The merger between the telecommunications operators Orange and MásMóvil was already difficult, but the latest decision of the High Court of Justice of the European Union (CJEU) against the proposed integration in 2016 between the subsidiary of Telefónica in the United Kingdom, O2, and Hutchinson , complicates it even more.
The merger of O2 and Hutchinson was previously blocked by the European competition authorities, but was subsequently stopped by the General Court of the EU for having detected “errors of law” and varying the level of proof required. Now, the European Court of Justice, the highest European judicial authority, has ruled in favor of the Commission against the two companies.
“The decision we heard this Thursday ratifies the position of the European Competition Commission that going from four to three operators in a country poses a risk to competition and generates price increases for consumers”, explains Pablo Ibáñez, professor of legislation at the London School of Economics.
The history of the merger between O2 and Hutchinson goes back a long way. In particular, from March 2015, when the two companies signed an agreement that determined that the company based in Hong Kong bought O2, Telefónica’s subsidiary in the United Kingdom, for 13,000 million euros. A year later the Competition authorities vetoed the merger because they considered it distorting the British market. Hutchinson appealed to the courts. In May 2020, the General Court of the EU dismissed the Competition decision and gave the merger the go-ahead.
The decision did not affect the protagonists, who had already taken other business destinations, but it gave respite to the mergers that were being cooked up in the rest of the EU countries, which saw how Vestager’s strong position was weakened.
The future guidelines of the sector in Europe depend on the outcome of the merger between Orange and Más Móvil, which will be known before September 4. Its protagonists and defenders have always used the operation between O2 and Hutchinson as a reference to validate the concentration of the Spanish market from four to three dominant operators.
“The judgment of the TJUE questions the ‘standard of proof’ and considers it sufficient to annul an operation the fact that it ‘is likely to lead to an increase in prices’, while the General Court established that there had to be a ‘strong probability’. It also points out that the General Court has gone too far in its analysis of the market”, explains Pablo Ibáñez. Even before the ECJ ruling, Verstager’s position was strict. On June 27, the EC sent Orange and Más Móvil a statement of charges which, as explained by the Moody’s rating agency, warned that the alliance of companies faced significant regulatory obstacles, which could reduce competition retailer of mobile phone and internet services as well as multi-offer packages in the country and believed that this will lead to price hikes.
“The ruling is negative because it endorses the original decision of the European Commission to block the operation. This suggests that there are no changes in the Commission’s approach to mergers and acquisitions in the sector and that approvals will continue to be difficult”, they assured yesterday from Moody’s. This position is joined by another fear in the sector: “Vestager is leaving his post and wants to shore up his positions before he leaves”, warn business sources.
