The increased focus on both internal documents and user data introduces new complexities and challenges in merger clearance reviews, especially for technology companies where data is integral to the viability of their business. entire business models. I recently participated in a virtual roundtable organized by Global Competition Review (GCR) to discuss these issues with Tom Madge-Wyld, GCR Editor and Moderator, Sharon Malhi, Partner in the Antitrust, Competition and Trade Group at Freshfields, and Marc Zedler, Case Manager in the Competition Directorate ( DG Competition) of the European Commission. During the session, we discussed three key areas related to data review in technology industry transactions, including:
Competitive concerns about customer data. As customer data is now a very valuable asset, it can have a significant impact on an organization’s competitive position, especially when combined (as in mergers and acquisitions) with other adjacent data sets. Google’s recent acquisition of Fitbit (see CNBC article) was discussed as a prime example throughout our roundtable. In this particular case, authorities expressed concern that the acquiring company’s ability to access the target’s vast databases of customer preferences and information could lead to an unfair competitive advantage in profiling and targeting users.
Privacy issues are also among the additional concerns that data can introduce into antitrust compliance and merger control issues; for example whether combining or accessing the customer datasets of both companies would be lawful.
Another common challenge we discussed is the uncertainty that arises – for organizations and regulators – when start-ups merge or a company acquires a nascent competitor (such as the so-called “kill acquisition” situation). In these scenarios, it may not yet be clear whether restricting access to either entity’s technology or customer base will harm competition in the market, and therefore regulators in the competition may require more information or further examination to determine potential future issues as parties/markets mature.
Procedural data issues. When data issues are being investigated as part of an antitrust or merger clearance investigation, several procedural issues can arise when attempting to collect, analyze, review and produce documents all at once. internal and user/customer data for the authorities. Many internal documents reside in traditional formats and can therefore be easily accessed for discovery. However, when cloud-based and collaboration platforms (eg, Microsoft Teams, Salesforce.com, Slack, Google Workspace) are used for operations and internal communications, the discovery process becomes more complex. Similarly, company-controlled user/customer data (e.g., customer’s platform usage history, payment information, geolocation data, social media activity , health information, contact details, etc.) /or disparate systems that can be incredibly difficult for a regulator to research and produce.
In any case, the growing volume, variety and wide dispersion of both categories of data presents significant challenges for organizations to respond to regulatory requests within the short timeframes typically required, particularly in reviews undertaken by UK authorities and Europeans. Having well-organized and understood internal and user data is essential to reduce the burden of discovery and to ensure that the data produced allows regulators to assess their concerns.
Data Remedies. As competition authorities increasingly scrutinize data as part of law enforcement, we are also seeing the emergence of data-driven solutions to deal with transactions deemed problematic. During our roundtable, we discussed a number of creative solutions required for the combined data within the merged entity, often dependent on monitoring monitors, including data silos, ring-fencing, access provisions, and in an area that our team at FTI Technology support, extensive delineation and disposal of data.
Our panel agreed that while some data remedies may seem conceptually simple, they can be technically very complex and quite expensive to implement given the scope and scale of IT systems. in large companies. Organizations that are at increased risk of encountering these types of issues will likely need to engage data experts to enable them to have a clear understanding of their data, develop a proportionate resolution plan, and negotiate with authorities on the parameters of solutions based on the data.
Innovation within the technology industry has been fundamentally responsible for data as we know it today. Ironically, data within technology companies is now well positioned to become the focus of the most intense competitive scrutiny and enforcement ever.