1. Thomas Deisenhofer Head of Unit Mergers Basic Industries, Manufacturing, Agriculture DG Competition, European Commission Trends in substantive merger control in the EU: a view from the shop floor GCLC lunchtalk – 16 September 2016

2. Disclaimer I speak in my personal capacity. Please do not attribute what I say to the European Commission or DG Competition. When using information from my presentation, please refer neither to my identity nor affiliation.

3. Agenda Has the Commission become more interventionist? Trends in the substantive assessment Trends in the investigation 3

4. HAS THE COMMISSION BECOME MORE INTERVENTIONIST? 4

5. Interventions… 5 # Intervention Cases/ Year Phase I w/ remedie s Phase II w/ remedies Prohibiti ons Abandoned in Phase II Notified 2015: 2213702337 2016 so far: 1812411236

6. …Interventions Intervention-rate depends on nature of notified mergers: currently unprecedented number of large and complex often global transactions Intervention-rates of 6.5 % (2015) and 7.6 % (2016 so far) are not unusual Small sample size => No evidence that the Commission has become more interventionist 6

7. More interventionist than US authorities?... FTC intervention in horizontal mergers in markets subject to second request 1996-2011 Significant Competitors EnforcedClosedTotal Percent Enforced 2 to 1297630398.0 3 to 23314037189.2 4 to 31745122577.3 5 to 4663710364.1 6 to 519355435,2

8. …More interventionist than US authorities? 8 US DoJ accepts remedies only in around 60 % of intervention cases (up from about 33% ten years ago) and seeks prohibition for the remainder EU accepts remedies in more than 85 % of intervention cases

9. TRENDS IN THE SUBSTANTIVE ASSESSMENT T 9

10. The 'dominance' of unilateral effects on price Unilateral effects on price: 38 of 40 interventions Unilateral effects on innovation: 3 (on top of price effects) Vertical effects: 2 Coordinated effects: 3 (on top of unilateral effects) 10 # Intervention Cases/ Year Phase I w/ remedie s Phase II w/ remedies Prohibiti ons Abandoned in Phase II Notified 2015: 2213702337 2016 so far: 1812411236

11. Some typical unilateral effects cases in oligopolistic markets 11 GE/Alstom Telecom mergers x 7 (IE, DE, ES, BE, DK, UK, I) Staples/Office Depot (Halliburton/BH) … Phase II interventions Phase II Siemens/DR Fedex/TNT Phase I Amadeus/Navitaire Trelleborg/CGS Sysco/Brakes … Phase I/II clearances

12. Typical assessment of unilateral effects in oligoplies… Principles assess extent of loss of competition between parties to keep it simple and robust, assume no changes of production, distribution, costs, investments, R&D … =>the assessment is static and short-term: Typical themes 1.Market structure and market functioning pre-merger Number of players, concentration Possibility for costumers to switch Barriers to entry 2.Degree of closeness and importance of competition between parties If they are close and important competitors the harm does not diminish because there is an even closer third competitor 3.Possibly dynamic factors: merger involves particularly important competitor, pipeline products, potential competition… 12

13. … Typical assessment of unilateral effects in oligopolies 4.Role of non-merging parties Absent efficiencies third parties in an oligopoly benefit from loss of competition between the parties: higher demand for their products => they also can raise price No (tacit) coordination required for that effect, but tacit coordination can reinforce it 5.Dominance not necessary, but reinforces effects 6.Qualitative evidence increasingly from internal documents 7.Economic techniques Market shares and concentration analysis Bidding analysis: participation, win/loss ratios, evolution of margins…) (GE/Alstom) Diversion analysis (Mobile mergers) Natural experiments in the past (Ineos) 13

14. Merger control beyond static unilateral effects on prices… Strengths of unilateral effects analysis uncontroversial economic theory simple, focussed and robust allows to predict magnitude of effects on consumers But Mergers are undertaken precisely because the parties want to make fundamental/structural changes to sourcing, production, investments, R&D, costs, distribution Economics (and common sense) suggest that the dynamic/structural/medium-term effects of a given merger for example on innovation or entry – whether beneficial or harmful – can be more significant and important for competition than the short term price effects 14

15. …merger control beyond static unilateral effects on prices Assessing beneficial medium-term and long-term effects Efficiency claims accepted in number of cases: UPS/TNT, GE/Alstom, Orange/Jazztel, Ineos/Solvay… Key problems: verifiability, merger specificity and pass-on Counterfactual analysis: failing and 'flailing' firm arguments Assessing harmful medium-term and long-term effects On non-price parameters such as innovation and choice (e.g. pharma, GE/Alstom) On competitive structure and incentives: barriers to entry, foreclosure Tacit coordination (e.g. ABI/SABMiller, Italian Mobile case) 15

16. TRENDS IN THE INVESTIGATION T 16

17. The rise of the simplified procedure… 17 *2016 projections based on notifications up to April

18. Strengthening of investigation, evidence and reasoning in phase II cases 18

19. Increasing share of 'global' mergers 19 Merger activity by origin of parties in 2004-2013

20. International Cooperation in Merger 2012-2013

21. Growing importance of internal documents and data Challenges amount of data Getting the right documents (targeting) interpretation timing LPP Benefits more targeted and realistic enforcement decisions are more evidence based and robust 21

22. Timing Faster treatment of unproblematic cases through simpilification Many large and complex intervention cases are solved in phase I (12 phase I remedy cases so far in 2016) Well conducted prenotificatin and pre-discussed remedies can lead to conditional phase I clearances even in very large and complex cases (Holcim/Lafarge, ABI/SABMiller) Phase II procedure is data and document intensive, but affects only a few cases 22

23. Conclusions No evidence that the Commission has become more interventionist In horiztonal cases well functioning unilateral effects analysis of short term effects on prices Complemented by dynamic assessment of efficiencies, counterfactual, effects on innovation and barriers to entry and as well as of tacit coordination In the investigation (1) simplification for the un-problematic cases and (2) thorough investigation of the more complex cases Overall: we seek (and perhaps even succeed) to gradually achieve an ever more accurate enforcement both for harmful and beneficial mergers 23