Making Science

Top European court annuls decision to block 2016 merger of O2 and Three

David Murphy

The decision taken by Margrethe Vestager, the EU’s competition commissioner, to block a merger between O2 and Three on consumer interest grounds in 2016 has been annulled by the European General Court of the European Court of Justice, following an appeal by Three’s owner, CK Hutchison, against the decision. The decision comes just three weeks after O2 agreed to merge with Virgin Media in a 50:50 deal valuing the combined entity at £31.4bn.

In a statement announcing its decision, the Court said: “After clarifying the scope of the change made by the Merger Regulation, as well as the burden of proof and the standard of proof in relation to concentrations, the General Court finds that the Commission’s application of the assessment criteria of the so-called ‘unilateral’ (or ‘non coordinated’) effects – namely, the concept of ‘important competitive force’, the closeness of competition between Three and O2 and the quantitative analysis of the effects of the concentration on prices – is vitiated by several errors of law and of assessment.”

The court found unproven the European competition authority’s assertion that prices would have risen and competition would have been damaged as a result of the merger by reducing the number of UK mobile networks from four to three. At the time, Ms. Vestager described the aborted deal as “bad for UK consumers and bad for the UK mobile sector.”

CK Hutchison welcomed the reversal, saying in a statement: “In our appeal, we argued that the Commission’s approach to reviewing the proposed merger, and European telecoms mergers more broadly, was guided by a misconceived default view that European telecoms markets are better served by having a minimum of four Mobile Network Operators in each EU Member State.

“This approach ignores market realities, the clear evidence of successful market consolidation in Europe and across the world, as well as the very significant efficiencies in terms of increased investment, network improvements and consumer benefits that can be achieved from mobile mergers.”