On 26 October 2017, the General Court (GC) annulled the Commission's 2014 decision approving the merger between cable companies UPC Nederland B.V. (UPC) and Ziggo N.V. (Ziggo) following an appeal brought by KPN. The GC found that the Commission had failed to properly assess the vertical effects of the merger on a potential market for premium pay TV sports channels. Although merger decisions are rarely annulled by the EU courts, this judgment marks the second time it has happened this year.
In the earlier judgment, the GC annulled the Commission decision to block a merger between parcel delivery companies UPS and TNT [see our April 2017 Newsletter].
On 10 October 2014, the Commission approved the merger subject to the divestment of premium pay TV channel Film1. During its review, the Commission found that there were only four premium pay TV channels available in the Netherlands at the time (Film1, HBO Nederland, Sport1 and Fox Sports). The Commission considered that the merger would raise horizontal and vertical concerns either on the premium pay TV channels market or on a possible sub-segment of that market limited to film channels. Post-merger, the combined entity would have owned the only two premium pay TV film channels (Film1 and HBO Nederland). As far as the sports channels were concerned, the Commission found that the merger would not raise horizontal concerns since Fox Sports was not subject to the transaction.
KPN appealed the decision, arguing that the Commission had failed to assess the possible vertical effects on the market for premium pay TV sports channels, whereas it should have done so. In KPN's view, since (i) the merger enabled Liberty Global to cover 90% of territory in the Netherlands and (ii) Sport1 is an essential input for downstream competitors, the merger was likely give rise to vertical concerns.
In addressing the argument, the GC first established that the Commission left the precise market definition open because it considered that regardless of any further sub-segmentation of 'the market for wholesale supply and acquisition of premium pay TV channels', the merger would not raise competition concerns.
In that regard, the GC noted, however, that the Commission is "required to set out the facts and the legal considerations having decisive importance in the context of the decision". In this case, the GC found that the Commission acknowledged that the market could be sub-segmented into of film or sports channels, but only assessed the vertical effects on one of the two identified sub-segments. According to the GC, where the Commission ultimately leaves the precise market definition open, it is required to explain "at least briefly" the reasons why the proposed transaction would not raise competition concerns, including by addressing potential vertical effects on the identified sub-segments of the market. Given that the Commission had failed to explain why the merger would not have raised vertical concerns in relation to premium pay TV sports channels, the GC annulled the decision.
Following the merger between UPC and Ziggo, the cable company subsequently merged with Vodafone's Dutch business (Vodafone Ziggo). As a result of the annulment, the Commission will have to reassess the merger following a new notification of the original concentration by Vodafone Ziggo. Under the EU Merger Regulation, the a new notification must factor in "intervening changes in market conditions".