph 5 of the Regulation, and the other is Article 22 whereby Member States that have jurisdiction, or indeed in some cases don’t even have jurisdiction themselves, can say to the Commission would you like to take this one over? It is interesting in the last few years because Facebook’s acquisition of WhatsApp, the parties volunteered that case to the Commission, and Apple/Shazam that we are talking about now, I think seven Member States, jointly, made a request to the Commission.

Caroline Thomas: And when the Commission came to look at the case, what were the main issues that it was concerned about, and ultimately decided weren’t too much of a problem given that it reached a clearance decision?

Richard Whish QC: Well, obviously this is one of those cases where a possible concern is so said big data and this expression that people have used for quite a long time now without necessarily knowing what the problem was with big data – sort of an instinctive feeling that there might be something there that merits investigation. And, if so, what is the concern? Is it about privacy? Is it about the volume of information that is acquired, and so on? I think that we’ve all learned a lot in the last couple of years in terms of trying to identify theories of harm and I think there’s a realisation that the acquisition of vast amounts of data can, I don’t say will, but can give rise to competition concerns and that then sitting on that data and perhaps not sharing it with third parties could be problematic. Let’s face it, there are circumstances in which refusing to make information available to third parties can be an abuse of dominance. So, I think the Commission did think that there were concerns in this particular case and so it went to Phase 2. But having analysed the facts of this particular industry and the technology that was available and the relevant layers in the market, actually ended up giving an unconditional clearance. But that’s something that can happen in Phase 2 cases. It happens reasonably often.

Caroline Thomas: And interesting because, as I understand it, the Commission found that the data that was being acquired wasn’t necessarily unique and that there wasn’t a particular risk of a foreclosure effect here because these sorts of music recognition services, like Shazam, aren’t a major route for customers to come in to use these streaming services.

Richard Whish QC: Precisely, so that’s about the facts of that particular case and there were alternative facilities available, so yes, the Commission decided empirically in this case that there wasn’t a concern. Interestingly, the Chief Executive of the CMA, Andrea Coscelli, recently said, looking back to, I think 2012, when Facebook acquired Instagram, at that time that did not have an EU dimension, did not get referred to the Commission and the Office of Fair Trading, the predecessor of the CMA, looked at it and came to the conclusion in a very brief decision, I think ten pages long, that there wasn’t a worry. And Andrea Coscelli said, I wonder looking back, were we a bit naive? Should we have probed that case more than we did? But then I think that’s being said because we do know more about the possible theories of harm than we did then, so it’s sort of a learning experience. I wonder myself whether the Commission, when it cleared Facebook and WhatsApp a couple of years ago, I wonder whether in retrospect that might have been worthwhile looking into in slightly greater depth.

Caroline Thomas: And so do you think that we can expect closer scrutiny of these sorts of big data type of mergers going forwards?

Richard Whish QC: I’m sure that we will and one point incidentally, to conclude, is that I see that the Commission, or a Commission official, speaking at the IBA in Florence said that it is preparing a working paper on whether the thresholds of the Merger Regulation need to be adapted in order to accommodate these kind of cases. I think there’s going to be a consultation on that in the autumn.

Caroline Thomas: Something to look out for. Thank you very much, Richard.

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