Belgian Competition Authority v. Proximus: First abuse of dominance proceedings against an acquisition not captured by merger control rules since the Towercast ruling

On 21 June 2023, the Belgian Competition Authority (BCA) adopted interim measures against the proposed acquisition by Proximus, Belgium’s incumbent telecoms operator, of EDPnet, a provider of various telecoms services via Proximus’ network. The BCA had opened proceedings in this matter only days after the European Court of Justice (ECJ) published its ruling in the Towercast case¹. 

Based on the learnings from the Towercast case, the BCA case constitutes Belgium’s first review, under abuse of dominance rules, of a concentration that meets neither the EU, nor the national thresholds for merger control.

Key takeaways of the BCA’s application of the Towercast judgment:

• Article 102 TFEU allows for the review of a concentration even if such concentration took place in the context of a judicial reorganisation procedure. They BCA is not bound by a court judgment approving the purchase of the assets involved in the reorganisation.
• A referral under Article 22 of the EU Merger Regulation (EUMR) is mainly suitable for concentrations with a cross-border dimension while Article 102 TFEU (and its national equivalent) may also be used for concentrations without a cross-border dimension.
• Furthermore, the BCA considers that Proximus cannot rely on the lack of legal certainty arguments put forward in the Towercast case. In that case, the French Competition Authority (FCA) acted 13 months after the closing of the acquisition, while in the present case, the BCA opened proceedings immediately after the adoption of the decision by the Ghent court approving the acquisition.

Background

Article 102 TFEU establishes the prohibition on undertakings from abusing their dominant position on any market. Before the adoption of the EUMR, the concentrations were reviewed in accordance with the Continental Can decision². In Continental Can, the ECJ ruled that an acquisition by a dominant company of another company active on the same market that strengthens its dominant position, may constitute an abuse, in accordance with Article 102 TFEU. Once the EUMR was adopted, the European Commission (EC) expressly considered that Article 102 TFEU was not intended to apply to the review of concentrations.

However, the Towercast ruling of the ECJ held that the EC’s approach cannot apply to cases that, for a lack of community dimension, fall outside the scope of the EUMR. By way of background, in 2016, Télédiffusion de France (TDF), a Digital Terrestrial Television (DTT) broadcasting services provider, acquired Itas, another company active in the DTT broadcasting sector. The acquisition was made without notifying the transaction to the EC or to the FCA because the thresholds were not met.

In November 2017, Towercast, one of TDF’s competitors, complained to the FCA that TDF’s acquisition of Itas constituted an abuse of dominant position, due to the alleged impediment of competition on the upstream and downstream wholesale markets for DTT broadcasting by significantly strengthening TDF’s dominant position on those markets. However, the FCA concluded that there was a clear delineation between the control of concentrations and the control of anti-competitive practices, and that Article 102 TFEU could not be used to review a concentration, in the absence of an abusive conduct independent of that operation.

On 9 March 2020, Towercast appealed the decision to the Paris Court of Appeal, which noticed the uncertainty in the interpretation of the EU rules relating to the impossibility of applying the rules on the control of anti-competitive practices to a transaction that could not be subject to merger control. The impossibility is linked, in particular, to the fact that Article 21(1) of Regulation 139/2004 (EUMR) per se excludes the application of the other EU Regulations to a concentration falling within the definition of a concentration contained in Article 3 of Regulation 139/2004.

Therefore, the Court asked the following question to the ECJ:

“Is Article 21(1) of Regulation No 139/2004 to be interpreted as precluding a national competition authority from regarding a concentration which has no Community dimension within the meaning of Article 1 thereof, is below the thresholds for mandatory ex ante assessment laid down in national law, and has not been referred to the European Commission under Article 22 of that regulation, as constituting an abuse of a dominant position prohibited by Article 102 TFEU, in the light of the structure of competition on a market which is national in scope?”

In its ruling, the ECJ held that nothing precludes National Competition Authorities (NCAs) from reviewing a concentration without a Community dimension based on the direct effect of the prohibition of abuse of a dominant position, by using their national procedural rules. Even if the Merger Regulation remains the only regulation applicable to concentrations with a Community dimension, the national procedural rules continue to apply to concentrations without a Community dimension.

As a result, the NCAs must establish that three conditions are met to demonstrate that a concentration is abusive:

(i) the buyer must hold a dominant position on a given market (prior to the transaction);

(ii) the buyer must acquire an actual or potential competitor in the market; and

(iii) post‑transaction, only undertakings whose behaviour depends on the dominant undertaking would remain in the market.

BCA’s first application of the Towercast decision – Proximus / EDPnet

Following the ECJ’s confirmation that a non-notifiable concentration may be reviewed under the rules governing abuse of a dominant position, the BCA announced, on 22 March 2023, its intention to review under the Belgian rules on abuse of dominance³, Proximus’ acquisition of EDPnet, by citing directly the Towercast ruling to justify its decision to open proceedings⁴.

This led to the BCA’s adoption, on 21 June 2023, of interim measures to temporarily guarantee EDPnet's operational autonomy under the supervision of an independent trustee. Prior to the imposition of interim measures, Proximus sent observations to the BCA. In these observations, Proximus contested the lawfulness of the procedure for interim measures, due to its alleged inapplicability to a review under Article 102 TFEU.

On this point, the BCA argues that the Authority does have the power to adopt interim measures to suspend breaches of competition law, which includes breaches of Article 102 TFEU (and its equivalent in Belgian law). Once the Towercast judgment conditions are met, the Authority is competent to adopt interim measures aiming at suspending the alleged abusive acquisition of EDPnet by Proximus.

Proximus also contests the power of the Prosecutor to open ex officio proceedings against its acquisition of EDPnet by relying on three pleas of law:

1) First, Proximus argues that the Towercast judgment does not apply due to the existence of a judicial decision approving the transaction after being reviewed from a competition law perspective. As a consequence, it considered that the condition which requires that “no ex-ante control from a competition law perspective has been achieved”⁵ was not met.

2) Second, Proximus argues that it is dominant only on the wholesale copper/fibre network market, and not on the downstream markets on which EDPnet is active, namely the 'intermediate' wholesale resale market and the market for the retail supply of fixed Internet access services. As a result, Proximus argues that the second condition of the Towercast judgment would not be met.

3) Finally, Proximus argues that where an acquisition does not meet either the EU thresholds, nor the national thresholds, the BCA must refer the acquisition of the target to the EC via Article 22 EUMR, to guarantee the general principles of speed, legal certainty and sound administration.

In response to the first plea of law, the BCA stated that the fact that the merger took place in the context of a judicial reorganisation procedure, which involves the approval of a judge for the transfer of the activities of the target business, does not call into question the competence of the BCA to apply Article 102 TFEU to such a merger. The Towercast judgment makes no distinction between mergers according to the way in which they are carried out. Furthermore, the BCA is not bound by the judgment of the tribunal due to the fundamentally different missions of the BCA.

On the second plea of law, the BCA, by referring notably to AG Kokott’s opinion⁶, concluded that the scope of abuses of dominance covered by the Towercast judgment covers also “killer acquisitions”⁷. Therefore, nothing precludes the BCA from reviewing Proximus’ acquisition of EDPnet, despite the fact that the Parties are not active on the same market, but the target is active on markets which are downstream of the markets in which the buyer is active.

With regard to the third plea of law, the BCA mentions that the use of Article 22 is optional, and that Article 22 referrals are especially suitable for concentrations with a cross-border dimension which is not the case of Proximus’ acquisition of EDPnet. Furthermore, AG Kokott’s opinion points out the complementarity between, on the one hand, the EUMR, when the thresholds are not reached, and on the other hand, the application of Article 102 TFEU. The BCA also argues that the Continental Can case continues to apply, as shown by AG Kokott’s opinion. Finally, concerning the argument about legal certainty, the purpose is mainly to avoid a dual control. What would render the application of the Towercast judgment inapplicable is a previous decision from another NCA or from the EC, and not from a tribunal.

Furthermore, the BCA considers that Proximus cannot compare the problems of legal certainty raised in the Towercast case with the current case. In the Towercast case, the FCA acted 13 months after the closing of the acquisition, while in the present case, the BCA opened proceedings immediately after the adoption of the Ghent tribunal’s decision. In addition, the imposition of interim measures by the BCA will allow an increase in legal certainty by applying them immediately following the approval of the transaction by the tribunal. As a consequence, the BCA preliminarily concluded that, far from being illegal, the opening of ex officio proceedings against Proximus was made in good faith by referring to the Towercast case.

Abuse of dominant position through Proximus’ acquisition of EDPnet

On the substance of the proceedings against Proximus, the BCA alleges that the transaction constitutes a substantial restriction of competition constituting an abuse. First, the BCA considers that the acquisition was solely aimed at protecting Proximus’ dominant position on the wholesale fixed broadband market. The need for protecting the wholesale revenues of EDPnet would be justified only if EDPnet is no longer Proximus’ customer for the wholesale offers. However, if EDPnet is acquired by the second bidder, i.e., Citymesh/Digi, the latter does not have yet its own network, therefore EDPnet would have continued to base its offers on the purchase of regulated wholesale products from Proximus. As a consequence, the BCA concludes that there was no need for Proximus to protect such revenues.

Second, the BCA considers that the transaction would result in the elimination of the only competitor on the relevant wholesale market while leaving only players whose conduct depends on Proximus.

Third, on the relevant retail markets, the BCA considers that, despite the relatively low market share of EDPnet in this segment, the competitive pressure exerted by its offers on the products offered by Proximus' brands and, in particular, in the segment of separate broadband access offers aimed at price-sensitive customers, is very significant.

Furthermore, the BCA considers that it is not manifestly unreasonable to consider, on the basis of the offers proposed by EDPnet on the market, that the loss of independence of the largest alternative operator resulting from this acquisition could be detrimental to competition on the retail market, at least in the segment of separate fixed broadband access offers for residential and very small business customers.

Finally, the BCA considers that the acquisition would be a hindrance to the development of Citymesh/Digi. In the absence of its own network, EDPnet is the only existing alternative on the wholesale market which allows, thanks to its retail customer base, an immediate launch of the additional products mentioned by the BCA. The approval of the second bidder offer would have created a stronger degree of competition on the relevant retail markets, by allowing Citymesh/Digi to be able to offer convergent services. In accordance with recital 21 of the Guidelines on the application of Article 102 TFEU, the approval of the second offer would have created a situation where the fourth network operator (the new entrant) would become more efficient by spreading its fixed costs over a larger number of customers and being able to offer convergent services. It would have increased competition on the market.

Therefore, the BCA found that there was a “prima facie” abuse of a dominant position and obliged Proximus to:

• maintain the viability, the market value and the competitiveness of EDPnet;
• maintain the separation of Proximus’ and EDPnet’s activities;
• and protect EDPnet’s activity, including by not collecting EDPnet’s confidential information.

Finally, the BCA has nominated a trustee responsible for ensuring the separation of the companies' activities.

Key takeaways

Following the adoption of the Towercast ruling the legal certainty for undertakings involved in concentrations has decreased. The concentrations without an EU dimension and even without reaching the MSs thresholds, can be reviewed through two legal mechanisms, i.e., a merger control review by the EC following an Article 22 referral by a NCA (as interpreted by the Illumina case), and a potential abuse investigation under Article 102 TFEU either by the EC or by the NCAs (in line with the Towercast ruling).

The rationale for the Towercast ruling is similar to the rationale of Article 22 referrals, i.e., to catch concentrations involving acquisitions of innovative start-ups notably in the pharma or digital sectors, as well as acquisitions of emerging competitors in markets that are currently highly concentrated- so called ‘killer acquisitions’. The main problem with the Towercast judgment is the lack of guidance on its application. For example, although it is intended for reviewing the concentrations listed above, there is nothing to prevent NCAs from reviewing a wide range of concentrations below the thresholds.

Finally, the ruling would also allow NCAs to review mergers potentially years after they have been completed, creating a great deal of legal uncertainty. AG Kokott seems to suggest that “in view of the primacy of behavioural remedies and the principle of proportionality, there is not usually a threat of subsequent dissolution of the concentration, but rather only the imposition of a fine”⁸. Nevertheless, if an NCA considers the dissolution of the concentration as being proportionate, it may result in the dissolution of a concentration achieved a long time ago.

In the present case, the BCA decided to review Proximus’ acquisition of EDPnet just the day after the acquisition was approved by the Enterprise Tribunal of Ghent, which significantly reduced the legal uncertainty for Proximus. It remains to be seen whether the BCA will clear the transaction, with or without remedies, or order the dissolution of the concentration.