What has been going on in the antitrust environment in the past month(s)?

Looking at the general situation, we can say that Q1 of 2023 is currently not giving us anything flashingly different, but more of what we are used to. Which, in all honesty, is also calming news once in a while. Looking at the main pillars on which antitrust law is built, a framework is necessary that, for one, is capable of adaptation when a shift in the business environment demands it due to reasons that benefit consumers or drive innovation. However, it is equally important that this framework remains steadfast when business shifts may occur that require antitrust law and enforcement to protect consumers and maintain innovation. 

The latter is what I have been seeing a lot of this past month. Not only in the European hemisphere, but also internationally.

Looking at the business excerpts, I will take a closer look at mergers with the potential to shake up the business world and why international regulators are keeping a close eye on them.

As always, I am happily invite you to read, comment and join the discussion in this month’s article. 

General Outlook

Big Tech Faces Stricter Rules in the EU … Again

As has become tradition for Big Tech in Europe, the rules regulating the top technology corporations have become a little more tighter as Q1 settles in. Stricter online content regulations are being implemented in the EU for major tech companies such as Facebook, Google, Twitter, and TikTok due to their large user base. 

The new regulations, called the Digital Services Act (DSA), will classify companies with over 45 million users as very large online platforms (VLOPs) and mandate them to conduct risk management, undergo external and independent auditing, share data with authorities and researchers, and adhere to a code of conduct.

The European Commission had set the deadline on February 17 for online platforms and search engines to disclose their monthly active users. Twitter reported 100.9 million average monthly users in the EU, based on an estimation of the last 45 days. Meanwhile, Google provided two different sets of numbers, one based on users' accounts and another based on signed-out recipients, citing that its services can be accessed with or without a signed-in account. Other firms reporting MAU of “more than 45 million” include Alibaba’s AliExpress, Amazon and Apple’s iOS App Store, according to the report.

Apple stated that while only the iOS App Store has over 45 million monthly active users, its other App Stores do not meet this threshold. Nevertheless, the company plans to voluntarily conform each of its existing App Store versions to the DSA requirements for VLOPs, even those that do not currently qualify, as its consumer protection goals align with those of the DSA. This was announced by the company on its website.

Martin Shkreli in Clinch With FTC Over New Company Druglike Inc

“Pharma Bro” Martin Shkreli, who was sentenced to seven years in prison in 2017 after raising the price of the anti-parisitic drug Daraprim to $750 per tablet from $17.50 in 2015, is currently facing a contempt motion by the US Federal Trade Commission (FTC) for allegedly failing to comply with an order banning him from working in the pharma industry. 

The FTC has accused Shkreli of failing to provide information about Druglike Inc., a company Shkreli allegedly formed last July.

In a statement during the filing in Manhattan Federal Court, Shkreli argued that he has shown compliance with the ruling that banned him from Pharma "as extensively as possible and in good faith," and has provided the materials sought by the Federal Trade Commission (FTC) and seven further states.

In Friday's filing, Shkreli stated further that the scope of the pharmaceutical ban did not apply to Druglike and DL Software – a successor firm which Shkreli co-founded – due to the two firms being "software companies creating professional software for chemists and physicists." Moreover, he stated that he never had an ownership stake or executive role at Druglike.

The FTC has made no further statements so far.

Onion Cartel Being Investigated by Filipino Regulator

As humorous as the headline may sound, the Philippine Competition Commission (PCC) is taking very seriously the investigation of potential cartels in the onion industry, following an increase in onion prices – the bill which was to be footed by Filipino consumers. The PCC stated that it had been probing the high prices of onions since November 2022 to determine the existence of a cartel or an abuse of dominance. The PCC is acting on the grounds of House Resolution 681 which was filed by House Representatives. 

The PCC noted that the cause of the market anomaly is being investigated in coordination with regulators and law enforcement agencies. Businesses and individuals found to have taken advantage of the situation may face fines and jail time. 

The PCC launched its market assessment as the onion retail prices had been observed at an unusually high range which peaked at around 600 Pesos (around 10 EUR) per kilo in December 2022.

“As prices are seen to stabilise due to the imports and the SRP set on Feb. 6, the PCC is looking into the cause of such market anomaly in coordination with the sector regulators and other law enforcement agencies,” the Filipino watchdog commented, referring to the suggested retail price.

Under the Philippine Competition Act, businesses found to have taken advantage of the situation may be fined up to P100 million (EUR 1.7 million) and face jail time of up to seven years.

Business Excerpts

Investigation Into Inmarsat/Viasat Merger Opened

The proposed acquisition of Inmarsat by Viasat is currently under investigation by the European Commission under the EU Merger Regulation. The Commission has expressed concerns that the transaction could lead to a reduction in competition in the market for in-flight connectivity (IFC) services that provide broadband services to commercial airlines. Both Viasat and Inmarsat provide satellite-based communication services and are considered direct competitors. They each rely on their own geostationary earth orbit (GEO) satellites to offer services in the emerging market for IFC in the European Economic Area (EEA) and worldwide.

As per official statement, these are the main concerns voiced by The Commission:

• The parties are close competitors in the EEA or global markets for the supply of broadband IFC services to commercial airlines. In those markets, the parties compete head-to-head in tenders for IFC contracts, in particular in the EEA.
• There are currently few alternative suppliers, and the markets are characterised by relatively high barriers to entry, such as regulatory and technological.
• The satellite market is undergoing a transition with operators of non-geostationary satellites having entered or planning to enter the IFC market. The Commission plans to further investigate whether those new players are likely to exert sufficient competitive pressure on the merged entity in the near future.

The proposed transaction was brought to the Commission on January 9, 2023, the decision therefore has to be made within 90 working days, which ends on June 29, 2023. As always, the in-depth inquiry never pre-judges the outcome of the investigation as a whole.

French Regulator Loses to Swiss Drugmakers

More news from the pharma world: Novartis and Roche – two Swiss drugmakers – have won their appeal against the Autorité de la Concurrence, France's competition watchdog, which had issued a €444 million fine against the companies in 2020 for allegedly abusing their dominant position to promote their macular degeneration drug, Lucentis, over a cheaper alternative, Avastin. The Paris appeals court overturned the verdict, finding that the companies did not misuse their market dominance to protect Lucentis and that they had not been misleading or alarmist in their marketing. Novartis commented that it had always acted in regulatory compliance and in the best interests of patients, the official statement being that they “strongly contested these allegations from the outset and firmly believe the company has acted appropriately and in compliance with competition law and the interests of patients at all times.” They are further “satisfied that this has now been recognized by the Court of Appeal, which has annulled the French Competition Authority’s decision in its entirety.”

MBCC/Sika Merger

The German MBCC Group (Material Bau- und Carrosserie Centren), which specialises in car and commercial vehicle repairs has recently received green light to buy up the Swiss Sika AG, a producer of construction chemical products. MBCC announced its intention to acquire Sika AG in 2021.

The European Commission (EC), approved the merger after conducting an in-depth investigation. The Commission found that the merger would not significantly reduce competition in the market and that the companies' activities did not overlap significantly. The EC specifically investigated whether a tie-up between the two companies could lead to higher prices or reduced choice for consumers.

In addition, the Commission found that the combined company would face strong competition from other players in the market, such as BASF and Saint-Gobain. This would limit the ability of the merged company to raise prices or reduce the quality of its products. Moreover, the Commission also saw that the Swiss-German tie-up would bring benefits to customers, such as increased innovation and cost savings, which would be passed on to consumers.

VMWare and Broadcom Extend Their Merger Deadline

The mega merger which was announced last year and has been turning heads ever since is now being postponed by 90 days. This is however not an indicator that the deal might fall through, but rather just a sign that the regulatory authorities are taking their job very seriously here. 

“Together with VMware, we have agreed to extend the Outside Date in our merger agreement to May 26, 2023, which is common for a transaction of this size. We are continuing to make progress with regulatory authorities around the world,” a Broadcom spokesperson said.

The reason why the deal drew so much attention (apart from the enormous price tag of course), was the fact that so many antitrust regulators had – and still have – their say in the matter, including the US, UK and the European Union. Apart from that, Broadcom as a company had already made headlines in competition law before, when they acquired CA Technologies in 2018 and Symantec in 2019. 

In these previous cases, Broadcom proceeded to cut support and innovation, while at the same raising prices. Not the best look for a company trying to push through a deal of this size past regulators that are known to keep a very close eye on anything that resembles big tech.

Amazon to Create Second Buy Box Following EC Investigations

After more than three years of tough negotiations, Amazon has now bowed to the EU Commission: in order to avert a severe competition fine, the e-commerce giant has agreed to give in. This is good news for the industry, but also for the EU, which – among e-commerce participants – is often criticised for its lengthy, sometimes downright tortuous decision-making processes and regulations.

Quick refresher: In mid-2019, EU competition watchdog, then under Margrete Verstager, launched the investigation against Amazon to examine allegations that Amazon sellers had been making for years, namely that Amazon favours its own products on the platform, to the detriment of third party sellers. More than three years later, Amazon has admitted to it and the concessions are being implemented. The idea is to create a second “Buy Box” (the orange/golden field on Amazon where it says ‘buy now’ or ‘add to basket’) in order to draw more attention to alternative products. The idea is to create more opportunities for small and medium-sized businesses to reach a wider customer base, while at the same time regulating the widespread visibility of Amazon products.

The question that remains is who will check how the implementation is going and if Amazon is really doing what promised? Seeing that competition law regulation is not a one way, top down, watchdog authority regulates everything kind of deal, we can expect multiple methods. One option would be more probes, another would be to rely on what the sellers are saying, or a mixture of both.

Final Thoughts

As already touched upon in the introduction, there are no big surprises in the antitrust environment for us this month.

Top news in the EU are the stricter rules for Big Tech in the form of the Digital Services Act (DSA). A necessary means to ensure that consumers can draw the benefits that these companies provide, while at the same time not having to worry about unethical business practices especially in regard to personal data, something that Big Tech unfortunately cannot exonerate themselves from. 

As far as regulators go, it is also relevant to see that the French watchdog came up short recently, losing an appeal case against Novartis and Roche. While this is of course good news for the Swiss drug makers, the decision of the Paris Court of Appeals is also a reminder for regulators too, at times, look at situations from a more holistic perspective before slapping huge fines on companies.

Lastly, we want to highlight the creation of the second buy box by Amazon following the EC investigations, a great example of antitrust implementation but also a great example of cooperation between business and regulator to improve the everyday life of third party sellers on Amazon. Third party sellers are a stakeholder in the Amazon ecosystem that have thus far been quite underrepresented when selling on the platform.