Cable companies and telecommunications company KPN's downstream customers' opposition to the 2008 conditional first-phase approval of a glass fibre joint venture between KPN and Reggefiber was unsuccessful. The Rotterdam District Court recently annulled the Competition Authority's approval decision, but upheld its legal consequences: the establishment of the joint venture.(1)
In a 2010 interlocutory ruling the court found that the authority had based its decision – that no second phase investigation into the joint venture was required – on insufficient grounds.(2) However, after a further substantiation of the authority's reasoning, the court deemed KPN and Reggefiber's bundling of the optical fibre network activities in the joint venture unproblematic. The appeals by KPN's downstream customers against the effectiveness of a number of the remedies in the authority's 2008 decision were just as unsuccessful.(3)
Recently, the authority also gave unconditional first-phase approval to KPN's acquisition of three of Reggefiber's subsidiaries. However, a second-phase investigation is required for KPN's plans to acquire four of Reggeborgh's optical fibre providers (Edutel, XMS, Concepts ICT and KickXL). The second-phase application for the acquisition of cable company CAIW was withdrawn by KPN and CAIW's parent company.
In late 2008 the authority conditionally cleared the setting up of a joint venture between KPN and Reggefiber regarding their optical fibre network activities in the first phase. The authority's main concern was likely input foreclosure due to restricted access to the joint venture's optical fibre network. This issue was resolved by offering the (behavioural) remedy of guaranteed third-party access to the network at reasonable tariffs.(4)
Both downstream customers of the joint venture and competitors appealed the decision. Even though the court, in its interlocutory ruling, agreed that the authority had failed to assess all of the competition parameters, it considered that this was sufficiently corrected by the authority's supplemental reasoning as to why the parameters' quality and innovation would not lead to competition concerns. This led to a pyrrhic victory for KPN's competitors: the authority's decision was overturned but the joint venture's activities remain unaffected.
The acquisitions of full control over Reggefiber's three units (Lijbrandt, Reggefiber Wholesale and Glashart) were also considered unproblematic since:
- KPN, as joint owner of Reggefiber, already had joint control over Lijbrandt. The transition from joint control to full control would thus not have a substantial impact on the market structure;
- Reggefiber Wholesale is not a competitor of KPN, because it offers only low-quality wholesale broadband access when KPN is unable to do so for technical reasons; and
- sufficient alternatives existed to conclude that effective competition should not be impeded by the acquisition of Glashart, a provider that bundles and relays broadcast signals.
Not all of KPN's planned acquisitions run so smoothly. Previously, both the Independent Post and Telecommunications Authority and the Competition Authority defined retail markets in television, Internet and landline telephony as national in scope.
However, in April 2012 the authority indicated that a second-phase investigation into KPN's planned acquisition of four of Reggeborgh's optical fibre providers was needed, taking account of the overlap in activities between KPN and one or more of the providers on various regional markets. According to the authority, a second-phase investigation should focus on the potential restriction of consumer choice with regards to television, internet and landline telephony services in these regions. KPN's planned acquisition of cable company CAIW was aborted for the same reasons.
The authority informed the parties that, even after an in-depth investigation in the second phase, it would have continued concerns about the reduced consumer choices for television services, internet access and landline telephony services.
For further information on this topic please contact Jolling De Pree or Erik H Pijnacker Hordijk at De Brauw Blackstone Westbroek by telephone (+31 70 328 53 28), fax (+31 70 328 53 25) or email (firstname.lastname@example.org or email@example.com).