Merger Control: Commission approves acquisition of Jazztel by Orange, subject to conditions

On 19 May 2015, the Commission announced that it has approved the proposed acquisition of Jazztel plc ("Jazztel") by Orange SA ("Orange"), subject to conditions. Jazztel, registered in the UK, offers telecommunication services in Spain through its subsidiary Jazz Telecom S.A.U. Orange is a French telecommunications company that provides its services in over 30 countries. Orange España S.A.U., a subsidiary of Orange SA, is one of the main rivals of Jazztel in Spain.

The merger combines the third and fourth largest suppliers of fixed telecommunications services in Spain. Therefore, the Commission was concerned that the merger, as originally notified, could have led to raising prices of fixed internet access services across Spain.

In its in-depth Phase II investigation the Commission found that the merged entity would face fewer incentives to compete against the remaining competitors on the market. The remaining nationwide competitors Telefónica and Vodafone would also benefit from the reduced price pressure, and are thus unlikely to replace the former competitive pressure exercised by the merging entities. Further, the Commission considered that new competitors would face considerable difficulties due to high investments needed to enter the relevant retail markets. In addition, the Commission stated that end consumers do not have countervailing negotiation power to influence the contractual conditions offered by strong providers.

To address the Commission's competition concerns, Orange has committed to divest an independent Fiber-To-The-Home ("FTTH") network covering 700 000 – 800 000 building units in 13 urban districts located in Madrid, Barcelona, Valencia, Sevilla and Málaga. Additionally, Orange has committed to grant the purchaser of the FTTH network wholesale access to Jazztel's national ADSL network for up to eight years. According to the Commission, the commitments are intended to ensure that a fourth nationwide operator can enter the Spanish market and be able to compete as effectively and aggressively as Orange and Jazztel do today. Consequently, the Commission concluded that the transaction, as modified by the commitments, would no longer raise competition concerns. Source:Commission Press Release 19/5/2015

Merger Control: Commission approves acquisition of TSB by Sabadell; major step in restructuring plan of Lloyds Banking Group

On 18 May 2015, the Commission announced that it has approved the proposed acquisition of TSB Banking Group plc ("TSB") by Banco de Sabadell S.A. ("Sabadell"). TSB is a British retail and commercial banking services provider, a spin-off of Lloyds Banking Group ("Lloyds"). TSB provides services mainly to individuals and small and medium-sized enterprises in the UK. Sabadell, of Spain, provides banking and insurance services and is a newcomer to the UK markets.

Lloyds is one of the largest financial services groups in Europe, and it was formed by the acquisition of HBOS by Lloyds TSB. The takeover was facilitated by the UK State in 2008 by granting state aid, including a recapitalization of GBP 17 billion, to Lloyds in order to acquire the nearly bankrupt HBOS. The Commission approved the state aid based on a restructuring plan which included the commitment to divest part of Lloyds' UK retail banking operations, TSB. The measure was intended to compensate for the distortive effect on the market caused by the state aid, and also to stimulate competition in the UK retail banking markets by introducing a new challenger bank.

In May 2014 the Commission approved proposals by the UK authorities to amend Lloyds divestment commitment conditions, including extending the deadline for the disposal of TSB until 31 December 2015. In June 2014 Lloyds sold a significant part of its stake in TSB and once Sabadell completes the transaction, Lloyds will no longer hold any ownership stake in TSB. According to the Commission the proposed transaction is the final key requirement in Lloyd's restructuring plan. Consequently, the Commission concluded that the proposed transaction would not raise competition concerns.Source:Commission Press Release 18/5/2015

Merger Control: Commission gives conditional authorization for SNCF to acquire sole control of Eurostar 

On 13 May 2015, the Commission announced that it has approved the planned merger involving the acquisition of sole control of Eurostar International Limited ("EIL") by the French rail operator SNCF MOBILITIES. EIL provides rail services through the Channel Tunnel between the UK, France and Belgium. EIL was originally set up in 2010 and was at that time controlled by the French national railway company ("SNCF") and the UK Government. The Belgian national railway company ("SNCB") held a non-controlling minority share. The planned transaction involved selling the shares owned by the UK Government to a Canadian-based private company and adopting a new shareholders agreement, which gave the largest shareholder, SNCF, sole control of Eurostar.

The Commission had preliminary concerns that the planned merger, as originally notified, would hinder the entry of competitors to the London-Paris and London-Brussels routes, where EIL currently has a monopoly. The Commission noted that access to stations and to services provided in France and Belgium, and access to maintenance centers in France, Belgium and the UK, would become more difficult due to capacity limitations and the fact that EIL and its shareholders SNCF and SNCB managed the infrastructure in question. In addition, access to train paths at peak times would be problematic due to EIL’s priority access as the incumbent operator.

To address the Commission's concerns, EIL, SNCF and SNCB offered commitments designed to ensure that any new entrant would have fair and non-discriminatory access to: standard and cross-Channel areas and services; maintenance centers currently managed by SNCF, EIL and SNCB in France, the UK and Belgium; and train paths currently used by Eurostar at peak times, should a new entrant not be able to obtain such access through the usual procedure for path allocation by the infrastructure managers.

The Commission considered that the commitments reduce the barriers to entry for new operators on the London-Paris and London-Brussels routes. Therefore, the Commission concluded that the planned merger, as modified by the commitments, does not raise any competition concerns. The decision is conditional upon full compliance with the commitments. Source: Commission Press Release 13/5/2015 

Merger Control: General Court dismisses actions against Lufthansa's acquisition of Austrian Airlines and restructuring aid granted by Austria

On 13 May 2015, the General Court ("GC") handed down its judgments dismissing the actions brought by Niki Luftfahrt GmbH ("Niki Luftfahrt") against the Commission's decision's that approved the acquisition of Austrian Airlines AG ("Austrian Airlines") by Deutsche Lufthansa AG ("Lufthansa") and the restructuring aid granted by the Austrian State to Austrian Airlines. Austrian Airlines is the largest airline in Austria. Niki Luftfahrt is also an Austrian airline, commonly known as FlyNiki or Niki and it operates flights to destinations across Europe and North Africa. 

In 2008, the Austrian State decided to sell its majority shareholding of 41.56% in Austrian Airlines, due to the airline's financial difficulties, to Germany's largest airline, Lufthansa. The transaction involved three elements. First was the purchase price of EUR 366.3 million. Second was a debtor warrant capable of giving rise to an additional payment of up to EUR 162 million should Austrian Airline's financial situation improve, and the third element was for the Austrian State to pay Austrian Airlines a subsidy of EUR 500 

million in the form of a securitization structure to be used to increase the capital of Austrian Airlines. In August 2009 the Commission approved the planned acquisition, subject to conditions, and also approved the implementation of the restructuring aid. The remedy package included commitments to offer slots according to an efficient and timely slot allocation mechanism. Niki Luftfahrt brought actions before the GC for annulment of the Commission’s approval decisions. The GC, however, stated that none of the arguments put forward by Niki Luftfahrt is capable of casting doubt on the Commission's decisions. In particular, Niki Luftfahrt was unsuccessful in refuting the Commission's finding that the compatibility of Lufthansa’s acquisition of Austrian Airlines with EU competition law gave rise to serious doubts only as regards the Vienna-Stuttgart, Vienna-Cologne-Bonn and Vienna-Munich services as well as the Vienna-Frankfurt and Vienna-Brussels services. Nor was Niki Luftfahrt successful in showing that the commitments proposed by Lufthansa and Austrian Airlines were insufficient to address the identified concerns, as they reduced the barriers to entry and facilitated the entry of new entrants or the expansion of competitors already operating those services.

Niki Luftfahrt was also unsuccessful in showing that the Commission erred in finding that the State aid granted to Austrian Airlines, as a restructuring aid, was compatible with EU law. The aid was intended to reduce Austrian Airline's indebtedness and a restructuring plan was intended to ensure Austrian Airline's viability in the long-term. Consequently, the GC dismissed the Niki Luftfahrt's appeals and upheld the Commission's decisions. Source: General Court Press Release 13/5/2015

In addition, kindly note the following merger control decisions by the Commission which are published on the website of the Commission’s Directorate-General for Competition:

  • Commission approves the acquisition of joint control over two storage terminals by Oiltanking GmbH and 3i Group