On 25 July 2013, the Commission published the non-confidential version of its decision in case M.6497. The case concerns the conditional clearance of the acquisition of Orange Austria by Hutchison 3G Austria ("H3G").
Upon notification in May 2012, the Commission had serious competition concerns as the transaction reduced from four to three the number of market players on the Austrian market for the provision of mobile telecommunications services to end customers. Even if the undertakings concerned were only the third and fourth largest market players and their combined market share of 20-30% remained below that of Telekom Austria and T-Mobile, the Commission held that the notified concentration would have significantly impeded effective competition. This conclusion was based on inter alia an analysis of the increased degree of concentration resulting from the operation, on the closeness of competition between H3G and Orange Austria, and on the fact that H3G was an important, if not the most important, competitive force in the market and would have less incentive to compete aggressively after the merger.
Noteworthy is that the Commission used for the first time the ‘gross upward pricing pressure index’ (GUPPI). This is a tool that has found its way into the U.S. Horizontal Merger Guidelines and that is already being used by some national competition authorities in the EU (mainly by the OFT), but which the Commission until recently has shied away from using. The GUPPI test is a spin-off of the ‘upward pricing pressure’ (UPP) test and aims at quantifying the incentive to increase prices post-merger on the basis of undertakings’ profit margins and diversion ratios. Contrary to the UPP test, the GUPPI test assumes no effiency gains from a merger. The essential rationale underlying upward pricing pressure is that post-merger, the new entity would not lose all switchers after a unilateral price increase of one of its brands, but rather would retain a significant number and therefore internalise part of the losses which a price increase would otherwise bring about.
While the notifying party raised a variety of objections in relation to the price pressure analysis, the public decision shows that the Commission went at lengths to rebut these. Thus, it rejected accusations that the analysis ignored the importance of investments in network quality. It dismissed the claim that the UPP-framework does not constitute an adequate tool to predict pricing outcomes in a Phase II merger investigation, stating that "GUPPI is a generally accepted component of a merger analysis”.
In order to address the Commission’s concerns, H3G committed to divest radio spectrum and additional rights to an interested new entrant and to provide wholesale access to its network for up to 30% of its capacity to up to 16 mobile virtual network operators (MVNOs) in the next 10 years. The revised commitments were ultimately found sufficient to remove the identified competition concerns and the operation was conditionally approved by the Commission on 12 December 2012.