Covid no excuse for even more market power, regulators tell Big Tech
Very often when you look into markets you realise that at some point in the past there was a merger that really shouldn’t have happened.
UK regulator Andrea Coscelli
Antitrust regulators in the UK, Germany and Australia this week mounted a unified attack against the domination of internet giants, warning that the pandemic was not an excuse to approve deals.
The three regulators, which have been at the forefront of global attempts to rein in big tech companies such as Facebook and Google, said the pandemic had accelerated the concentration of power in the hands of a few, and warned they would take an increasingly sceptical view of tie-ups.
At a virtual event to launch the statement on Tuesday, the head of the UK’s Competition and Markets Authority, Andrea Coscelli, said he expected “tremendous pressure” from companies citing the need to rebuild after the pandemic as a reason to justify mergers and investment.
“We’re clearly in a difficult economic situation,” he said, “and it’s attractive, someone coming to you with plans for investment. But . . . this is really about the medium term, it’s about having market structures that are going to deliver day in, day out for consumers.”
The three regulators said the pandemic “should not be used to bring about a relaxation of the standards against which mergers are ultimately assessed”.
Germany’s cartel office, the Bundeskartellamt, took direct aim at Facebook’s business model in 2019 when it blocked the company from pooling user data without consent. Meanwhile, Australia recently moved to force Silicon Valley giants Facebook and Google to pay for news and the CMA waged antitrust battles against Google and Apple.
Rod Sims, chairman of the Australian Competition and Consumer Commission, said Australia had “very well known digital platform issues where most of the platforms have really built their strong position through
acquisitions.” He said: “We can together raise a strong voice on these important issues.”
Sims added: “Companies clearly have an incentive to acquire businesses, to gain market power and push up price. . . We have a whole body of knowledge now built up often from the advisers to merged parties that suggests that mergers are always good, but that is not so, and that view damages our economy.”
The three regulators said the pandemic had exacerbated dangerous concentration trends, and said they were taking an increasingly sceptical view of the benefits of tie-ups.
Andreas Mundt, head of the German cartel office, said: “We [were] already struggling with the platforms’ ecosystems, digital gatekeepers and the effect they have on the economy and antitrust. . .
“But of course the pandemic has been an accelerator here and we have seen that GAFA [Google, Apple, Facebook and Amazon] has been a winner during this crisis.”
Coscelli said global regulators had also approved mergers in the past that had caused harmful results for consumers in markets, including accountancy, where the Big Four firms — Deloitte, KPMG, EY and PwC — dominated.
“Very often when you look into markets you realise that at some point in the past there was a merger that really shouldn’t have happened,” he said, citing Google’s purchase of online advertising company DoubleClick in 2007 as “the source of a number of problems”.
In another warning to companies, the regulators said they were also increasingly less likely to accept promises from companies to change their behaviour. In the past, global regulators accepted both behavioural and structural “remedies” from merging groups seeking to complete a deal.
Sims said: “Behavioural remedies are asking companies to do something they don’t have an interest in doing. . . We find behavioural undertakings don’t turn out as we expect . . . They largely don’t work.”
His words come after the European Commission cleared Google’s acquisition of tech company Fitbit in December after Google promised a series of “behavioural remedies”, something the ACCC did not accept.