Posted by Chantal Lavoie on 9 December 2016
Just as the European Commission was finalising its merger review of the Microsoft/LinkedIn deal, Verizon notified on 17 November its proposed acquisition of Yahoo. Both transactions present some similarities which will be relevant for the review of this latest filing. For instance, the transactions are largely complementary. For both Microsoft and Verizon, LinkedIn and Yahoo respectively offer valuable user data, raising questions as to the effect of such concentration of data on competition and ultimately on consumers. The transactions also have an impact on the advertising markets, providing the parties with opportunities for increasing their share of advertising revenues in the digital world.
The Microsoft/LinkedIn transaction - which was cleared with conditions on 6 December - should serve as a useful precedent for the European Commission as it embarks on its review of the Verizon/Yahoo deal. The conditions imposed in Microsoft/LinkedIn sought to ensure that PC manufacturers and distributors were not required to preinstall LinkedIn on Windows and that the current level of interoperability between competing professional social network service providers and the Microsoft Office suite of products would be maintained. With respect to data, the European Commission concluded that the concentration of user data that can be used for advetising purposes did not create a competition concern in the context of that specific case. The conclusion was based on the finding that a large amount of user data exists on the market and that third parties would not have access to less data as a result of the acquisition.
The Verizon/Yahoo deal should allow Verizon (also owner of AOL) to diversify its traditional telco business by moving into the digital content and advertising space where large revenue growth is expected. As the largest wireless service provider in the US, Verizon will provide significant distribution opportunities for Yahoo. At the same time, the user data, content and ad-targeting technology of Yahoo will provide Verizon with a greater potential to target ads and to generate digital advertising revenues.
As it did for the Microsoft/LinkedIn deal, the European Commission is expected to consider the possibility and effect of Verizon being able to have its mobile phone manufacturers pre-install Yahoo products. The effect of the transaction on the advertising market should also be reviewed. Other issues likely to be considered are data concentration and data privacy concerns. Although data privacy issues do not fall stricly speaking within the scope of merger control review, the European Commission did emphasise in the context of its decision to clear the Microsoft/LinkedIn deal that they can also be "taken into account in the competition assessment to the extent that consumers see it as a significant factor of quality". In this context, it will be interesting to see whether Yahoo's recent data breach incident will be of any relevance.
The provisional deadline for the European Commission to decide on the Verizon/Yahoo deal is 21 December. The European Commission may decide to clear the transaction (with or without conditions) or decide to open a second-phase review. Information on the Verizon/Yahoo filing can be found on the DGComp webiste.