On 1 February 2016, Carles Esteva Mosso, the Acting Deputy Director General for mergers, gave a speech on the contribution of merger control to the definition of harm to competition at the Global Competition Law Centre ("GCLC") Conference. Esteva Mosso spoke about the mutual interaction between an emerging merger control regime and a well-established system of enforcement of Articles 101 and 102 of the Treaty on the Functioning of the European Union ("TFEU").
Firstly, Esteva Mosso discussed how EU merger control has been influenced by its “older cousin”, antitrust enforcement, and how it converged toward antitrust standards. He explained how at first the "creation or strengthening a dominant position" was the foundation for substantive assessments in merger control. As a result, in the early years, merger assessment was conceptually very different from the assessment under Article 101 of the TFEU of other types of agreements between undertakings. Esteva Mosso noted that the 2004 reform of EU merger control changed this situation. By attempting to move away from an excessively structuralist analysis in merger control towards a more effects-based analysis and by closing the gap of cases leading to unilateral effects in a non-collusive oligopoly it actually brought the substantive analysis under merger control and Article 101 of the TFEU much closer than in the past.
Secondly, Esteva Mosso discussed the significant contribution merger control has conversely made to antitrust, arguing that one of the imports from merger control to antitrust is the market power analysis. Merger control contributed to focusing Article 101 and 102 of the TFEU analysis on consumer harm and consumer welfare. In addition, he noted that merger control has made a significant contribution to defining the relevant market. Esteva Mosso noted that the Market Definition Notice has been used extensively in antitrust since 1997, especially in Article 102 cases, both in infringement decisions and in commitment decisions. In addition, some antitrust decisions even refer to merger decisions as precedents for a particular market definition. Further, Esteva Mosso argued that collective dominance is yet another import from merger control to antitrust. As a fourth import from merger control to antitrust, he cited counterfactual analysis.
Finally, Esteva Mosso examined whether there exists, or should exist, a single analytical framework for the analysis of agreements and horizontal mergers, under Article 101 of the TFEU and the Merger Regulation respectively. Esteva argued that, to a large extent, substantially the same test and standard of intervention apply in the context of antitrust and mergers. According to Esteva Mosso, a continued and enhanced dialogue between antitrust and merger control practitioners and enforcers is useful to better understand the common concepts and objectives of merger control and antitrust enforcement, thereby strengthening the foundation of antitrust and merger control work. Source: Speech by Carles Esteva Mosso – The Contribution of Merger Control to the Definition of Harm to Competition, GCLC Conference, Brussels, 1 February 2016
On 4 February 2016, the Commission approved the acquisition of a Belgian network operator BASE Company NV ("BASE"), by Liberty Global Plc ("Liberty Global"), subject to conditions. BASE is a subsidiary of a Dutch telecoms group KPN and one of Belgium's three mobile network operators, together with Proximus and Mobistar. BASE offers mobile services to consumers and businesses in Belgium. It also owns a 50% stake in Mobile Vikings, which is a mobile virtual network operator using BASE's mobile network. Liberty Global controls a Belgian cable operator Telenet. Telenet offers fixed telecommunications services in Flanders and parts of Brussels, plus mobile services as a full mobile virtual network operator, using Mobistar's network. Mobile virtual network operators do not own a network of their own; rather they rent other operators' networks to provide mobile services.
The Commission's investigation revealed that BASE competes aggressively on the Belgian retail mobile market and has challenged other operators with attractively priced offers. Telenet also has been an exceptionally successful mobile virtual network operator with its mobile offers that have brought mobile prices down. Without the commitments, the transaction would have significantly reduced competition and could have led to higher prices and less choice and innovation for Belgian mobile consumers. To address the Commission's concerns, Liberty Global committed to sell BASE's share in Mobile Vikings to a Belgian broadcaster Medialaan. BASE currently has an arrangement with Medialaan to sell mobile services under its JIM Mobile brand. BASE's JIM Mobile customer base will also be transferred to Medialaan under the commitments. Finally, Liberty Global committed to give Medialaan access to BASE's mobile network at conditions that will allow Medialaan to compete effectively as a full mobile virtual network operator. According to the Commission, the commitments adequately address its competition concerns and ensure the entry of a new mobile virtual network operator into the retail mobile market. The commitments also compensate for the loss of competition that results from the exit of Telenet as an independent mobile virtual network operator.
The Commission also investigated concerns raised by competitors that following the transaction, Liberty Global would be able to exclude competitors from the market by bundling fixed and mobile services in packages. However, the Commission rejected these concerns because Telenet already offers both fixed and mobile services. Thus, the transaction would not alter the market structure. Further, the Commission dismissed concerns that the transaction would result in worse wholesale access conditions for mobile virtual network operators in Belgium. It concluded that the incentives for BASE and Liberty Global to grant wholesale access to their network would remain unchanged.
Source: Commission Press Release 04/02/2016
On 4 February 2016, the General Court ("GC") handed down separate judgments on appeals by GFKL Financial Services AG ("GFKL") and Heitkamp BauHolding GmbH ("Heitkamp BauHolding") (jointly "appellants"), against a Commission decision that found that the tax advantages granted by Germany to ailing companies when there were significant changes in their shareholding were incompatible with the EU state aid rules.
Under the general German tax rules, the carrying forward of fiscal losses are forfeited if there are significant changes in the shareholding. In 2009, a new provision called the Sanierungsklausel was added to the general Körperschaftsteuergesetz. The new provision, concerning corporate income taxation of companies that experience significant changes in their shareholding, derogated from the general tax rules and allowed ailing companies that have potential for a turn-around to carry forward fiscal losses. According to the Commission and the GC, this constituted a state aid. Germany did not notify the Commission of the the Sanierungsklausel. The Commission announced in 2011, after an in-depth investigation, that the measure was unjustified state aid and ordered Germany to recover any aid granted under the scheme. In 2012 the GC dismissed Germany's action against this decision as manifestly admissible, since it was lodged too late.
Heitkamp BauHolding and GFKL brought separate appeals against the Commission's decision based on Article 263 of the Treaty on the Functioning of the European Union ("TFEU"). The appellants claimed they were directly and individually concerned, which was confirmed by the GC. Further, the appellants argued that the fiscal carry-forward measure was not selective and thus did not constitute state aid. The GC disagreed and concluded that the measure considers a certain category of companies that finds themselves in a specific situation and is therefore, prima facie, selective. In addition, the appellants claimed that the contested decision breached the principle of legitimate expectation. Regarding Heitkamp BauHolding, this claim was dismissed because it was a new argument before the GC. Regarding GFKL, the GC noted that it is settled case law that undertakings cannot entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the correct procedure. This was not the case since Germany had not notified the Commission of the aid. Consequently, this argument was dismissed as unfounded. The appellants raised some additional grounds for pleas, which were all dismissed, resulting in the GC dismissing the appeals in their entirety. Sources: Case T-620/11 – GFKL Financial Services AG (supported by Germany) v Commission, judgment of 4 February 2016 (in German) and Case T-287/11 – Heitkamp BauHolding GmbH (supported by Germany) v Commission, judgment of 4 February 2016 (in German)
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 acquisition of Ergo Italia by Cinven
- Commission approves acquisition of joint control of Hydro Dolomiti Enel by Macquarie European Infrastructure Fund and Dolomiti Energia
- Commission approves acquisition of Hunkemöller by the Carlyle Group
- Commission approves acquisition of Global Vía by USS Nero, OPTrust and PGGM
- Commission approves acquisition of Cameron by Schlumberger in oilfield industry
- Commission approves acquisition of SanDisk by Western Digital
- Commission approves acquisition of Dundrum Assets by Hammerson and Allianz
- Commission approves acquisition of Northgate by Goldman Sachs