General
Court annuls European Commission prohibition of Hutchison 3G UK/ Telefonica UK
merger
In
a breath-taking judgment, the General Court has upheld an appeal by CK Telecoms
UK Investments to challenge the European Commission's 2016 EU Merger Regulation
decision prohibiting the proposed acquisition of Telefónica Europe Plc (O2) by
Hutchison 3G UK (Three).
The
Commission found that the merger would have removed an important competitor on
the UK mobile market, reducing the number of operators from four to three. The
merged company would have occupied around 40% of the retail market.
The
General Court considered the Commission’s application of the ‘significant
impediment to effective competition’ (SIEC) test. It found that the mere effect of reducing
competitive pressure on the remaining players in an oligopolistic market is not
of itself sufficient to demonstrate a SIEC based on non-coordinated effects.
The
General Court found that the Commission had committed a number of errors in
finding that Three was an ‘important competitive force’ on the retail market. Although the parties were close competitors
in some segments of the market this was not sufficient to prove the elimination
of important competitive constraints to establish a SIEC.
The
General Court also found errors in the Commission’s analysis of the effects of
the merger on the network-sharing agreements and infrastructure provision in
the UK.
This
may well be one of the most significant merger control decisions that the
General Court has issued in the last fifteen years. The Commission will need to take a root and
branch look at how it appraises mergers in oligopolistic markets and where it
bases its theory of harm on non-coordinated effects falling short of creation
or strengthening of a dominant position.
It is expected that the Commission will appeal the judgment given its
wide implications.
CK
Telecoms UK Investments Ltd v European Commission (T-399/16), ECLI:EU:T:2020:217)
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