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Global competition authorities call for stronger policing of mergers

UK, Australian and German agencies highlighted the dangers of anticompetitive mergers, particularly in the tech sector

The UK, Australian and German competition authorities have released a joint statement highlighting the importance of rigorous and effective merger enforcement, with an emphasis on the tech market in particular.

“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 reads.

The authorities believe there’s a need for strong merger enforcement from competition agencies globally to maintain and promote competition for the benefit of consumers.

The statement underlines that market power can be easily established and entrenched in dynamic and highly concentrated markets like technology, “where a seemingly small transaction of a startup or mid-tier business by a dominant player can cause a competitive market to tip in an anticompetitive direction”.

In the full report, it points to the technology sector in particular: “Technology markets can also be examples of highly concentrated markets with features such as high barriers to entry due to network effects. This can result in high market concentration, such that market power is easily created or entrenched, and is likely long lived.”

“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," said ACCC Chair Rod Sims.

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The Australian Competition and Consumer Commission (ACCC) recently won a case against Google which argued that the company had misled consumers about personal location data collected through Android devices between January 2017 and December 2018. Following this win in the Australian courts this month, the ACCC is now seeking declarations, pecuniary penalties, publication orders and compliance orders which will be determined at a later date.

This comes after the CMA was instructed by the government this week to intervene in the sale of Arm to Nvidia. The CMA is currently preparing a report with advice on the jurisdictional and competition issues regarding the takeover.

The UK also launched the Digital Markets Unit (DMU) earlier this month to regulate anti-competitive activities of big tech companies and crack down on unfair practices that restrict consumer choice. It sits within the CMA and is the first regulator of its kind charged with specifically examining the role big tech firms occupy in business and society.

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