This interview was originally published in German in NJW-Aktuell (10/2022, p. 12-13) and can be accessed here: https://rsw.beck.de/aktuell/daily/magazin/detail/verzwergte-fusionskontrolle.
NJW: Microsoft wants to buy the video game provider Activision Blizzard for almost 70 billion euros. Are there antitrust concerns about the mega deal?
Künstner: According to media reports, the Federal Trade Commission (FTC), the US competition authority, will examine the takeover under merger control law. How this will turn out is, in my view, quite open, especially since there are interesting paradigm shifts in antitrust law.
NJW: Which?
Künstner: In the United States, the so-called Chicago School had prevailed since the late 1970s/early 1980s, which basically advocated a non-application of antitrust law - with the result that there were hardly any cases. Now, progressive antitrust lawyers and economists, referred to somewhat pejoratively by their opponents as hipster antitrusts, are increasingly being heard. They call themselves the New Brandeis School, referring to former Supreme Court Justice Louis Brandeis. They sharply criticise the concentration of power in the big internet corporations and argue not only economically but also socially, pointing out the dangers to democracy. The new head of the FTC, Lina Khan, is considered to be part of this movement. Many expect her and the Biden administration to tighten merger control significantly.
NJW: You recently publicly described merger control as "insufficient". Can you elaborate on that?
Künstner: Effective merger control would have to be designed through standardisation and supervision in such a way that certain deals are not even considered. In the case of Activision Blizzard, Microsoft should have said: No chance, we won't even notify the merger. But they do it because such takeovers have gone through for a long time, often even without remedies. And I'm not just referring to the US, but equally to the EU and Germany.
NJW: Is this due more to restrained competition authorities or to lax laws?
Künstner: Both. The laws are designed in such a way that even in the case of mergers that are questionable in terms of competition policy, they can get through to the courts by complex legal argumentation. And because the antitrust authorities know this, they prefer to wave through some transactions rather than get involved in a legal battle that lasts for years. One would wish for more courage on the part of the officials. On the other hand, if antitrust law ultimately makes something possible that is not wanted in terms of competition policy, then merger control obviously also has normative weaknesses.
NJW: At the German Federal Cartel Office, however, one has the impression that it deals almost exclusively with Big Tech. In any case, that does not seem restrained?
Künstner: The Federal Cartel Office is indeed very progressive when it comes to Big Tech. It also gets backing from the Cartel Senate of the Federal Supreme Court, which usually upholds the Office's decisions - often against the Düsseldorf Higher Regional Court in the lower instance. But the Federal Cartel Office also sometimes lacks the necessary instruments. The Office’s President recently made this clear again with regard to the takeover of Kustomer by Meta (Facebook), which I interpret as a clear signal to politicians that they would have liked to do something about this deal, but were unable to.
NJW: Why does antitrust law seem to be less effective in this segment than in other areas?
Künstner: This can be explained quite simply on the basis of merger control: Its purpose is to prevent market dominance. When it was created, the world was a different place. It focused on transactions in which, for example, the largest construction group wanted to take over the second largest, i.e. direct competitors were involved on a horizontal level. Merger control still works to some extent there. The few prohibitions you have each year, also from the Federal Cartel Office, concern this area. In the case of vertical mergers, i.e. of companies on different market levels, or in the case of conglomerate mergers, through which the services of the companies involved can be linked to each other in a way that impedes competition, the situation is different. It is not easy for the cartel authorities to find the right lever to prohibit a merger.
NJW: Is this why takeovers like those of WhatsApp and Instagram have been allowed by Facebook?
Künstner: The companies involved, even if each of them was already dominant in its area, were not direct competitors in accordance with the market definition. So the merger could not be blocked as a horizontal merger. By the way: If one did not delineate the markets so finely, one would come to the conclusion that the companies may be competitors, but none of them was powerful enough to justify the prohibition of a merger between them.
NJW: We have already talked about the lack of instruments. What would be necessary to effectively curb the market power of internet corporations?
Künstner: Merger control would have to give up its self-deprecation.
NJW: You have to explain that in more detail.
Künstner: Merger control virtually dwarfs itself because it is limited to the economic consequences. The concentration of power is a problem on many levels. It is also a danger for us as a society and for democracy, for example through the privatisation and algorithmic influence on the formation of public opinion or the use of mass personal data for social scoring or the like. Moreover, one should not underestimate the lobbyist influence that goes hand in hand with great accumulation of power.
NJW: But is it the task of antitrust law to also take such aspects into account?
Künstner: Antitrust law regulates competition. Issues such as sustainability and environmental protection are also relevant to competition. Therefore, they should also be taken into account. However, the competition authorities would of course need the necessary resources, which they lack today already, as the former chief economist of the Competition Directorate in the EU Commission Tommaso Valletti has just pointed out.
NJW: Let's talk about the instruments again. The Digital Markets Act (DMA) is currently being negotiated. How do you assess it?
Künstner: It is a step in the right direction. It is important that it does not repeat the earlier mistakes of merger control. That means: it should not be another system that leads to political compromises between the enforcement authorities and the Big Techs. There is a need for instruments with which the Commission can be carried to the hunt. Agreements under half-baked conditions must be prevented. One possibility would be to give the national competition authorities a right of enforcement. And there needs to be private enforcement, because the third parties affected by such mergers are not willing to compromise. The action for annulment, which they can use to challenge clearance decisions by the EU Commission, is inefficient because of the narrow interpretation of individual concern by the European Court of Justice. And lastly: unlike in the USA, there is no legal basis for unbundling in Germany and the EU without abusive behaviour. Therefore, if a merger has already been approved, the ship has already sailed.
