On 13 March 2019, the Government’s Digital Competition Expert Panel, led by former chief economic adviser to president Barack Obama, Jason Furman, published a report setting out a number of recommendations to address competition issues across the digital economy. With respect to merger control, the panel has encouraged the CMA to intervene more frequently and with greater force in merger scenarios where threats to consumer welfare and innovation are at stake. It also recommends that firms holding a ‘strategic market status’ in the digital sector should be placed under an obligation to report all proposed acquisitions.
Experian / ClearScore merger prohibition
Following a Phase 2 investigation, on 28 November 2018 the CMA released its provisional findings in the merger between the UK’s two largest free credit rating agencies. Experian agreed to purchase the three-year-old fintech group, ClearScore, for £275 million in March 2018. However, despite ClearScore’s start-up status, the regulator identified that the transaction could result in a substantial lessening of competition and that the only effective remedy is to prohibit the merger. On 27 February 2019, Experian and ClearScore abandoned the transaction.
PayPal / iZettle
On 26 November 2018, the CMA found a number of potential competition concerns with Paypal’s acquisition of iZettle, a Swedish payments start-up that was set to be the biggest FinTech company in Europe to list. The regulator determined that the £2.2 billion transaction between the UK’s two largest suppliers of mobile point of sale devices could lead to a decline in innovation, higher prices or a reduction in the range of services for customers (namely small and medium-sized businesses).
Under the Enterprise Act 2002, the regulator may decide to accept undertakings in lieu of a reference to a Phase 2 investigation. However, as PayPal did not offer proposals to address the CMA’s concerns, the merger has been be referred for a Phase 2 investigation by an independent group of CMA panel members. The CMA published its issues statement on 15 January 2019, with the deadline for the final decision being 21 May 2019.
Nielsen / Ebiquity merger inquiry
On 22 November 2018, the CMA published its final report on the acquisition by Nielsen Media Research Limited of the advertising intelligence division of Ebquity plc. The CMA found that, although both Nielsen and Ebiquity sell advertising intelligence products to UK and international customers, the design of the products, how they are used and the fact that very few customers switch between the companies meant that they do not closely compete. This finding was supported by the fact that the companies have not invested significant amounts of money or resources in competing for each other’s customers and, according to internal documents, are unlikely to do so in the future.
Trinity Mirror / Northern & Shell Media Group
On 20 June 2018, the CMA cleared the acquisition by Trinity Mirror plc (owner of the Daily Mirror) of certain assets of Northern & Shell Media Group (including the Daily Express), which completed in February 2018. The CMA began the merger inquiry on 10 April 2018, notifying the Secretary of State of the potential public interest considerations, who subsequently issued an intervention notice on media plurality and free expression of opinion public interest grounds.
The CMA held that the newspapers published by the two parties target different demographic groups and differ in content and tone. In relation to advertising and online presence, the CMA found that the parties were not particularly close competitors (in that they did not compete more closely with each other than with other tabloids) and that they faced significant competitive constraints from other national print newspapers and other forms of newspaper media.
Sky / Fox / Comcast
On 5 June 2018, and following receipt of the CMA’s final report on the proposed acquisition by 21st Century Fox of the shares of Sky plc that it does not already own, the Secretary of State for Digital, Culture, Media and Sport, Matt Hancock, accepted the CMA’s recommendation that the anticipated acquisition was not in the public interest because of media plurality concerns, and accepted the CMA’s recommendation that the most effective and proportionate remedy was for Sky News to be divested to a suitable third party.
Mr Hancock also confirmed that, having taken into consideration the need for a sufficient plurality of people with control of media enterprises, the need for a wide range of high-quality broadcasting, and the need for a genuine commitment to broadcasting standards, and concluding that it did not meet the threshold for intervention, the government would not intervene in Comcast’s competing bid for the acquisition of Sky.
The panel has called for the establishment of a Digital Markets Unit, an independent body tasked with designing and implementing pro-competition rules. Other recommendations outlined in the report include policies of data openness and ‘aggregator services’ that could allow users to switch between search engines and social media sites by transferring their data (such as search histories or friends lists). Where appropriate, the revised policy regime should be supported by legislative changes.
The panel calls on the government to engage with regulators internationally to coordinate and develop a consistent approach to the regulation of international digital markets.
Finally, the report addresses the potential anticompetitive and consumer welfare concerns raised by the development of machine learning algorithms and artificial intelligence, particularly through their use in the development of dynamic pricing models and the digital advertising market. The panel have recommended that these markets should be subject to ongoing monitoring to ensure that they do not create detriment to consumers or lead to anticompetitive activity.
ComparetheMarket home insurance
On 2 November 2018, the CMA issued to ComparetheMarket a ‘statement of objections’ in the context of its investigation into the company conducted under the Competition Act 1998, setting out its provisional view that clauses in many of the company’s contracts with home insurers break competition law and could lead to higher premiums.
The CMA found that these ‘most favoured nation’ clauses prevent rival comparison sites and other channels from trying to win home insurance customers by offering cheaper prices than ComparetheMarket. It also means home insurance companies are more likely to pay higher commission rates to comparison sites with the extra costs potentially being passed on to customers.
The company will now have an opportunity to respond in detail and the CMA will consider the response and any further evidence before reaching a final decision.
This investigation continues the CMA’s work following a market study into digital comparison tools. The study, which concluded in September 2017, showed that many people visit more than one comparison site as they shop around for the best deals. It also laid out clear guidelines for price comparison sites on how to use people’s personal data and how to display important information such as price and product description.
On 8 October 2018, the CMA published a study into pricing algorithms in the digital markets. The CMA’s study identifies various ways in which pricing algorithms could be used to support anticompetitive practices, in particular:
- the enforcement of collusion within cartels: cartelists could use algorithms to automatically detect competitor pricing changes, identify instances in which their fellow cartel members deviate from an agreed pricing model, and ‘punish’ them accordingly; and
- personalised pricing (use of data relating to an individual consumer’s behaviour to set prices for that consumer): while this can be used to ease market entry for new firms and increase competition (for example, by offering targeted discounts), it can also cause obvious consumer harm.
The study is another example of the CMA’s efforts to increase its expertise in the digital sector.
Social media influencers
On 16 August 2018, the CMA announced that it has launched an investigation under its consumer protection powers into concerns that social media stars are not properly declaring when they have been paid, or otherwise rewarded, to endorse goods or services. The CMA claims that if such social media ‘influencers’ do not label their posts properly, fans or followers may be led to believe that an endorsement represents the star’s own view, rather than a paid-for promotion. They are then more likely to place trust in that product, as they think it has been recommended by someone they admire. They might not do so, however, if it was made clear that the brands featured have paid, or in some other way rewarded, the celebrity in return for endorsement.
The CMA investigation is considering the extent to which influencers are clearly and accurately identifying any commercial relationships, and whether people are being misled. If the CMA finds practices that break consumer protection law, it can take enforcement action.
On 23 January 2019, the CMA reported that it had secured formal commitments from 16 celebrities to ensure they will now say clearly if they have been paid or received any gifts or loans of products which they endorse, including singers Ellie Goulding and Rita Ora, models Alexa Chung and Rosie Huntington-Whiteley, former Coronation Street and Our Girl actress Michelle Keegan, and TV reality stars Millie Mackintosh and Megan McKenna. Warning letters have also been sent to a number of other celebrities, urging them to review their practices where some concerns have been identified.
Further investigation work will look at the role and responsibilities of social media platforms more broadly.
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