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Speech given by EVP Vestager at the International Bar Association 26th Annual Competition Conference in Florence "Merger control: the goals and limits of competition policy in a changing world.

"Check against delivery"

Introduction

Ladies and gentlemen,

It is a great pleasure to address the 26^th Annual Competition Conference of the International Bar Association, and to be here this year in person, which I regret I was not able to do last year. Moreover, to be here in Florence - one of Europe's most beautiful cities - is particularly inspiring. I spent some of the summer at home in Copenhagen, and the contrast between the two cities - both beautiful yet very different - reminds me of the rich and varied tapestry of European culture. That diversity gives us our strength.

‘Strength in diversity' is more than just a good slogan for Europe. If you think about it, it is also the essence of competition policy. When we preserve and nurture competitive markets, we are protecting the economic diversity that makes our markets strong. New ideas, innovations, they often come as a challenge to established practice. So it is economic diversity that sows the seeds of positive disruption.

How the digital transition is changing our work

This has always been true. But it is one thing to know what good policy is, and it is quite another to implement it in practice. In times of turbulence, it is easy to lose sight of our goals; to give in to the temptation for a short-term gain; or to act out of fear instead of good policy sense.

At the same time, we cannot remain ignorant of the profound changes happening around us; and to recognise that our policy instruments also have their limits. That is why I think the topics for today's conference are so well chosen.  In the face of digital change and a shifting world order, what are the goals and limits of competition policy?

I can't pretend to have all the answers, and even if I did, there's no way I could fit them all in one speech. That is why I look forward to listening to the in-depth discussions of the panellists and the questions from the floor. I am sure we stand to learn quite a bit.

Merger control

However, there is one area where I would like to share some thoughts, and that is on Merger Control. As is the case with other instruments in the policy toolkit, the EU is rather lucky to have strong Merger Control tools at its disposal. I personally was also very lucky because when I came to the Commission seven years ago, there was already a very well-established, rigorous and effective system of merger investigation in place; a strength on which I could continue to build.

That strength comes from having an effective set of laws and procedures at EU level, starting with the EU Merger Regulation and including the various pieces of soft law that complete the architecture. Importantly, these rules were conceived with sufficient flexibility to allow us to adapt when that is needed. That is why our investigations always start with the facts of the individual case, and the realities of that market. We adapt our assessments and our methodologies in line with market specifics and based on our case experience. This includes new theories of harm related to data and innovation, in markets ranging from tech to life sciences to agrochemicals.

Article 22 referrals

It is also true that the Merger Regulation was written to give us powers which in the past have not been needed. Here I am referring to the enhanced use of Article 22, i.e. referrals to the Commission from EU Member States for cases for which national jurisdictional criteria have not been met. These powers were always provided for in the legislation. In July, the General Court confirmed this in its ruling in the Illumina case, a case referred to us by six Member States, but for which the notification thresholds were not met in any jurisdiction.

A few days ago, we issued our decision prohibiting this merger, because it was clear that the transaction would have hampered innovation in the market for blood-based cancer detection tests. Such an outcome would have been harmful not only to competition, but ultimately, to European patients as well.

In the past, it's true we discouraged such referrals because, based on our experience at that point in time, we considered that the turnover-based thresholds captured all transactions that could materially impact the internal market. But the world is changing. With zero-price markets and business models based on data and early R&D, turnover is not the only signal of competitive significance - sometimes it is not a signal at all. The point being: the goals of our Merger Control policy have not changed, but the context in which we pursue those goals has evolved, and that is where flexibility comes in.

The evolution in the application of Article 22, which I announced two years ago, is just one example of how flexibility and adaptability can work in practice to help us address emerging challenges. By adapting the referral mechanism, we can capture below-threshold acquisitions that could raise competition concerns. And to maximise this potential, we need to work together with the national competition authorities across the Union to develop a unified and coherent approach.

This is certainly not an open door for bringing in an indiscriminate number of new cases - that's not something we would ever want. Believe me: as it is, we have more than enough work to do evaluating the mergers that come in above the notification thresholds!

Rather, it is a targeted tool; one which can respond to the challenges posed by these dynamic markets and the special features of some digital players. Whether for ‘killer acquisitions' or other types of ‘pre-emptive acquisitions', it is the dynamism of today's markets - in particular for pharma and tech - that makes this kind of targeted tool so vital. Let me stress that this new approach to Article 22 should not be the cause of any uncertainty for market players. And my message to anyone who thinks otherwise is simple: come to us. Ask us. Our door will be open.

This is also why we have found synergies with the new Digital Markets Act. For digital platforms, a provision in the new law requires gatekeepers to inform the Commission of relevant transactions. This creates important synergies with the new approach to Article 22, because the Commission will be in a position, where needed, to invite Member States to refer cases, when the Commission has been informed about a transaction in accordance with the DMA. It's one example of how our enforcement work has pointed the way forward when it comes to the new ‘ex ante' regulation.

Recent merger cases support our approach

Our recent enforcement work points to something else too. It shows that despite all the change and disruption of the past few years, our practices have remained quite stable.

We have now had a string of cases before the Courts. The  vast majority of our decisions have been upheld.

For example, in the recent Canon case, the General Court fully upheld our decision on gun-jumping, in particular the distinction between the concepts of ‘concentration' and ‘implementation of concentration' when it comes to change of control. And in the Altice case, the Court largely confirmed our approach to gun-jumping in transaction documents and integration discussions.

In the Wieland case, the Court vindicated our approach on two key issues. First, on defining a broad product market while focusing our assessment on segments. By being able to maintain a ‘dual-level' approach, the Commission could more accurately assess market power in differentiated markets, such as the manufacture of specialist copper products.

And second, Wieland judgement confirmed our firm approach to divestiture remedies.  When assessing divestitures, we have a clear preference for an existing stand-alone business.  This means that the business must be viable without having regard to the qualities or resources of the potential purchaser. But when the parties propose for divestiture a business that is not stand-alone, we need to ascertain that it will be viable and competitive.  In so doing, Wieland confirmed that we can take into account the resources of the future purchaser but only when we are in a ‘fix it first' scenario -- if the purchaser has been specifically identified and the notifying party has committed to sell the business to that party.

In the ThyssenKrupp case, we had an important finding on ‘gap' cases. This was the first time since the CK Hutchinson ruling - which by the way we have appealed before the Court of Justice - that the General Court pronounced itself on the legal standard for finding a significant impediment to effective competition, in the absence of dominance.

When you look over this run of cases, the pattern that emerges is about more than success. That's important to us. But what is even more important is stability, and that is what we are seeing. I would add that most of these judgements make explicit reference to our guidelines and assess the Commission's decisions on the basis of these soft law rules. That was especially true in both the Wieland and ThyssenKrupp cases.

This stable and successful track record in the face of changing markets is a credit to the hard work of my teams in the Commission services, of course. But it also points to the value of having flexibility built in to our rules and procedures. In the ThyssenKrupp case, the Courts confirmed this flexible approach - specifically that we are not bound to define markets on the basis of a rigid SSNIP test in every case - giving us more leeway to define markets by relying on the best evidence available, including qualitative evidence. From this perspective, both  the Wieland judgment and the ThyssenKrupp judgement will also feed into the process of review of the market definition notice, which as you know is ongoing.

Not every ruling has gone our way of course. And not every ruling will go our way. This is the natural consequence of having flexibility in an effective and thorough double degree system of judicial control. But overall, the recent judgements show that our course is the right one, because it increases predictability and legal certainty for businesses.

Conclusion 

I have only brushed the surface of what is happening on merger controls in Europe, and of course that is only a part of the wider discussion on Competition Policy, its goals and its limits. There is certainly much, much more for us to pick over. I am sure that during the next day and a half, you will have the opportunity to do so.

But at least as regards merger control, the lesson is clear: As our recent track record has shown, a good set of rules is like a sturdy oak tree in the wind. If it is cultivated and left to grow, it can be flexible enough to bend in the wind, but also have the strong roots to keep it grounded in the storm.

Thank you.

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