Long-awaited decision upholds European Commission’s appeal, dashing hopes of a more lenient approach to telco mergers
On 13 July, the highest EU court—the European Court of Justice (ECJ)—handed down its much anticipated judgment in the Three UK/O2 mobile telco case, setting the direction of travel for merger control policy within the sector and beyond for years to come. The European Commission (EC) succeeded on all six grounds of its appeal (partly or in full), with the ECJ setting aside the General Court (GC)’s previous judgment in its entirety due to the “breadth, nature and scope of the errors made.”
Notably, the ECJ confirmed that “more likely than not” is the appropriate standard of proof for determining whether a merger would significantly impede effective competition, rejecting the GC’s use of “strong probability” as incompatible with the EU Merger Regulation.The ECJ went on to clarify the concept of “important competitive force,” explaining that it is not limited only to firms that “compete particularly aggressively” on price, but rather captures any firm with an outsized influence on the competitive process relative to its market shares or similar measures.
Similarly, the ECJ stated that the GC erred by insisting the EC should have demonstrated the merging parties were “particularly” close competitors, and endorsed the EC’s approach—consistent with its Horizontal Merger Guidelines—of considering closeness of competition as merely one of multiple factors which are relevant to determining whether a merger may result in non-coordinated effects. The ECJ also quashed any notion of a presumption that all mergers give rise to “standard” efficiencies, holding that this would effectively reverse the burden of proof in way that could reduce the effectiveness of merger control, and that instead the parties must demonstrate any merger-specific efficiencies (a notoriously difficult task with the EC).
The EC must undoubtedly be relieved by the ECJ’s findings, which effectively restore the status quo that prevailed prior to the GC’s 2020 judgment on this case. Conversely, deal‑makers and telco sector players who had been hoping a loss by the EC would unlock future European consolidations will be disappointed.