Merger control - on-going investigations
Orange's acquisition of Jazztel to be reviewed at Phase II by the Commission
The proposed acquisition by Orange S.A. of Jazztel plc was notified to the European Commission ("Commission") in October 2014. In November this was followed by a request from Spain to refer the notification to the Spanish competition authority for its consideration - this request was made pursuant to the EU Merger Regulation which enables a Member State to submit a request to the Commission to refer all or part of the assessment of a merger to its national competition authority where competitive effects of the merger are national or local. Jazztel is a company registered in the UK, but is mainly active in Spain where it operates a fixed telecommunications network and offers mobile telecommunications services on Orange's network. In Spain, Orange operates mobile and fixed telecommunications networks. On the 26 January 2015, the Commission decided not to refer the planned acquisition for assessment under Spanish competition law. The Commission reasoned that it has extensive experience in assessing cases in this sector and would therefore be better placed to ensure consistency in the application of merger control rules in the fixed and mobile telecommunications sectors across the EEA.
The proposed acquisition is now subject to an in-depth Phase II investigation, during which the Commission will further investigate its preliminary concerns that the transaction will affect the retail market for fixed internet access, reducing the number of nationwide fixed telecommunications providers in Spain from four to three. On 6 March 2015, in an attempt to relieve some of the Commission's preliminary concerns, Orange has submitted commitments to the Commission. Details of the remedies proposed by Orange are yet to be made public. The Commission has until 30 April 2015 to conclude its investigation.
Portuguese regulator requests permission to review Altice/Portugal Telecom transaction
Luxembourg-based telecoms group, Altice, notified its proposed acquisition of the Portuguese and Hungarian assets of Portugal Telecom to the Commission on 25 February 2015, simultaneously submitting commitments in order to address initial competitive concerns about the transaction. On 5 March, the Portuguese competition authority requested a referral so that it could assess the parts of the transaction concerning Portuguese assets - claiming it was in a better position than the Commission to analyse the merger.
As seen above, the Commission has shown itself to be reluctant to hand over the assessment of transactions in the telecoms sector to national competition authorities, rejecting four referral requests in the last three years (Orange/Jazztel, Telefónica Deutschland/E-Plus, Liberty Global/Ziggo (see below), and Hutchinson 3G Austria/Orange Austria). The Commission now has until 20 April to either conclude its preliminary investigation or determine whether to refer the relevant part of the merger assessment to the Portuguese competition authority.
CMA issues "invitation to comment" on BT Group's proposed acquisition of EE
Further to the announcement in the UK of the proposed acquisition of mobile network operator, EE, by the UK's incumbent telecoms provider, BT Group (as previously discussed in in our Technology update in February), the UK's Competition and Markets Authority has issued a preliminary invitation to comment for third parties who may have an interest in the transaction. Unlike Orange/Jazztel and Altice/Portugal Telecom, this transaction does not qualify for review by the European Commission under the EU Merger Regulation. No formal investigation of the acquisition has yet been commenced by the CMA, making the request for comments slightly unusual. The deadline for parties to submit a preliminary view is March 18.
Merger control - recently completed investigations
Commission conditionally clears Liberty Global's acquisition of controlling stake in De Vijver Media
On the 24 February 2015, following an in-depth Phase II investigation, the Commission conditionally approved the acquisition by Liberty Global of a stake in Belgian media company, De Vijver Media. As a result of the acquisition international cable operator, Liberty Global, will have joint control of De Vijver alongside Waterman & Waterman and Corelio Publishing.
The notified transaction gave rise to concerns that competition on the Flemish broadcasting market would be affected. The Commission was concerned that the acquisition would make it profitable for Telenet, a cable company controlled by Liberty Global, and De Vijver to withhold popular Flemish television channels Vier and Vijf from competitors. This was of particular concern to the Commission because it considered that access to those TV channels is essential to TV distributors in order to be able to compete on an equal footing with Telenet in the Flanders and Brussels regions of Belgium. To address these concerns De Vijver entered into agreements to license Vier and Vijf to certain TV distributors. De Vijver and Telenet also committed to license Vier and Vijf and similar channels to any interested TV distributors in Belgium on fair, reasonable and non-discriminatory terms for seven years. A non-confidential version of the commitments can be found by following the link.
Acquisition of Dutch Cable TV operator Ziggo by Liberty Global cleared by the Commission
On 10 October 2014 following an in-depth, Phase II investigation the Commission cleared the acquisition of Dutch TV operator Ziggo by Liberty Global, subject to a commitments package. The transaction resulted in a merger between the first and the second largest cable TV networks in the Netherlands. The Commission was concerned that the merger combined the only two linear Premium Pay TV film channels in the Netherlands, resulting in Liberty Global being able to increase the wholesale price of these channels for competing retail pay TV operators. The Commission was also concerned that Liberty Global's increased buying power would allow it to hinder the development of innovative audio-visual OTT services. Liberty Global addressed these concerns with two commitments. Firstly, Liberty Global committed to sell Film1, its premium pay TV channel and secondly, to terminate clauses in their channel carriage agreements that restrict, directly or indirectly, broadcasters from offering their channels and content via OTT services. Liberty Global also committed not to include such clauses in their carriage agreements for a period of eight years.
European regulators suggest better policing of emerging "oligopolies"
At the BEREC (Body of European Regulations for Electronic Communications) Workshop on Oligopoly Analysis and Regulation, European regulators explored whether the EU's current telecom laws are still adequate to deal with the evolving telecoms market (videos of the Workshop sessions can be found at the link). The EU's legal framework which was established in 2002 was predominantly designed to regulate single telecoms operators which had "significant market power". However, BEREC believes that the market is now evolving away from this model and towards a market where a small number of operators hold similar market shares, creating "oligopolies". BEREC has therefore suggested that going forward the industry should be regulated with traditional competition rules. There was not overwhelming support for this proposal from telecoms operators, who generally appear to take the view that there are more urgent problems and that regulators already have sufficient tools to handle changes in the market. BEREC plans to publish a report taking into account the results of the Workshop in December 2015.
Denmark tightens rules on telecom mergers
In February 2015 Denmark published new rules regulating telecom mergers - these rules are expected to enter into force by 1 July 2015. The rules will allow the Danish Business Authority (the body regulating competition in the telecommunications market in Denmark), to refer mergers to antitrust officials at the Danish Competition and Consumer Authority ("DCCA"). Previously telecoms mergers were subject to the same jurisdictional thresholds for notification as all other sectors - namely, notification to the DCCA was required where parties to a transaction had (i) sales of at least 100 million kroner each; and (ii) had combined sales of 900 million kroner in Denmark. Under the revised rules a merger in the telecoms sector will be referred by the Business Authority to the DCCA if the parties have combined sales of 900 million kroner in Denmark.
Commission fines Slovak Telekom and Deutsche Telekom for abusive conduct on the Slovakian broadband market
Slovak Telekom and its parent company, Deutsche Telekom, have been jointly and severally fined €38,838,000 for abusing their dominant position on the Slovak market for broadband services. Deutsch Telekom has been fined an additional €31,070,000 both to sanction repeated abusive behaviour (in 2003 Deutsche Telekom was fined for margin squeeze on the German broadband market) and to deter any future abuse.
The Commission began an in-depth investigation of Slovak Telekom and Deutsche Telekom in April 2009 and December 2010 respectively for alleged abuse of a dominant market position. The Commission held that over a period of five years Slovak Telekom had refused to supply unbundled access to its local loop to competitors and had set its retail prices and prices for access to its local loop at levels which would cause a margin squeeze for any competitors wanting to sell broadband services at prices matching those of Slovak Telecom. Deutsche Telekom was found to be jointly and severally liable with Slovak Telekom because as the majority shareholder in Slovak Telekom it was found to have decisive influence over the subsidiary.
From the European Courts…
CJEU hands down ruling on the interpretation of the right of appeal enshrined in the Framework Directive
In April 2013 the Austrian Administrative Court made a request for a preliminary ruling to the Court of Justice of the European Union ("CJEU") with respect to the application of Articles 4(1) and 9b of the Framework Directive and Article 5(6) of the Authorisation Directive:
- Article 4(1) Framework Directiveprovides that the EU's Member States must ensure that an undertaking or user providing electronic communications networks or services which is affected by a decision of a national regulatory authority ("NRA") has the right to appeal that decision to an independent third party at national level;
- Article 9b Framework Directivesets out the procedure for the transfer or lease of individual rights to use radio frequencies; and
- Article 5(6) Authorisation Directiverequires an NRA to ensure that competition is not distorted by any transfer of rights of use of radio frequencies.
The Austrian court sought clarification as to whether a competitor of an undertaking which was subject to the transfer of radio rights procedure provided for in the Article 9b Framework Directive and Article 5(6) Authorisation Directive could rely on the right of appeal set out in Article 4(1) Framework Directive.
On 22 January 2015 the CJEU handed down its judgment. Based on the rather complex facts before it (which can be read in more detail here), the court confirmed that the right to appeal enshrined in Article 4(1) Framework Directive could be relied upon by a competitor to challenge an NRA Decision with respect to the transfer of radio rights if (i) the party seeking to bring an appeal was a competitor of the party subject to the procedure for the transfer of radio rights and of the addressees of the NRA's decision; and (ii) the decision of the NRA was likely to have an impact the position on the market of the party seeking to appeal.
Belgian reference for ruling on Universal Service Directive
The Universal Service Directive sets out the rules for the provision of communication services in the EU's Member States and covers the provision of voice, facsimile and data communications. The Directive controls the procedures for designating the providers of these communication services and the minimum set of services the designated operators must provide. To ensure the affordability of tariffs the Directive permits NRAs to monitor the level of retail tariffs and where necessary require designated operators to introduce lower social tariffs, price capping or geographic averaging to ensure the affordability of access to the Member State's communication networks. The Directive also provides for designated operators to be compensated where the provision of the universal service at "regulated" prices represents an unfair burden.
In March 2014 the Belgian Constitutional Court made a reference to the European Court of Justice to clarify whether the Universal Service Directive applies to mobile electronic communications and internet subscriptions. In January 2015, Advocate General Pedro Cruz Villalón handed down his opinion (not yet available in English), stating that:
- the compensation mechanism provided for by the Universal Service Directive does not apply to mobile electronic communications;
- the compensation mechanism and social tariff for universal service is applicable to internet subscriptions where the subscription is provided via a fixed location (i.e. not internet accessed via non fixed mobile devices); and
- although Member States can make additional services publicly available in their territory (i.e. services in addition to those set out in the Directive), no compensation mechanism may be imposed as these services cannot be added to the universal service obligation.
The Belgian Constitutional Court now awaits the CJEU judgment.