Common sense prevails as Europe hands over review of Virgin/O2 merger to the UK

As previously rumoured, the European Commission has decided to stay out of the Virgin Media merger with O2 UK on the grounds that it’s none of its business.

It was always a straightforward matter. The proposed merger has no competition implications whatsoever for the European Union, therefore the European Commission has no jurisdiction to approve or block it. The only complicating factor was that the UK doesn’t technically leave the EU until the start of next year, so it was possible that the EC would refuse to hand the case over until the last second.

Thankfully common sense prevailed and the eventually EC granted the request of UK Competition and Markets Authority to scrutinise the move. What is says about the efficiency and devotion to public service of the EC that it took over a month to come to the obvious conclusion is another matter, but at least it got there in the end.

“We welcome the European Commission’s decision to transfer the proposed deal between Virgin and O2 to the CMA for investigation,” said CMA Chief Exec Andrea Coscelli. “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.”

On that note, the companies have asked the CMA to get a move on, since they announced the merger in May. Specifically they want it to fast-track the process or proceeding to a more in-depth review, since that seems to be inevitable. The CMA seems to have accommodated this request, commencing its phase 1 investigation immediately and setting a deadline of 1 February for its completion.

The EC didn’t have much to say on the matter, inevitably making no direct reference to the circumstances that have rendered it irrelevant to the process. “The evidence gathered by the Commission confirmed that the proposed transaction threatens to affect competition in the telecommunications sector in the UK, where Telefonica and Liberty Global are currently two large market players,” said the announcement. “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.”

Josh Buckland, Managing Associate at law firm Linklaters, filled in the blanks for them: “The looming end of the transition period was likely to be the decisive factor in the Commission’s decision to refer this case to the CMA,” he said. “The key reason the Commission previously refused to refer the Three UK/O2 deal to the CMA was because it wanted to ensure a ‘coherent and consistent approach’ to assessing telecoms mergers throughout the EU.

“With the UK leaving the EU and the transition period shortly coming to an end, that rationale becomes redundant. The CMA winning jurisdiction over this major deal is certainly a sign of things to come with the authority having increased jurisdiction over mergers from the start of next year.”

While the EC deserves recognition for doing the right thing, its insistence on waiting five months before even starting to look at the deal is disappointing but not surprising. As the CMA has shown immediately, these things can be done much more quickly when you feel like it. There’s no need for the phase 2 investigation to take long either as, unless it can be proven that this deal harms competition significantly more than BT’s acquisition of EE, it should be approved.

UPDATE – 12:30 19/11/20 – Here’s the joint statement from Liberty Global and Telefónica: “Liberty Global and Telefónica note that the European Commission has completed its review of the proposed merger of the UK businesses in Phase 1, and has now referred this matter to the UK’s Competition and Markets Authority. The Parties have requested the CMA to start a ‘fast-track’ Phase 2 in the UK. We have been in close contact with the CMA and Ofcom throughout this process and are confident the transition will be seamless. Our view remains that this transaction is pro-competitive and we continue to expect closing around the middle of next year.”