Vertical Assessments by the European Commission: A Decade of Intensifying Merger Scrutiny

Ruffling through its data, Rhino came across an interesting pattern. In the last 10 years, it appears that the European Commission has substantially increased the intensity of its vertical assessments. 

This came to light as Rhino applied text recognition software to all non-simplified merger decisions in the past 10 years (see also our main page under ‘Vertical relationships’). While the number of non-simplified decisions has declined since 2013, the percentage of decisions with a significant assessment of vertical issues has increased to 50% in the last five years compared to less than 15% in the preceding five years (Figure 1 below). Thus far, Illumina/Grail remains the only prohibition that is exclusively based on vertical concerns. Microsoft Activision is another case to watch in that space.  The data shows that these prominent cases are not outliers but indicative of more intense scrutiny of vertical cases, with a need for more detailed investigation and analysis, irrespective of the ultimate result. 

Figure 1: High intensity vertical assessments in non-simplified EU merger control decisions

The trendline shows a consistent increase of vertical assessments in non-simplified cases, with a spike just before the pandemic. This is not only, and not even mainly about tech but spread across many different sectors (Figure 2).  Technology (17%), transport (11%) and telecoms (9%) together account for less than 40% of the cases.

Figure 2: cases with high intensity vertical assessment per sector (2013-2022)

What the data does not show is the reasons for this increased focus on verticals. Some global authorities have advocated a stricter approach to merger control. There is generally more willingness to explore theories of harm that go beyond unilateral horizontal effects. There has been more court scrutiny, leading to longer decisions. More recently, the focus has been on supply chains and this may have led to more mergers with vertical angles.  

What to expect next?

In the words of none other than Margrethe Vestager, one must have been living under a rock to not realise that the world is changing. With the covid crisis and the recent Russian attacks on Ukraine confirming the need for secure supply chains, the trend is likely to continue across sectors as it has in the past and the substantive assessment of Illumina/Grail will likely not be the last.