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Vodafone Group and cable MSO Liberty Global have welcomed the conditional clearance by the European Commission of the two companies’ proposed merger of their operating businesses in the Netherlands to form a 50:50 joint venture.
Following its Phase I investigation, the European Commission concluded that the transaction, as modified by the commitments offered by the parties, does not raise any competition concerns.
The commitments entail a divestment of Vodafone Netherlands’ consumer fixed business, prior to closing of the proposed merger of the two companies’ Dutch operations. This represents a structural remedy offered by the parties to address any concerns regarding the overlap between the fixed telecoms and TV activities of Vodafone and Ziggo in the Netherlands. Having already received a number of expressions of interest, the parties will now proceed with the sale process.
Vodafone Netherlands’ consumer fixed business has a customer base of more than 120,000 with a high triple-play penetration rate. The divestment could potentially also include MVNO access subject to agreement on commercial terms.
The Commission had concerns that the proposed transaction would have eliminated the benefits brought to the Dutch telecoms market by Vodafone’s recent entry. Indeed, absent the merger, Vodafone had the potential to become a strong competitor in the provision of fixed line and fixed-mobile multiple play services to consumers. The divestment offered by Vodafone fully addresses these concerns, allowing the Commission to clear this telecoms merger in Phase I. In parallel, the Commission also rejected a request to refer the assessment of the transaction to the Dutch competition authority.
Commissioner in charge of competition policy Margrethe Vestager said: “The telecoms market is of strategic importance for our digital society. I am pleased that we have been able to approve the creation of the joint venture between Vodafone and Liberty Global in the Netherlands. The commitments offered by Vodafone ensure that Dutch consumers will continue to enjoy competitive prices and good choice.”
The Commission assessed the transaction against the backdrop of current access obligations in the Netherlands and had concerns that the merger, as initially notified, would have reduced competition in the markets for fixed multiple play services and for fixed-mobile multiple play services in the Netherlands. The merger would have removed Vodafone as a player with the potential to exercise a strong competitive constraint in these markets. This would likely have led to higher prices and reduced competition on the markets.
To address the Commission’s concerns, Vodafone offered to divest its retail consumer fixed line business in the Netherlands.
This will allow the purchaser of the divested assets to play a competitive role similar to that of Vodafone today. The divestment entirely removes the overlap between the activities of Vodafone and Liberty Global in the markets for the provision of fixed and fixed-mobile multiple play bundles and so addresses the identified competition concerns.
The Commission therefore concluded that the transaction, as modified by the commitments, would raise no competition concerns. The decision is conditional upon full compliance with the commitments.
The Commission cooperated closely with the Dutch competition authority in the assessment of the proposed transaction.
Rejection of referral request
In parallel, the Commission also rejected a request from the Netherlands to refer the merger to the Dutch competition authority for assessment under Dutch competition law.
Article 9(2)(a) allows the Commission to refer all or part of the assessment of a case to a Member State provided that the competitive effects are restricted to national markets. In deciding whether to refer a case to a Member State under Article 9(2)(a), the Commission particularly takes into account which authority is better placed to deal with the case. The Commission concluded that, given its extensive experience in assessing cases in the telecommunications sector, and the need to ensure consistency in the application of merger control rules in this sector across the European Economic Area (EEA), it was better placed to deal with this case. The Commission therefore rejected the request.