Antitrust Watch: Unpacking the Impact of International and European Cases

Last article encompassed a colourful mix of International and European antitrust cases and events. From an international perspective - saw updates and progress on the Broadcom and VMWare merger which is still getting lots of media attention – what else can be expected when a deal gets scrutinised by three major regulators across two continents? In addition the Indian regulator get put in its place by the Delhi High Court due to overstepping their regulatory powers under the Indian Competition Act, as well as the Australian Watchdog stepping in for potentially cheaper flight tickets by taking the air out from under Qantas’ and Virgin Australia’s very large wings.

From a European perspective German FCA has been quite busy, publishing the final report of a sector investigation into online ads and also taking a swing at Vodafone, whose subsidiary is allegedly obstructing a significant rival from expanding on the German market.?

This and more is included in this article. As always, I invite you to read, comment and join the discussion.

International Landscape

Delhi High Court Denies Indian Regulator

The Competition Commission of India (CCI) was put in its place by the Delhi High Court earlier, when the latter ruled that the authority of the CCI is restricted to regulating markets and does not encompass the examination of decisions made by statutory regulators, such as the Institute of Chartered Accountants of India (ICAI).

The ICAI are conducting the Continuing Professional Education, a program where the CCI had reason to assume anticompetitive conduct and directed the Director General to investigate the matter. This order by the CCI was set aside by the Delhi High Court with sound reasoning from Justice Justice Vibhu Bakhru, who stated:?

“The CCI has wide powers under the Competition Act but this Court is unable to accept that the said powers extend to reviewing all decisions made by statutory bodies or a foreign government, which are not relatable to a sovereign function of the Government. The scope of examination must be confined to only those areas of economic activities, which have a bearing on the market that engages entities involved in trade and commerce.”

The CCI may have been more successful in communicating the matter to the Central Vigilance Commission (CVC), the regulatory body responsible for overseeing the functioning of government institutions and ensuring that they act within the bounds of the law. The CVC is an apex government body that acts as a statutory regulator, whose aim it is to prevent corruption and misconduct in the public administration.

Broadcom/VMware Debacle Continues

The $61 billion supermerger between the software company and the chipmaker has been closely scrutinised by – so far – three regulators (EU, UK, US) and has drawn more media attention than any other merger discussion in the past year. At the beginning of May, Broadcom CEO Hock Tan provided testimony during a closed hearing alongside senior European Commission officials where it was argued that the presence of Amazon, Microsoft, and Google in the cloud sector was evidence of robust competition.

Regulators however are more concerned with the lack of competition in the hardware component? sector, specifically addressing restrictive competition in the global market for the supply of fibre channel host bus adapters and storage adapters. The EU commented that if left unchallenged, the deal could result in “higher prices, less innovation and lower quality products that will impact businesses and consumers.”

Broadcom is optimistic that the deal will go through this fiscal year, despite having to possibly divest up to two units after acquisition, according to information provided by Business Insider.

Apart from this, Broadcom doesn’t have much to complain about at the moment, specifically taking into account that they recently closed a multi-billion-dollar (with a “b”) deal with Apple over 5G radio frequency components that raised their stock by 2.2% – a record high.

Bolt Looking To Take Tier For A Ride (One Way)

European micromobility startup Tier is currently in late-stage acquisition discussions with its rival, Bolt. As the micromobility sector faces challenges in obtaining growth capital and managing expensive operations, mergers – or at least the discussion of mergers – become a prevailing trend. Bolt, headquartered in Tallinn, Estonia, is currently conducting due diligence on Tier, with the valuation of the potential deal yet to be determined. The acquisition could be finalised within a few weeks.

Berlin-based Tier is a dominating entity in the mobility business, operating e-scooters and e-bikes in 560 cities worldwide. Tier products such as e-bikes and scooters are by far the most represented when you are looking for mobility options in any larger German city. However, the company has faced significant challenges in the past year. The company has accrued over €130 million in debt and has struggled with substantial losses, which have led the company to conduct multiple layoff rounds in the past year.

Moreover, Tier has encountered an increasingly challenging political climate, particularly in one of its key markets, Paris. The city recently voted to ban rental e-scooters, posing further obstacles for Tier. Currently holding a licence to operate 5,000 e-scooters in Paris, the company will need to remove them by the end of August. Additionally, Tier faced setbacks earlier this year when it lost a tender in Oslo and was excluded from the tender in Vienna last month.

However, as mentioned above, Tier is not the only mobility company going through these struggles. The same goes for rivals such as Voi or Bird. It is quite safe to assume that we will see further mergers in this area in the year to come.

Australian Watchdog Challenges Qantas and Virgin Australia

To address the issue of limited competitive pressure on Qantas and Virgin Australia, resulting in higher ticket prices, the Australian Competition and Consumer Commission (ACCC) has proposed a solution: the opening up of peak-time landing slots at Sydney Airport. The ACCC, an independent regulatory body, recognizes that the lack of competition in the aviation industry has contributed to an increase in the price of tickets which is of course a direct detriment to the consumers.

By recommending the opening up of peak-time landing slots, the ACCC aims to introduce more competition into the market. This means allowing other airlines, both domestic and international, to access these slots, enabling them to compete with Qantas and Virgin Australia on equal footing. This increased competition is expected to result in benefits for consumers, such as lower ticket prices, improved service quality, and increased options for travel.

The ACCC's proposal recognizes the importance of a healthy competitive environment in fostering innovation and efficiency within the aviation industry. Opening up peak-time landing slots not only promotes competition between airlines but also encourages new entrants to the market. This could potentially lead to more choices for travellers, as well as spur investment and the introduction of new services.

European Landscape

German Watchdog Publishes Final Report to Online Advertisement Sector Investigation?

The German FCA published a sector investigation reporting on the current state of online advertisement in August 2022. In the wake of this report, market leaders of the sector were asked for commentary, many of whom gladly complied. Comments were provided largely by industry associations and individual companies, notably Alphabet. While the comments from the industry associations focused on the role of data (availability) in the context of online advertising, Alphabet in particular made comments on the classification of its own market position and conduct.

Why go through all this fuss over online advertising though? The FCA (quite correctly) sees the discussion report as a way to offer an outlook on current and possible developments of the affected markets from a competitive point of view. The discussion report and the commentary by stakeholders such as the above mentioned parties will allow the watchdog to draw various conclusions for the further shaping of the legal framework of these markets.

The general tone and result of the final report is written in a very diplomatic fashion, as is characteristic for the FCA. No clear indication as to whether online ads are harmful to consumers can be made per se. Here an excerpt:

“Neither a classification that asserts its welfare-enhancing effect does justice to the multi-layered phenomenon of online advertising, nor a blanket characterization of it as anti-consumer or anti-privacy.” (para. 140)

The report does however indicate that two should not be ignored: “the complex competitive situation of comparatively open programmatic advertising, for example in relation to the (integrated) offerings of the large digital groups on the one hand, but also to other forms of advertising, such as search-based advertising, on the other hand.” (para. 140)

Sony Faces Probe by Romanian Regulator

Gamers could possibly benefit from cheaper PS5 keys from third-party sites in the future, depending on what the results of the probe by the Romanian Watchdog in regard to Sony entails.?

The Romanian Competition Council (RCC) is currently investigating the electronics giant over concerns of potential abuse of its dominant position in the console market. The investigation focuses on Sony's practice of exclusively selling digital games through the PlayStation Store and prohibiting third-party distributors from selling activation codes.

The RCC has expressed that it has evidence suggesting Sony may have engaged in an abuse of its dominant position in the video game console market. This alleged abuse includes selling online video games compatible with PlayStation consoles exclusively through the PlayStation Store platform and preventing competing distributors from selling game activation codes for PlayStation consoles.

The council argues that these actions have limited consumers' options for purchasing PlayStation games, resulting in higher prices for titles on Sony's consoles. Additionally, it emphasises the potential negative impact on Romanian game studios, potentially discouraging them from developing video games that are compatible with PlayStation.

Vodafone Possibly Obstructs 1&1, Faces Probe by FCA

With a market share of around 38.3 %, Vodafone is a significant player in the German communication industry and they are now facing a probe by the national watchdog for allegedly obstructing the expansion of their rival 1&1. Here is what happened:

The Federal Cartel Office has initiated an investigation into Vodafone and its German subsidiary Vantage Towers, following concerns that they may have hindered the progress of 1&1, a subsidiary of United Internet, in deploying radio masts.?

1&1, aspiring to become a leading telecommunications provider in Germany, has encountered delays in constructing the anticipated 1,000 radio masts. In February, 1&1 lodged a complaint with the cartel office, holding Vantage Towers responsible for the “sluggish” progress and alleging that the company had not fulfilled its obligations as a collaborative partner in infrastructure development.

Vodafone responded to the allegations, firmly denying them and expressing its willingness to cooperate with the authorities. Vantage Towers, as an impartial host, emphasised its commitment to providing open access to its passive infrastructure for all customers.?

Final Thoughts

There are a few important learnings I would like to draw from this article. One would be the importance of legislative bodies keeping each other in check, as per the example of the Delhi High Court and the CCI. Whereas the CCI holds widespread regulatory power, a spillover into the examination of government institutions is not foreseen and not necessary, especially if other regulatory bodies exist that are already in place for this task.

Another noteworthy element this month is the multifaceted nature of competition regulation, as was demonstrated by the German watchdog by assuming a researching role in the online ads sector investigation specifically, but has also been demonstrated in other ways by many other regulators before:?

Regulatory bodies are increasingly recognizing the need to expand their functions beyond traditional investigating and fining activities. By conducting in-depth research and publishing comprehensive reports, regulatory bodies provide valuable insights into specific sectors, emerging trends, and potential competition concerns.?

This proactive approach enhances market intelligence, facilitates informed policy-making, and contributes to the overall development of effective competition frameworks.