On August 14, 2013 the Higher Regional Court of Düsseldorf (“OLG Düsseldorf”) overturned the merger clearance decision issued by the German Federal Cartel Office (“Bundeskartellamt”) on December 15, 2011 for Liberty Global’s USD 4.1 bn acquisition of the cable network operator Kabel BW. Kabel BW is Germany’s third-largest cable company. Liberty Global already owned Unity Media, the country’s second largest cable company.
The Bundeskartellamt had only cleared the transaction after Liberty Global had made extensive concessions in order to preserve competition in the cable market. Nonetheless, the clearance was appealed by two competitors (Deutsche Telekom and Netcologne). The competitors asserted that the obligations (“Auflagen”) imposed on Liberty Global were insufficient to protect unhindered competition and to compensate for the increase of the market-dominating position resulting from the transaction. The concessions included, e.g.: removing encryption of digital free TV programs; renouncing the use of certain exclusivity clauses; granting special termination rights for large contracts and enabling competitors to bid on contracts with housing associations that make up for a considerable part of the sales.
The OLG Düsseldorf has now ruled that the obligations imposed by the Bundeskartellamt were not sufficient to compensate for the increase of the market-dominating position. The court expected that, without the concentration, Kabel BW might have extended its operations to the regions served by Unity Media and acted as a competitor of Unity Media. The Court further came to the conclusion that the geographic market was not to be defined as national market (as assumed by the Bundeskartellamt), but that it was mainly regional.
Leave to appeal the judgment of the OLG Düsseldorf to the Federal Court of Justice was refused. However, the judgment is not yet effective and the parties can appeal against denial of leave to appeal before the Federal Court of Justice itself within a period of one month.
If the judgment becomes binding, the case will be remitted back to the Bundeskartellamt for reexamination as to whether the merger should be cleared subject to stricter obligations. If the merger cannot be cleared, the concentration between Liberty Global and Kabel BW would have to be dissolved.