EU to investigate acquisition by Vodafone of Liberty Global businessesTuesday, December 11th, 2018
Mergers: Commission opens in-depth investigation into proposed acquisition by Vodafone of Liberty Global’s business in Czechia, Germany, Hungary and Romania
BRUSSELS — The European Commission has opened an in-depth investigation to assess Vodafone’s proposed acquisition of Liberty Global’s business in Czechia, Germany, Hungary and Romania under the EU Merger Regulation. The Commission is concerned the takeover may reduce competition in Germany and Czechia.
Commissioner Margrethe Vestager, in charge of competition policy, said: “It’s important that all EU consumers have access to affordable and good quality telephone and TV services. Our in-depth investigation aims to ensure that Vodafone’s acquisition of Liberty Global’s telecommunications businesses in Czechia, Germany, Hungary and Romania will not lead to higher prices, less choice and reduced innovation in telecoms and TV services for consumers”.
In Czechia, Hungary and Romania, Vodafone is mainly active as a mobile network operator, and Liberty Global as a fixed telecommunications operator.
In Germany, Vodafone and Liberty Global operate non-overlapping coaxial cable networks (i.e., networks that cover different areas and regions). Vodafone is also active in areas where Liberty Global offers cable services via wholesale access to Deutsche Telekom’s xDSL network.
The Commission’s preliminary competition concerns
The Commission’s initial market investigation identified the following main concerns:
- In Czechia, providers of standalone telecommunications services could be shut out from (i) the retail market for mobile telecommunications services, (ii) the retail market for Internet access services and (iii) the retail market for TV services, because of the converged products that the merged entity could offer.
- In Germany:
- Vodafone and Unitymedia (Liberty Global’s subsidiary in Germany) currently compete against each other in areas served by Unitymedia via cable on the retail fixed telecommunications markets and on the retail TV markets. The Commission has concerns that the transaction would eliminate competition between the merging companies, reduce the number of players and limit the merged entity’s incentives to compete effectively with the remaining operators, both in areas already served by Unitymedia and in Germany as a whole.
- The proposed transaction could eliminate competition between the merging companies in terms of investment in next generation networks
- The transaction could substantially increase the bargaining power of the merged entity vis-à-vis TV broadcasters. This, in turn, could negatively impact these broadcasters’ ability to stay competitive and to invest.
At this stage, the Commission has not identified any specific competition concerns relating to the proposed merger for the Hungarian and Romanian markets.
The Commission will now carry out an in-depth investigation into the effects of the transaction to determine whether its initial competition concerns are confirmed.
The transaction was notified to the Commission on 19 October 2018. The German Competition Authority requested a referral of the case on 7 November 2018 under Article 9 of the EU Merger Regulation. This referral request is pending.
The Commission now has 90 working days, until 2 May 2019, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.
Companies and products
Vodafone, based in the UK, is primarily involved in the operation of mobile telecommunication networks and in the provision of mobile telecommunication services, such as mobile voice, messaging and data services. Some of its operating companies also provide cable television, fixed line telephony, broadband internet access and/or IPTV services. Within the EU, Vodafone is active in twelve Member States, including Czechia, Germany, Hungary and Romania.
Liberty Global, based in the UK, offers television, broadband internet, mobile and telephony services as well as mobile services. Liberty Global owns and operates cable networks offering TV, broadband and voice telephony services in Czechia, Germany, Hungary and Romania. In Germany and Hungary, Liberty Global also provides mobile telecommunications services as a mobile virtual network operator. Liberty Global operates under the name Unitymedia in Germany and under the name UPC in Czechia, Hungary and Romania.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
However, as part of the current matter the Phase I deadline was extended by 10 working days following a request for a partial referral of the matter to the German competition authority, made by the latter under Article 9 of the Merger Regulation.