Chillin'Competition

The Vodafone/Three merger, cleared last month by the UK Competition and Markets Authority, has been widely discussed, and for good reasons. For a long time, competition agencies insisted on structural remedies as a non-negotiable first-best. Any concerns would need to be addressed from the outset and without the need of subsequent monitoring.

The authorities’ traditional approach reflect the very logic of merger control, which is after all to prevent the harmful effects of lasting changes to market structures. It was therefore inevitable that the sort of behavioural remedies imposed in Vodafone/Three would spark discussions within the community.

Are the remedies in Vodafone/Three even legally consistent with the essence and objectives of the merger control regime? Can effective compliance with a commitment to invest and to cap prices be guaranteed in the first place? What are the consequences for the system if such remedies become the bread-and-butter of merger control and authorities’ resources are increasingly dedicated to monitoring activities?

These are all fascinating questions that should be, and will be, discussed at length. My immediate reaction focused on a different aspect, which is the relationship between competition law and regulation. The outcome of this investigation reflects particularly well the trends towards the ‘blending’ of competition law and regulation, which I addressed in The New EU Competition Law.

A great deal of scholarly energy has been devoted to identifying differences between competition law and regulation and/or to determining whether discrete instruments, such as the Digital Markets Act, are best characterised as the former or the latter.

My impression has long been that these discussions are ultimately immaterial. Formal regulatory instruments often replicate the logic and operation of competition law. It is not infrequent, moreover, that their objectives are aligned with those of antitrust.

Conversely, competition law, precisely because it is so malleable, often mimics regulatory regimes. It can intervene both ex ante and ex post and can be both prescriptive and proscriptive. Remedies, moreover, have become increasingly regulatory-like across both antitrust and merger control.

As a result of these parallel trends, where competition law becomes more like regulation and vice versa, the lines between one and the other become blurred, and agencies are likely to have recourse indistinctly to one or the other (just think of action by the European Commission against Big Tech).

Vodafone/Three is but an example of this trend. From now on, mobile telephony activities in the UK will be regulated in the country not just by means of formal regulatory instruments, but also via the administration of remedies imposed in the context of a merger investigation.

When the EU Regulatory Framework for electronic communications was adopted, it was hoped that, over time, regulation would roll back as markets become effectively competitive and the need for ex ante intervention decreases. Effective competition, it was hoped, would keep prices down and investments up.

The regime did not foresee that markets might become less competitive after reaching ‘peak effective competition’ and that re-regulation might be necessary as a result. If the trend towards consolidation is followed on the other side of the Channel, regulation through merger control might become the new normal across Europe.

What would keep investments up and prices down in such a landscape would not be effective competition, but explicit obligations imposed upon operators. And competition law and regulation would turn into an indistinct blend where it is not easy to tell where one starts and the other finishes.