On 7 November 2008, the Council conditionally cleared the acquisition of sole control of Scarlet by Belgacom. This decision follows a Phase II investigation that was initiated on 6 May 2008. At the end of Phase I, the Council had expressed serious doubts as to the admissibility of the concentration and considered the commitments proposed by Belgacom insufficient (see our Belgian Competition Law Report of the third quarter of 2008).

Belgacom and its subsidiaries are suppliers of several telecommunication services, in particular in Belgium, and offer products and solutions through their different brands such as Belgacom, Proximus, Telindus/Belgacom ICT, WIN and Skynet. The Belgacom group is mainly active in the following markets: fix lines services (FLS); mobile communication services (MCS); international carrier services (ICS); internet services; and television. Scarlet is a Dutch telecommunication company that supplies most of the services provided by Belgacom, in Belgium as well as in the Netherlands.

In its additional report of 4 July 2008, the Auditor found that the competitive weight of Scarlet was more important than its market share suggested and that the concentration would significantly impede effective competition. Belgacom proposed (new) commitments, however the Auditor found that they were insufficient to allow the concentration.

The Council dealt with several procedural issues in this case. Belgacom had twenty days, from the Council’s decision to initiate a Phase II proceeding, in order to submit commitments. On the twentieth day Belgacom submitted only confidential documents (and not the non-confidential version of the commitments). However, the Council still decided to extend the period for the adoption of its final decision. Moreover, contrary to the request of the Auditor, the Council refused to impose a fine despite the non-confidential version of the commitments not being supplied within the applicable time limits.

The Council decided to grant the third parties that showed sufficient interest to be heard in Phase I, access to the additional report of the Auditor. According to the Council, access to this report was necessary to allow these third parties to express their opinion on the concentration in a useful manner. With this, the Council confirms the case law of the Supreme Court (Cour de Cassation/Hof van Cassatie) on granting third parties access to the file in Phase I, and states that these principles also apply in Phase II.

Also, the Council confirmed that the parties have until the hearing in Phase II to submit commitments. The Council added that it is, however, in their best interest to do this at the stage of the investigation, i.e. within twenty days after a Phase II investigation is initiated.

As to the substance of the case, the Council reiterated the existence of significant (i) horizontal overlaps in the fixed lines and the broadband internet market, and (ii) vertical overlaps between the retail leased lines market and the wholesale leased lines market, as discussed in its Phase I decision.

In relation to the retail market for broadband internet access, the Council reiterated that Belgacom was the most important player in the market. The concentration would (i) result in a combined market share above 50% and would (ii) lead to the disappearance of Scarlet as an independent broadband operator. In the broadband internet access market, competition from alternative operators is very important, and Scarlet had an innovative role on the market. The Council also noted that KPN Belgium would remain the only alternative operator and that potential newcomers would be discouraged from entering as a result of the market structure. Therefore, the Council concluded that the concentration would significantly impede effective competition.

In relation to the retail market for fixed lines, the Council referred to the market shares and the market concentration, as discussed in its Phase I decision, and concluded that the concentration would significantly impede effective competition.

In order to obtain clearance for the transaction, the notifying parties agreed on significant commitments. In particular: (i) Scarlet’s network infrastructure will be divested to a competitor; (ii) Scarlet’s clients for broadband internet access will be presented with the possibility to change operators; (iii) Belgacom commits, for at least three years, to uphold the existing Scarlet concept, brand, products, and services for end-consumers under the same conditions; (iv) Belgacom guarantees that Scarlet will respect its agreements with end-consumers at the pre-5 November 2008 conditions and that it will not make use of the contractual possibilities to end those agreements for a minimum of three years; (v) Belgacom guarantees that Scarlet will respect all Dark Fibre agreements (regarding the leasing to other operators of the optical fibre that belongs to Scarlet’s network) in accordance with the dispositions of those agreements, and that it will not make use of the contractual possibilities to end those agreements (until the completion of the Sales Agreement regarding Scarlet’s infrastructure); (vi) Belgacom guarantees that Scarlet will respect all wholesale agreements in accordance with the dispositions of those agreements, that it will not make use of the contractual possibilities to end those agreements for at least three years, that it will offer the possibility to its counterparties to extend the wholesale agreements to a maximum of three years, and that it will preserve, for at least three years, the existing wholesale offer from Scarlet at the same conditions; (vii) Belgacom offers a commitment in relation to the Cybercenter agreement (the details of which are business secrets); (viii) Belgacom commits not to raise the rental fee for the BROBA ADSL2+ service above a monthly compensation of EUR 6,26; and (ix) Belgacom commits to apply uniform basic prices for the whole Belgian territory for services to residential clients regarding DSL-based broadband internet access at a fixed location, access to the fixed telephony network and price plan iTalk.

On the basis of these commitments, the Council cleared the operation, as it was of the opinion that they were sufficient to ensure that the acquisition would not significantly impede competition on the Belgian market.