Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: EC competition commissioner talks merger reviews in telecom sector, (Oct 2, 2015)

By Jeffrey May, J.D.

In her first address to Fordham Law’s Annual Conference on International Antitrust Law and Policy as European Commissioner for Competition, Margrethe Vestager explained how the European Commission (EC) approaches mergers in the telecommunications sector as Europe moves away from national markets with public monopolies to a “true single digital market.” Stressing the importance of improving consumer choice keeping markets upon for innovation, Vestager discussed in her remarks the lessons that can be learned from recent transactions in the sector.

The case-by-case nature of merger work before the EC was noted by Vestager. A proposed joint venture between the Danish operations of two Scandinavian telecom operators, the Swedish-Finnish TeliaSonera and the Norwegian Telenor, served as a cautionary tale. The parties ultimately abandoned the deal last month after it appeared increasingly likely that it would be prohibited.

Vestager explained that her home country of Denmark is “one of the most competitive mobile markets in Europe, with low prices, high usage and large customer choice [and is] one of the leading markets from a technology perspective.” According to the competition commissioner, the proposed deal, which would have left the market with two large mobile operators—the merged entity and the former national monopolist—and a much smaller third rival, would likely have harmed the competitive market.

“According to our analysis, the merger would have had anti-competitive unilateral effects across the board from retail private and business customers to wholesale customers and co-ordinated effects at least on certain retail customers,” Vestager said.

The parties proposed remedies purporting to either facilitate entry by a fourth mobile provider in the country or create a fourth mobile provider. However, these remedies did not satisfy the EC's concerns. While Vestager believes that an effective remedy in the Danish case would have been the creation of a fourth mobile network operator, “the remedy appeared to fall short of creating a strong and independent fourth mobile provider in Denmark that could address serious competition concerns in this case. “

Lessons learned. With future mergers in the pipeline, Vestager suggested that there are three lessons that can be learned from recent merger reviews in the telecom sector, including the abandoned joint venture in the Danish market. First, because there is a case-by-case approach to mergers, there is no magic number of mobile network operators in a competitive market. However, many of the recently reviewed deals that were approved subject to conditions were four-to-three transactions.

Second, investment for its own sake is not enough. Promises of investment made by merging parties must translate into consumer benefits. “Why should a company invest and innovate if there is no competitor to provide the impetus,” Vestager asked.

Lastly, a merger that raises competition concerns can only be approved if the remedies proposed address those concerns in a comprehensive and effective manner, according to Vestager. The competition commissioner noted her preference for structural remedies. “Other types of remedies may be appropriate in some circumstances,” Vestager noted. “But they generally present more risks as to their effective implementation.”

News: AcquisitionsMergers Antitrust