Former executive Vice-President Vestager, 27 June 2024: “The main problems are reduced contestability, dynamism and innovation. These problems arise across sectors and markets, digital or traditional. So we are called upon to develop novel theories of harm that take into account these market dynamics in a wide range of sectors.”

In a probe into the EU's merger control landscape, Rhino has unearthed a shift in the European Commission's approach to assessing mergers. Over the past decade, our analysis of non-simplified procedure decisions reveals a transformation in the predominant theory of harm, moving from predominantly focusing on horizontal issues to other types of concerns (Figure 1).In 2014-2016, the EC predominantly applied a horizontal theory of harm in approximately 45 decisions each year. Fast forward to 2020-2023, this number has almost halved to approximately 25 per year. Looking at the same data in percentages, the EC predominantly applied a horizontal theory of harm in almost 50% of cases from 2015 to 2017, and in less than 40% of cases from 2020 to 2023 (Figure 2).  

In 2014-2016, the EC predominantly applied a horizontal theory of harm in approximately 45 decisions each year. Fast forward to 2020-2023, this number has almost halved to approximately 25 per year. Looking at the same data in percentages, the EC predominantly applied a horizontal theory of harm in almost 50% of cases from 2015 to 2017, and in less than 40% of cases from 2020 to 2023 (Figure 2). 

 How does this work?

Step 1 - We determine the intensity of each of the horizontal, vertical and conglomerate assessment in each merger decision. This intensity rating, which ranges from very low to very high, is based on text recognition software applied to a database of EU merger control decisions. The software attributes a numerical value to each decision based on key words that are representative for a horizontal, vertical, or conglomerate assessment. Whether a decision’s intensity is qualified as high or low, depends on how the value compares to the average values for the same type of decision in the dataset. For example, a phase I remedies decision’s horizontal intensity assessment will be determined in relation to the average values for all phase I remedies cases in the dataset.

Step 2 - Cases are categorized based on the most intense scrutiny they have undergone. For instance, a decision with a 'very high' horizontal assessment intensity with 'average' vertical and 'low' conglomerate assessments is labelled 'Horizontal'. But if all assessment types share equal intensity, the decision is tagged as 'Horizontal / Vertical / Congomorate'. This approach helps us understand the depth of the EC’s concerns in different areas. 

What is going on?

The data doesn’t show why there is increased scrutiny of vertical and conglomerate aspects of cases in the EC’s decisions. However, the data suggests a trend that the EC's concerns are evolving, or perhaps the nature of mergers themselves are changing, with companies possibly steering clear of transactions that might raise the more obvious/traditional horizontal issues and focus more on their product pipeline or on their portfolio growth.

As we have described before, part of the explanation is that there is an increased focus on the complicated cases. In addition, there is more willingness to explore theories of harm beyond unilateral horizontal effects. In the case of ecosystems, the EC will even undertake a ‘multi-directional’ examination of the possible interactions between all products that fit within an ecosystem. The EC has the backing from the General Court for this expansion, which ruled in the Android case that “the relevant markets that make up that ecosystem may overlap or be connected to each other on the basis of their horizontal or vertical complementarity”.

However, the trend is not limited to digital markets (Table 1). Looking at the unconditional approval decisions in 2023 with at least an average vertical assessment and at least an average conglomerate assessment, only one (M.10855) can be considered a digital market transaction, with the others belonging to more traditional markets.