Australia’s competition watchdog has teamed up with its counterparts in the UK and Germany in an effort to enforce effective merger controls, with the technology industry being named as one of the problem areas.
The Australian Competition and Consumer Commission (ACCC), the UK’s Competition and Markets Authority and Germany’s Bundeskartellamt have issued a joint statement highlighting the importance of “rigorous and effective merger enforcement”.
The statement was launched at a virtual event by the heads of each of the agencies.
“Competition can only be maintained by ensuring anticompetitive mergers do not happen. This is even more so in a fast-developing digital world impacted by the Coronavirus (COVID-19) pandemic,” the statement said.
“We believe that in the world today there is a real need for strong merger enforcement from competition agencies globally to ensure that high concentration levels do not become the accepted norm, and to maintain and promote competition for the benefit of consumers.”
According to the ACCC, the joint statement highlights that market power can be easily established and entrenched in dynamic and highly concentrated markets such as technology, where a seemingly small transaction of a start-up or mid-tier business by a dominant player can cause a competitive market to tip in an anticompetitive direction.
“Merger controls are the first line of defence; if a merger is approved, and the new entity develops market dominance, there is often little competition agencies can do to address the situation retrospectively with the tools available,” the ACCC said in a statement.
“This doesn’t mean that all such transactions raise concerns but they require careful scrutiny and, if appropriate, competition agencies will take action to block problematic mergers.
“Protecting competition is often only achievable by opposing a transaction outright or via divestiture remedies rather than via behavioural remedies,” it added.
The watchdog said that the forward-looking nature of merger control reviews involves inherent uncertainty, given the need for competition agencies to assess and, in contested merger cases, prove in court the likely effect of a merger on competition in the future.
As such, the joint statement makes clear that the focus of competition agencies, courts and tribunals must be on the importance of protecting competition and preventing anticompetitive mergers.
“I am delighted to be releasing this joint statement with our UK and German counterpart authorities,” ACCC chair Rod Sims said. “We all recognise that competition is fundamental to the success of a market economy. Competition crucially depends on effective merger control.
“Companies have a clear incentive to merge with or acquire their competitors to increase their market power and raise prices. This is why effective merger control is so important, and why some mergers must be blocked by competition authorities.”
"We know that once market power is gained from a merger, it is very difficult to restore competition with our other competition enforcement tools, making it crucial for us to use merger control more effectively,” he added.