RBB publications

Brief 66: Seeing vertical mergers through a different lens? Implications from EssilorLuxottica/GrandVision 02.11.22

In 2021, the European Commission concluded its in-depth review of EssilorLuxottica/GrandVision, in which it required structural remedies to approve the transaction. Contrary to previous vertical mergers, the Commission’s concerns did not entail a refusal to supply downstream rivals (total input foreclosure); rather, its concerns were exclusively focused on a more gradual theory of harm, related to the changes in pricing incentives that the merger could bring about. Such changes in pricing incentives were measured with vertical price pressure tests, which were used by the Commission for the first time in this investigation.

This Brief discusses the Commission’s assessment of this case and its possible implications for future vertical merger investigations.

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Business Investment in Europe at Significant Risk From EU Foreign Subsidies Proposal New Study Finds 25.10.21

New rules could impact innovation, growth and jobs in both European and non-European companies

Foreign investors’ willingness to pursue business ventures in the EU Single Market could decline if a new EU law on non-EU subsidies is adopted as proposed, according to a new study released today by RBB Economics. The study was commissioned by the Computer & Communications Industry Association (CCIA Europe).

The proposed EU Regulation, published by the European Commission (EC) on 5 May 2021, is designed to tackle non-EU subsidies that the EC claims cause distortions and prevent a level playing field in the EU. Tackling non-EU backed subsidisation has the potential merit of allowing EU and non-EU companies to compete on a more even footing. However, the study shows that the rules would introduce substantial new risks, increasing legal uncertainty for multinationals  looking to complete acquisitions and participate in government procurement procedures. The rules would also open up the prospect of burdensome investigations, which would act as a deterrent to investment in the EU.

Benoît Durand, Partner at RBB Economics said: “The European Commission’s Proposal to level the playing field creates significant new risks for all firms doing business in the Single Market. The Commission’s broad approach can be expected to seriously discourage foreign investment in the EU – even if that investment involves no subsidy and results in no distortion – to the detriment of Europe’s economic recovery. Crucially, the Commission has not shown that any benefit from the Proposal will outweigh the costs.”

“We hope our paper will help provide EU lawmakers with additional information to ensure that the final Regulation meets its stated goals while avoiding unintended harms to Europe’s economy.”

The study outlines a number of negative impacts of the proposal, including:

A reduction in the overall flows of Foreign Direct Investment (FDI) into the EU. The measures in the proposed Regulation risk deterring global companies from making EU investments. As the Proposal is unclear on exactly what is non-EU subsidy and when it is distortive, companies will face significant legal uncertainty. Furthermore, it gives the EC the power to impose strong redressive measures where it identifies distortive foreign subsidies, including divestments, publication of research and development results, and licensing on FRAND terms.

European growth and competitiveness will suffer if FDI flows are reduced. Given that 25 percent of total research & development investment in the EU is made by foreign-owned companies, innovation in Europe is very likely to be affected. FDI often stimulates innovation in products and services and reduced FDI will limit the spread of technology and know-how of firms operating in the EU single market, with a knock-on impact on growth. Jobs and wages could be hit as many foreign-owned firms invest significantly in the EU, creating high value jobs.

European companies would also be adversely affected. Those companies who benefit from non-EU subsidies would also face the same burdensome obligations as foreign entities. Furthermore, the Proposal risks triggering third country retaliation to the detriment of European firms and the European economy.


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Brief 65: Fuel for thought? Developments in CMA local merger assessment 25.08.21

The CMA recently cleared the acquisition of UK grocery chain Asda by fuel retailer Euro Garages. In its assessment of local overlaps between the parties the CMA adopted a mechanical decision rule methodology, suggesting a shift away from the traditional two stage filtering approach.

In this Brief we consider the CMA’s evolving approach to local market assessment in phase I merger review, and argue that the emerging preference for mechanical decision rules unnecessarily reduces the quality of merger review by disregarding relevant and available information.


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Brief 64: Surviving the broad axe: The UK class action regime is alive and kicking, but what can the Supreme Court’s judgment in Merricks/Mastercard tell us about the role of economics in class certifications going forward? 28.04.21

On the 11th December 2020, the UK Supreme Court (“SC”) handed down its judgment in the case between Walter Hugh Merricks, CBE (“Merricks”) and Mastercard Incorporated (“Mastercard”).1 The judgment concerns Merricks’ Collective Proceedings Order (“CPO”) application to pursue a class action for follow-on damages against Mastercard for £14 billion (after interest), on behalf of 46.2 million people.2 The application was originally rejected by the UK Competition Appeal Tribunal (“CAT”) in 2017, before the CAT’s ruling was overturned on appeal by the Court of Appeal (“CoA”) in 2019.3 Mastercard then appealed the CoA’s decision before the SC, but was unsuccessful, with the SC sending the case back to the CAT for re-consideration.

This brief expands on this and other important economic considerations that arise from the SC judgment, including how failing to interrogate a claimant’s proposed damages estimation methodology in sufficient detail is liable to cause serious issues at trial.


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RBB Brief 63: Digging in the Scrap Heap! A new theory of adverse buyer power 15.03.21

The Aurubis / Metallo merger was approved unconditionally by the European Commission after an in-depth investigation, which included the sending of a Statement of Objections to the Parties and an oral hearing. The Commission was concerned that this merger, by combining the two largest purchasers of copper scrap in the EEA, would give rise to significant buyer power. Whilst increased buyer power usually benefits consumers, as lower input costs often translate into reduced product prices, in some cases imposing lower prices on suppliers could result in a significant impediment of effective competition (“SIEC”).

In this Brief, we offer an economic perspective on the Commission’s approach to investigate competition concerns stemming from increased buyer power that results
from horizontal mergers, with particular focus on a new theory of harm.


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