Gillian Douglas (Executive Dean, King’s College London) delivered the welcoming speech and opened the conference by referring to the long history of law teaching at King’s College London, one of the oldest and leading law schools in the United Kingdom. After illustrating the excellence and variety of the specialised Master programmes at King’s College London, including a pathway in Competition Law, Professor Douglas introduced the keynote speaker, Mr Andrea Coscelli.
Andrea Coscelli  (Chief Executive Officer, Competition and Markets Authority) launched the conference with a keynote speech centred on the primary importance of dynamic competition and innovation economics, compared with static competition, for the modern practice of competition authorities at the national and European levels. An increased number of competitors focussing on incremental and radical innovation on a market is surely beneficial to the interests of consumers. The role of competition authorities is to protect an effective level-playing field for all players, incumbents and others, to be in a position to contribute to the competitive dynamics in a market, without any damaging regulatory loopholes.
Mr Coscelli underlined the influence of other public policy areas, such as tax policy and employment issues, on competition law enforcement. He cited the cases concerning Uber/taxis and Airbnb/hotels as illustrations of this intertwinement. Therefore, a holistic approach to regulation allows for competition to flourish.
Mr Coscelli mentioned the fast-developing and central role of data, algorithms and artificial intelligence in the contemporary and future competitive frameworks. Describing the recent efforts of the Competition and Markets Authority in adapting to these recent technological developments, he explained that a new data unit, headed by a Chief Data Officer and assisted by digital forensics and economists specialised in big data, will soon be created.
Addressing several issues related to merger control, Mr Coscelli mentioned an ongoing debate about merger under-enforcement, which comes mainly from the US but is becoming more relevant in the context of the European Union. Firstly, he referred to the more complex merger control cases and the difficulty of “drawing the line”. In dealing with this issue, the Competition and Markets Authority advocates for ex-post merger evaluation, in regard to mergers as well as remedies. Looking back on previous enforcement outcomes and learning from case studies is very healthy for competition authorities. Secondly, Mr Coscelli noted the relatively limited intervention of competition authorities around the world regarding the purchase of start-ups by established players in various industries, such as the acquisition of Instagram by Facebook or that of Waze by Google. These acquisitions raise an issue about information asymmetries and potential lack of knowledge preventing the application of the competition law framework to rapidly-changing sectors. In doubt, most competition authorities prefer not to intervene, which causes a risk of under-enforcement. Thirdly, Mr Coscelli stressed the importance of R&D aspects for the recreation of competitive intensity after the implementation of mergers.
Unlike other competition authorities, the Competition and Markets Authority specialises in competition enforcement and consumer protection. In some industries, such as online gambling or online dating, consumer protection is very important for the level-playing field. The number of players on these markets is indeed not the issue. However, the consumer’s experience and welfare is of particular importance. Yet, these types of industries have loopholes which some players may take advantage of. The issue is therefore the application of uniform rules in the interest of consumers.
MERGERS & INNOVATION : CAN MERGER POLICY PROTECT INNOVATION ?
The first panel of the conference, moderated by Bill Kovacic (Professor, King’s College London and Non-Executive Director, Competition and Markets Authority), focused on the role of merger policy in protecting innovation. Professor Kovacic talked about the great difficulty of predicting the outcome of innovative techniques and technologies during the assessment of a potential transaction. Citing the telling example of SpaceX in the aerospace industry, he recognised that forecasting the impact of innovation on competition and placing a market value on an innovative idea may sometimes be a question of intuition.
Richard Whish QC (Hon) (Emeritus Professor, King’s College London) introduced the issue of jurisdiction in cases concerning the IT sector and other IP-focused industries such as pharmaceuticals, focussing more specifically on the “jurisdictional gap” and the debate on under-enforcement of merger control. When start-ups are acquired by incumbent operators at a development stage where they are dynamic competitors but do not yet have considerable turnovers, the operation may not be subject to merger control under either EU law or UK law even though it is potentially harmful for competition on the relevant market. This issue has led to the amendment of legal thresholds in Germany and Austria. The European Commission has launched a consultation on this matter. Professor Whish mentioned that it is possible for the European Commission to decide on a case even when the higher European thresholds are not met, by way of referral by the Member States or the merging parties. In the Facebook/WhatsApp merger, the parties decided to submit to operation to the Commission under Article 4(5) of the Merger Regulation. In contrast, in the Apple/Shazam merger, it was Austria –later joined by several other Member States– which referred the case to the Commission under Article 22 of the Regulation.
Carles Esteva Mosso  (Deputy Director-General Mergers, DG COMP) explained the European Commission’s decisional practice on the assessment of innovation in the frame of merger control. Although the Commission’s core focus is on the short-term impact of a merger, including potential price increases, medium- and long-term effects on innovation are also taken into account, as stated in the Guidelines and confirmed by the European Court of Justice. This is illustrated by cases such as GE/Alstom (2016) and Dow/DuPont (2017). In Dow/DuPont, the Commission concluded that the two merging parties were good innovators in a number of areas in the pesticides industry and had close lines of research. Therefore, the merger was likely to reduce incentives to innovate and affect competition on a number of markets. Mr Esteva Mosso specified that internal documents from the parties confirmed their intention to reduce spending in innovation with the aim of reducing their respective R&D targets after the implementation of the operation. These competitive concerns were resolved by a structural divestiture. Considering that empirical studies show that the rate of discontinuation of a line of research is higher when it is subsequently acquired by a competitor, competition authorities should be concerned about what goes on below the notification thresholds. Jurisdictional and substantive tools could resolve this issue, but law makers and enforcers must remain careful. Currently, the main focus on macro-policy is to restore productivity in Europe : competition policy, focussing on dynamic effects of mergers, can contribute to this objective efficiently.
Colin Raftery  (Director of Mergers, Competition and Markets Authority) also focussed on the issue of the “jurisdictional gap” and more specifically on the “share of supply” test under UK law, which may allow the Competition and Markets Authority to assert jurisdiction over an operation falling under the turnover threshold. A key aspect of this test is that it is not determined by the usual economic principles of market definition. Relatively narrow cuts of a market may constitute the basis of a share of supply. This considerable degree of flexibility in measuring segments has put the CMA in a position to review acquisitions of competitively significant companies even when they only generated negligible revenues in the UK, such as Google/Waze. Mr Raftery then noted that the CMA factors innovation into its competition analysis across a variety of sectors, including children toys and payment systems. He concluded by outlining four constituent questions for the preliminary assessment of post-merger innovation on a market : the importance of competition in the relevant market, the overlap in the merging parties’ innovation capabilities, the other competitors’ own capability to innovate and the barriers to innovating in that market. As illustrated in Dow/DuPont, these key themes are useful in assessing potential anticompetitive impact in terms of innovation.
Nadine Watson (Senior Vice President, Compass Lexecon) identified the uncertainty of rival response as an important element of the competition analysis in innovative industries. Mergers may indeed be an opportunity for competitors to increase their strategy on innovation in order to win the R&D race. However, they may also reduce the parties’ innovation efforts and therefore the competitive pressure on other competitors to innovate. The other players’ reaction is not as predictable in regard to innovation as it would be in the case of a price increase. Ms Watson also presented contestability and “appropriability” of the product as two important factors of the impact of mergers on innovation. Whereas a merger always reduces contestability –the market power of the merging parties will be combined–, appropriability may remain unaffected by a merger, for example when the product is protected by patents. Finally, Ms Watson pointed out the strong need for more empirical evidence on drivers of innovation or discontinuation at industry level. These factors are indeed highly industry-specific and competition authorities cannot rely on observations from one industry for their assessment of innovation in another sector.
Nicholas Levy (Partner, Cleary Gottlieb Steen & Hamilton) began by expressing some scepticism about the revision of EU turnover thresholds to fill the “jurisdictional gap” due to the risk of deterrence. In its decision in Dow/Dupont, the Commission possibly created a legal presumption that a merger may be expected to have a unilateral effect on innovation, similar to an effect on price. However, no presumption exists in economic theory that mergers may have an effect on innovation. It could therefore be an overly simplistic approach to consider that rivalry is the only relevant factor for innovation, as other factors exist, such as regulation or acute pressure from imitators and generics. Mr Levy considered that the theory of harm in Dow/DuPont may have been speculative and stressed the asymmetrical burden of proof between the enforcers and the merging parties, responsible for establishing efficiencies. Adverse effect on competition due to the reduction of incentives to innovate should be established by reference to current and future market facts. Competitive concerns only arise when it is sufficiently certain that the merger will reduce incentives to innovate and that the reduced levels of innovation will significantly affect competition on a distinct market within a reasonable period of time.