Following a request from the UK’s Competition and Markets Authority (CMA), the European Commission has referred the proposed merger of Virgin Media and Virgin Mobile with O2 to the CMA for investigation.
Following the announcement of the deal in May 2020, the CMA publicly indicated that it would make a formal request to the European Commission (EC) to review the proposed merger, given its potential impact on competition in several retail and wholesale telecommunication markets in the UK.
The CMA made its formal request for the case to be transferred on October 8th 2020, shortly after the opening of the EC’s investigation. That request has been accepted by the EC and the case will be transferred for the CMA’s formal investigation to begin immediately.
“We welcome the European Commission’s decision to transfer the proposed deal between Virgin and O2 to the CMA for investigation,” stated Andrea Coscelli, Chief Executive at the CMA. “These are incredibly important UK markets, that continue to evolve, and the deal needs to be carefully reviewed to make sure that consumers are protected.”
“We have worked closely with the European Commission so far and we will build on the work that has already been carried out to make sure that the case can be investigated as quickly and efficiently as possible.”
Virgin and O2 have asked the CMA to move quickly to the in-depth Phase 2 stage of its review through a ‘fast-track’ process.
In most merger cases, a full Phase 1 investigation is needed to determine whether a deal can be cleared or whether further scrutiny is required.
However, merging companies can ask for the CMA’s probe to be moved more quickly to Phase 2 where it is clear from an early stage that the deal requires an in-depth investigation.
The CMA expects to accept this request unless it receives any valid objections to the use of the fast-track process.
The CMA is now inviting views by November 26th on how the merger could affect competition, and on the companies’ request for a fast track process. Further opportunities to submit views will also be provided during the Phase 2 investigation.
On September 30th 2020, O2 owner Telefónica and Virgin Media parent company Liberty Global notified the proposed transaction to the EC. In its October 8th request, the CMA put forward competition concerns in a number of telecommunications markets in the UK, namely the markets for retail and wholesale mobile services, and the market for leased lines. In addition, the CMA claimed that it would be well placed to review the transaction in view of the upcoming expiry of the transition period.
The evidence gathered by the EC confirmed that the proposed transaction threatens to affect competition in the telecommunications sector in the UK, where Telefónica and Liberty Global are currently two large market players.
Based on an overall assessment, the Commission decided to refer the proposed transaction to the CMA which will deal with the case under UK national law.
As a result of the close cooperation between the CMA and the Commission during the procedure, the CMA is already well informed on the elements of this case and the investigation will continue uninterrupted.
According to Article 9(2)(a) of the EU Merger Regulation, the Commission may refer a transaction notified to it to the competent national competition authority (NCA), when a Member State requests such a referral because a transaction would threaten to significantly affect competition in a market within that Member State and that market presents all the characteristics of a distinct market.
According to the Withdrawal Agreement, the transition period will expire on December 31st 2020 and the UK will no longer be part of the internal market.