Short Reads

Commission blocked Hutchison's proposed acquisition of Telefónica UK

Commission blocked Hutchison's proposed acquisition of Telefónica UK

Commission blocked Hutchison's proposed acquisition of Telefónica UK

02.06.2016 EU law

On 11 May 2016, the European Commission blocked Hutchison's proposed acquisition of Telefónica UK ("O2"), despite remedies offered by the parties. The Commission's full decision will be published later this year.

The concentration would have reduced the number of mobile network operators ("MNOs") active in the UK from four to three. After the takeover, Hutchison would have been the largest mobile player in the UK, with a combined market share exceeding 40%. In addition, Hutchison and Telefónica have existing network sharing agreements with Vodafone and BT/EE, respectively. This would grant the combined entity access to both physical network infrastructure operations in the UK. The Commission had serious concerns that the transaction would have:

  • significantly reduced the incentive to compete with the two remaining players Vodafone and BT/EE, resulting in reduced choice and quality of service for consumers, as well as higher prices;
  • hampered the development of mobile infrastructure, because the combined entity would have had access to the network development plans of its two remaining competitors; and
  • reduced the willingness of the network operators to host mobile virtual network operators ("MVNOs"). 

The Commission dismissed Hutchison's proposed remedy package. Hutchison offered various commitments aimed at strengthening the position of existing and new MVNOs, including granting access to its network capacity. The Commission, however, found that even with the commitments the MVNOs would remain commercially and technically dependent on the combined entity. The other commitments were intended to address the Commission's second and third concerns relating to its ties with Vodafone and BT/EE. However, the Commission considered that the proposed behavioural (i.e. non-structural) commitments would be difficult to implement and monitor effectively, and did not allay the Commission's structural concerns. In addition, the behavioural remedies aimed at granting MVNOs access to future technologies were considered commercially unattractive.

The Commission's approach highlights its continued scrutiny of mobile telecommunication mergers in concentrated markets. Although there is "no magic number" of MNOs to ensure effective competition, the Commission will continue to place high importance on the structural nature of remedies (e.g. full divestment of fixed capacity and/or spectrum) as well as offering concrete assurances to ensure swift and sufficient entry of new competitors. The Commission is also close to finalizing a second-phase investigation into a four-to-three deal between Hutchison and VimpelCom Holdings in Italy, which might face the same fate unless the parties manage to offer a viable remedy package.

This article was published in the Competition Law Newsletter of June 2016. Other articles in this newsletter:

  1. General Court rejects Trioplast's action for annulment of a Commission notice to pay interest
  2. General Court confirmed that German law on renewable energy amounts to State aid
  3. European Commission publishes guidance on the notion of State aid
  4. District Court of Rotterdam upheld the ACM's unconditional clearance decision in telecoms merger KPN/Reggefiber
  5. Rotterdam District Court considered "franchise agreements" in breach of competition law in launderette cartel case
  6. UK High Court held that territorial limits apply to EU cartel damages claims

Team

Related news

01.08.2018 EU law
Belgian Court of Cassation annuls decision prohibiting pharmacists from using Google Adwords

Short Reads - On 7 June 2018, the Belgian Court of Cassation, ruled that a decision of the Pharmacists Association Appeals Council (Appeals Council) prohibiting pharmacists from using Google Adwords to offer over-the-counter (OTC) products violated Belgian competition law because the Appeals Council did not sufficiently justify why such a prohibition was necessary for health reasons. The Appeals Council must now issue a new decision.

Read more

01.08.2018 EU law
General Court underlines importance of Commission's duty to state reasons

Short Reads - On 13 July 2018, the General Court annulled the EUR 1.13 million fine imposed on Stührk Delikatessen Import GmbH & Co. KG (Stührk) by the European Commission in 2013 for Stührk's participation in the shrimp cartel. The Court ruled that the Commission had failed to adequately state reasons in the contested decision as to why the cartel participants were granted divergent fine reductions.

Read more

01.08.2018 EU law
Court of Appeal in the Netherlands decides to appoint independent economic experts in TenneT v ABB

Short Reads - On 20 July 2018, the Court of Appeal of Gelderland published another interim judgment in the ongoing proceedings between TenneT, the grid operator in the Netherlands, and ABB in relation to the gas insulated switchgear (GIS) infringement. After the Dutch Supreme Court had confirmed in a judgment of 8 July 2016 [see our August 2016 Newsletter] that the passing-on defence is available under Dutch law, the Court of Appeal of Gelderland decided to appoint independent economic experts to provide input on the calculation of overcharge and the existence of pass-on.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy – en cookieverklaring