This presentation by Luisa AFFUSO, Chief Economist at the UK communications regulator Ofcom, was made during the discussion “Vertical mergers in the technology, media and telecom sector” held at the 131st meeting of the OECD Competition Committee on 7 June 2019. More papers and presentations on the topic can be found out at oe.cd/vmtm

1. PROMOTING CHOICE • SECURING STANDARDS • PREVENTING HARM
Vertical mergers in the Technology, Media
and Telecom Sector – Enforcement challenges
Luisa Affuso
7 June 2019, OECD Roundtable
Disclaimer: all views expressed in this presentation are my own and do not represent the views of Ofcom

2. PROMOTING CHOICE • SECURING STANDARDS • PREVENTING HARM 2
1. Introduction and overview
1. Introduction
2. Rapid technological change raises significant challenges for enforcement
3. How can sector regulators aid enforcement?
4. Is the current framework fit for purpose to assess digital mergers?
5. Conclusion

3. PROMOTING CHOICE • SECURING STANDARDS • PREVENTING HARM 3
2. Rapid technological change raises significant
challenges for enforcement
Significant and rapid technological change in TMT sectors
• Substantial technological change (and convergence) have led to radical changes in business
models and increased vertical integration
o e.g. fixed/mobile comms; creation, aggregation and distribution of media content
• Emergence of digital ecosystems present at different stages of the vertical chain operating
across different markets with innovative monetisation models pose serious challenges to the
standard framework of analysis
Dynamic TMT markets raise fundamental questions in relation to vertical merger review
• Given the difficulty to predict technological evolution, are merger decisions robust to change?
o e.g. Comcast/Sky - linear EPG regulation to dispel customer foreclosure risk BUT
increasing consumption of non-linear (VoD) and curated personalised recommendation
• As new business models generate a range of harms, how to capture all potential harms?
o e.g. media plurality, disinformation, political influence -boundary between competition
and wider harms becoming blurred (data/privacy as price; disinformation as quality?)

4. PROMOTING CHOICE • SECURING STANDARDS • PREVENTING HARM 4
3. How can sector regulators aid enforcement?
Sector regulation can be relevant to the assessment of vertical theories of harm
• Existing regulation may remove the ability / incentive to foreclose
o e.g. BT/EE Ofcom’s regulation of mobile backhaul access dispelled input foreclosure risk
• Periodic review of regulation may help ensure decisions are robust to change
Sector regulators can facilitate remedies design
• Regulators can design, monitor and enforce a wide range of behavioural remedies (e.g.
KPN/Reggefiber; Google/ITA; Qualcomm/NXP)
• Periodic review may help ensure remedies stand the test of time
• Role of FCC in Comcast/NBCU vs AT&T/Time Warner
Sector regulators can advise on a range of harms wider than competition
• Sector regulators well placed to assess wider harms e.g. media plurality (Fox/Sky), privacy, etc.
• How to weigh-up the consumer benefits from efficiencies with occurrence of other harms?

5. PROMOTING CHOICE • SECURING STANDARDS • PREVENTING HARM 5
4. Is the current framework fit for purpose to assess digital
mergers?
Platforms’ evolution into ecosystems raises important questions for merger assessment
• Vertical mergers may promote marker power of tech companies
o Eliminate the threat of innovative businesses which may become potential competitors
o Promote the ability to leverage market power
• However, they raise particular challenges in assessing trade-off of harm vs efficiencies
o Short-term focus of merger review not well-suited to potential long-run dynamic effects
o e.g. Facebook/Instagram; Facebook/Whatsapp; Google/DoubleClick
Numerous international calls for a review of the merger framework for tech companies
• Furman in the UK – need for firmer action, balancing harms rather than probabilities?
• EU expert panel – burden of proof on Parties to show efficiencies offset anti-competitive effects
• Stigler Centre in the US – burden of proof on dominant player who buys actual/potential rival

6. PROMOTING CHOICE • SECURING STANDARDS • PREVENTING HARM 6
5. Conclusion
• Rapid technological change raises significant challenges for traditional enforcement approach
of vertical mergers, particularly for digital platforms
• Several proposals for new authorities / frameworks / tests to address these challenges
• Are we prepared to accept a higher risk of false positives (over-enforcing) in the future if we
deem that we have been underenforcing to date?
• Merger control (as well as antitrust) are not the right tools to address market failures in digital
markets - if the underlying problems in tech markets stem from market failures, they require
proper targeted ex-ante regulation rather than a revolution of merger (and antitrust) policy