Digital markets and merger control: some reflections on the CMA’s Lear Report

Sarah Long

Ex-post evaluation of competition authorities’ decisions is a very valuable exercise, and something that the OECD Competition Committee has been championing for many years. The Lear Report is good example of why ex-post evaluation should be carried out, and exemplifies the challenges faced by competition authorities when assessing mergers in digital markets.In particular there are some interesting lessons from the assessment of the Facebook/Instagram merger, which is often cited as the reason why a more draconian approach should be taken to intervene in digital markets. While it is clear Facebook no longer faces the competitive constraint that might have been exerted by Instagram, the Lear Report acknowledges that the merger has generated significant efficiencies to the benefit of users and advertisers. Instagram quickly developed into an entirely different product after the merger, through offering direct messaging and social media tools. Facebook drove that development. A conclusion that Instagram would have been directly competing with Facebook absent the merger is therefore potentially misleading – Instagram may not have had developed in the same way, or as quickly.The Lear Report will do little to quell current public opinion of Facebook. However, the findings do demonstrate the need to be mindful when looking at things with hindsight. It is clear that the current competition framework is not entirely fit for purpose in a digital age. But we must be careful not to undermine the rigorous legal assessment that underpins our merger control regime and its voluntary nature. For example, I would have some reservations around the Lear Report’s recommendations for competition authorities to simply accept more uncertainty in the counterfactual analysis. I also have concerns around the proposal for dawn raids in the context of merger investigations.The Lear Report also identifies that one of the main issues for competition authorities is a lack of understanding of digital markets, particularly for online advertising. One solution may be the inclusion of stakeholder meetings with independent industry experts early on in the process, or commissioning an independent expert report on a particular feature of a market, in order to bridge the knowledge gap.

*The CMA commissioned Lear Report on Ex-post Assessment of Merger Control Decisions in Digital Markets was published on 9 May 2019.

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