Hutchison/O2: A higher bar for EU merger prohibitions?
Global | Video | november 2020 | 05:49
Video Details
| Jason Logendra | Hi Richard, thank you for coming today. I would very much like to talk to you about the EU General Court’s judgment in the Hutchison/Telefónica O2 merger decision, where the General Court overturned the European Commission’s prohibition decision, which is the first time that has happened in a while. I think the first question that is on people’s minds is: does that signal a significant change in approach that the European Commission may take to mobile mergers? |
| RIchard Whish QC | Well, I would not expect that at all, to be honest. We will have to wait and see what comes of this case because there will be an appeal to the Court of Justice. But I would expect the Commission to continue to look very closely at mobile mergers, and then to decide on the facts of any specific case whether there is a problem. I can’t see that because of this setback they would change their underlying policy. |
| Jason Logendra | I think we will get on to the contents of this 731-page European Commission decision where they obviously analyse a lot of evidence, but I think before that there is the bigger question about whether at least there is a change in standard, or the burden, of proof that the Commission must meet in these “gap” cases? |
| RIchard Whish QC | Well, of course, it is not burden of proof is it, it is standard of proof that we are talking about. I mean, obviously the Commission always has the burden of proof, but the question is how far does it have to go? And I am a little bit surprised by this judgment because we have this paragraph 118, where the Court says that the standard of proof applicable in the present case is stricter than a balance of probabilities, but it is not so strict as beyond all reasonable doubt, rather there has to be a strong probability. And I am not entirely sure where that came from or rather, insofar as it came from anywhere, it seems to be from three Advocate General opinions. But it does not seem to me to be routed in any jurisprudence of the Court and, of course, that is one of the things that the Commission is appealing to the Court of Justice and I would not be surprised to see them win on that point of law. That is separate from the substance of the decision which we will talk about, but paragraph 118, I did raise my eyebrows when I read that. |
| Jason Logendra | So while that is very much an area to watch in terms of the standard of proof, there are I think some clearer statements from the Court on the gap test and, for example, how does one identify an important competitive force? |
| RIchard Whish QC | Well, I think the judgment is very interesting on, first of all, just explaining what the gap is. And paragraphs 77 to 105 I think explain quite nicely what the gap is. It is where you have a merger, a non-collusive oligopoly if you like, where post-merger each of the remaining parties in the market has more market power than they had previously, but none of them is individually dominant and they can extract benefits from their market power without coordination. Now, that is the gap, and I think the Court explains that quite well. But then, of course, you have got the totally different question which is, on the facts of any particular case, what does the Commission have to do? And clearly there the Court just was not happy with its treatment of closeness of competition, the maverick and the nature of the competitive force that is removed from the market. And there there’s a difference of opinion, clearly, between the Court and the Commission. |
| Jason Logendra |
Yes, and that does seem to be the area where the discussion may focus going forward. There was a movement from how they identify the maverick player, do they just have an impact on competition, do they need to be the closest competitor? So that may be an area where perhaps we could see some change going forward. |
| RIchard Whish QC | Well, I think one thing that comes out of this absolutely clearly is that these gap cases, it is not numerology. It is not like an equation, there were four, now there’s three, therefore there is an SIEC. That is not good enough. I mean, you have to show that removing that competitor is going to give rise to a significant impediment, and that is where the Court is just not convinced that the Commission has got it right. |
| Jason Logendra | Yes, I think it is probably worth clearing up that point about four to three and whether this opens the door to four to three mergers in a way that wasn’t there before. |
| RIchard Whish QC | And we have to remember that there was a merger decision about two years ago. It was T-Mobile/Tele2 in the Netherlands, and that was four to three and it was cleared. So it is wrong to say that every four to three merger has been either prohibited or has led to remedies. That is an example of a case that actually got through empirically on the facts of the case. In the end, to my mind, these cases are all about evidence. And here the Court is not satisfied with the Commission’s conclusions derived from the evidence. |
| Jason Logendra | So perhaps that is the impact that we could see – even more evidence gathered during these processes and perhaps earlier on. |
| RIchard Whish QC | Well, not necessarily more, but better analysis of it – let’s put it that way. |
| Jason Logendra | Thank you very much for your thoughts on that, Richard. Let’s wait for the Court of Justice judgment. |
| RIchard Whish QC | OK, thank you. |