Connected Research

Union policy research in the 21st century

T-Orange hopes for EU probe

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The owners of Orange and T-Mobile, France Telecom and Deutsche Telekom respectively, are reported this morning to be pressing for EU regulators, rather than ones in the UK, to examine the merger proposal of their UK businesses, on the basis that this would be a shorter enquiry than a UK investigation and that both companies have a bit to fear from a drawn-out investigation – including not least the loss of customers to rivals.

The Financial Times report (which is rather confused) says that EU authorities may investigate the merger on the grounds that two-thirds of the turnover of the parents are outside the UK. This is correct – but whether they will hear the case, or pass it back to the UK authorities, is a little more uncertain and this looks a little like company spin to me (although the source for the story (or one of the sources) appears to be ‘two unnamed competition lawyers’). If the merger proposal was between the parent companies, then the EU authorities would have clear competence to review the case. Indeed, they would be the only ones able to investigate the impact on competition of such a merger in the different EU member states in which both companies operate. But this is not the merger being proposed – what is being suggested is the merger of the UK subsidiaries only, in which case it is the UK authorities that have the primary competence since it concerns competition policy in the UK market alone. For this reason, the EU authorities may well decline to get involved.

My view here is that the operators are looking for a more sounder footing for their constant argument that a large operator with dominant market share is the case in other EU markets (see below, passim) – and that this provides grounds for the merger to be approved in the UK. In any case, appealing to EU authorities in the first instance looks a very defensive move to me, and I wonder whether the companies have had noises from the UK regulatory authorities either that their initial view of the proposal is a dim one and/or that such an argument is baseless as regards what happens in the UK market.

The operators might also have had sight of today’s Ofcom statement on the mobile sector which reports that the ‘continued promotion of sector competition’ should remain the ‘primary means of achieving good market outcomes’, and that the regulatory body should put ‘more focus on the enforcement of rules promoting competition’ – neither of which sends positive signals for the merger.

Neither the European Commission, the UK authorities, nor Deutsche Telekom or France Telecom, would comment on the story at the time of initial publication – providing further grounds for thinking that this looks like a fairly desperate move on the part of the companies directly involved.

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Written by Calvin

17/12/2009 at 12:22 pm

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