Short Reads

Court bundles educational publishers merger off to ACM for reassessment

Court bundles educational publishers merger off ACM for reassessment

Court bundles educational publishers merger off to ACM for reassessment

01.04.2021 NL law

Digital mergers have steered competition authorities away from their usual mantra of structural over behavioural remedies. The Rotterdam District Court recently gave its blessing to the ACM’s remedies for securing access to a digital school platform. This behavioural approach could become more common, particularly when dealing with the ACM.

Even so, the merger decision was annulled for lack of an in-depth investigation into potential bundling strategies. The ACM will now need to reassess whether Sanoma Learning will be able to foreclose competing publishers by bundling its educational materials with its newly acquired digital school platform.

Behavioural monitoring seems a sign of the times; it remains to be seen how this interacts with the upcoming Digital Markets Act. For now, companies should realise that behavioural merger remedies are an increasingly common option; particularly in digital markets, but potentially also in other innovation-driven markets.

The ACM’s conditional clearance

In 2019, the Dutch Authority for Consumers and Markets (ACM) granted conditional clearance to Sanoma Learning, owner of (digital) educational materials publisher Malmberg, to acquire Iddink Group, a distributor of educational materials and owner of Magister. Magister is an e-learning portal used by more than half of secondary schools in the Netherlands. The ACM’s concerns mainly focused on whether, post-acquisition, (i) competing publishers would still be able to offer their educational materials through Magister and (ii) commercially sensitive information concerning competing publishers, obtained through Magister, could be used to Malmberg’s advantage.

Instead of resorting to divestment of Magister (and thereby negating the acquisition’s complementarity rationale), the ACM opted for behavioural commitments to stimulate innovation whilst, at the same time, ensuring a level playing field for competing publishers in a ‘digitalising market’. With this, the ACM has for the first time granted merger clearance subject to remedies relating to data access and equal access to a digital platform.

Rotterdam District Court sends ACM back to drawing board

One of Malmberg’s competitors appealed the ACM’s clearance decision at the Rotterdam District Court. The court considered the ACM’s commitments to adequately solve the potential interoperability and self-preferencing concerns, and reiterates the ACM’s guidelines on remedies, which state that behavioural commitments may be used to resolve vertical issues; even more so when dealing with rapidly evolving technologies in a ‘digital’ context.

However, the argument raised about the potential foreclosure effects (from the possible bundling of Malmberg’s educational materials with Magister) does hit the mark. The ACM based its conclusion – that post-acquisition bundling was not possible – mainly on the notion that 66% of small schools and 52% of medium-sized schools had no need to bundle their e-learning environment with educational materials. According to the court, the same data also showed a need for bundling in 34.2% of small schools, 48.4% of medium-sized schools and 57.8% of large schools. This data, together with the acquisition’s rationale (i.e. to develop educational products that fully integrate with a school’s e-learning environment) should have motivated the ACM to conduct a more detailed investigation of the schools’ bundling and switching needs, particularly given the schools’ determinative role in this context. If schools insist on bundling – whether or not as a result of a progressive integration of content and platform – suppliers are compelled to find a way to offer it. Furthermore, the court found that the current data insufficiently clarified whether, and for which amounts, schools would be willing to switch; such data is necessary to determine the point at which the bundling strategy could be sufficiently profitable to provide Sanoma/Iddink with a bundling incentive.

The court therefore annulled the ACM’s conditional clearance decision and ordered the ACM to take a new decision.

Conclusion

In its new decision, the ACM may need to apply a similar future-oriented approach to the possible bundling strategies as it did to its remedies to safeguard a ‘digitalising market’. Even so, the ACM was pleased with the court’s confirmation that behavioural remedies can serve as an adequate way to resolve competition concerns and promote innovation.

Companies should realise that competition authorities are likely to resort to behavioural remedies more frequently, at least in innovation-driven and digital markets. The interaction between this approach and the ex ante behavioural obligations for gatekeepers under the upcoming Digital Markets Act, are yet to crystallize. For now, Commissioner Vestager has clarified that the Digital Markets Act is complementary to the competition rules. More is yet to come.

 

This article was published in the Competition Newsletter of April 2021. Other articles in this newsletter:

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