On 28 May 2020, the EU General Court annulled the European Commission’s decision to block the merger between Three and O2 in the UK, a deal worth £10.25 billion.1
This judgment is unlikely to resume that deal, after four years from its prohibition, given the recent announcement of O2’s new plans to merge with Virgin Media in the UK. However, the General Court has set a higher bar for the European Commission (Commission) to challenge future similar mergers resulting in a reduction of the number of national mobile network operators (MNOs) from four to three, also called “gap cases”.
The term “gap cases” in competition law parlance refers to anticipated mobile mergers resulting in a significant impediment of competition, although neither creating nor strengthening a single or collective dominant position (unilateral or non-coordinated effects).
The Three/O2 decision was the first merger prohibition ordered by EU Competition Commissioner Margrethe Vestager since she took office in November 2014, and only the second telecoms deal blocked in 25 years, while the 243 calendar days review was the longest before a prohibition decision in 25 years.
Challenging four-to-three consolidation in highly concentrated mobile markets has been a central feature of merger enforcement under Ms Vestager’s watch – with a mobile merger abandoned in Denmark in the face of a prohibition decision and another mobile merger approved in Italy only subject to the entry of a new fourth player.
The General Court’s judgment will be studied closely to see the extent to which it may allow further consolidation in the sector. In addition to the already announced merger plans between O2 and Virgin Media in the UK, financial analysts forecast that this judgment could reignite consolidation attempts in markets with four MNOs, such as France, Italy, Spain and Sweden.
In outline, the following bullet points summarise the main findings of the General Court:
In conclusion, the reduction from four to three operators on the wholesale mobile market is not in itself capable of establishing a significant impediment to competition, and it is for the Commission to adduce convincing evidence of this. The General Court found that the Commission had failed to do so in this case.
The Commission now has two months to file an appeal. The EU Court of Justice takes an average of 11.1 months to rule on appeals, although those in competition cases usually take much longer. In the meantime, the General Court’s verdict is the law of the land.
1Case reference: In Case T-399/16, CK Telecoms UK Investments v Commission, [ECLI:EU:T:2020:217] available at: http://curia.europa.eu/juris/documents.jsf?num=T-399/16
The EU General Court annulled the European Commission’s decision to block the Three-O2 deal – with potential implications for in-market mobile consolidation
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