The EU Court of Justice upheld Brussels’ decision to veto the merger of O2 and Three

The Court of Justice of the European Union (CJEU) annulled the judgment of its lower instance (the General Court) which granted freedom purchase of UK subsidiary Telefónica (O2) by Hutchinson 3G (now Three)which was vetoed by the European Commission in 2016.

In practice, the judgment returns the case to the General Court of the EU (TGUE), which has to decide again on the failed merger of the two telecommunications companies.

Brussels banned the sale of O2 to Hutchinson in 2016. operation estimated at around 13,000 million eurosgiven that the merger would leave just two mobile network operators in the UK and because of concerns that “UK mobile users they have fewer choices and will pay higher prices.

Four years later, the General Court rejected the prohibition of the operation and stated that the Commission had not proved that the said merger harm competition or raise pricesa court guarantee that could facilitate the merger of European telecommunications companies in the future.

The Executive Council of the Community filed an appeal against this judgment before the CJEU, which now annuls the judgment of the General Court and confirms the decision of the European Commission.

O2 and Three never merged. In fact, in 2020 Telefónica reached an agreement with Liberty Global to merge its UK subsidiary with Virgin Media, a transaction that closed in June 2021, while Hutchison has just agreed to merge Three with Vodafone.

In its explanation, the CJEU exposes up to six legal errors that led to the annulment of the verdict that opened the door to the transaction, among them that it “imposed (on the European Commission) a requirement for proof that has no basis in the concentration regulation”. It also questions that “it is possible to prove the existence of a significant obstacle to effective market competition only if the Commission proves that two cumulative requirements are present”, namely “the removal of significant competitive pressures that the parties to the merger exerted on each other” and “the reduction of competitive pressures on the remaining competitors”.

After developing each of them, and “considering the size, nature and extent of the errors” of general courtwhich “affect his entire reasoning”, annuls his sentence and returns the case for re-imposition.

In this regard, it is stated that “it is for the General Court to re-judge this dispute in its entirety, taking into account all the clarifications made by the Court of Justice on appeal.”