CK Telecoms UK Investments Ltd v European Commission.

JurisdictionEuropean Union
ECLIECLI:EU:T:2020:217
Docket NumberT-399/16
Date28 May 2020
Celex Number62016TJ0399
CourtGeneral Court (European Union)

JUDGMENT OF THE GENERAL COURT (First Chamber, Extended Composition)

28 May 2020 (*)

(Competition — Concentrations — Wireless telecommunications — Retail market for mobile telecommunication services — Market for wholesale access and call origination on public mobile networks — Acquisition of Telefónica Europe by Hutchison — Decision declaring the concentration incompatible with the internal market — Oligopolistic market — Significant impediment to effective competition — Non-coordinated effects — Burden of proof — Standard of proof — Market shares — Effects of the merger on prices — Quantitative analysis of upward pricing pressure — Close competitors — Important competitive constraint — Important competitive force — Network-sharing agreements — Level of concentration — Herfindahl-Hirschmann Index — Error of law — Error of assessment)

In Case T‑399/16,

CK Telecoms UK Investments Ltd, established in London (United Kingdom), represented by T. Wessely, O. Brouwer, lawyers, A. Woods, M. Davis, I. Ditchfield, S. Prichard, J. Aitken, R. Romney, M. Dickson and K. Asakura, Solicitors, and B. Kennelly QC,

applicant,

v

European Commission, represented by T. Christoforou, G. Conte, M. Farley, J. Szczodrowski and C. Urraca Caviedes, acting as Agents,

defendant,

supported by

United Kingdom of Great Britain and Northern Ireland, represented by S. Jones, S. Brandon, S. Huijts, C. Blairs, M. Rahman, J. McInnes, M. Brown, B. Potterill, S. Cardell, C. Brannigan, S. Munday, C. Short and A. Dadley, Agents, and R. Williams and J. Morrison, Barristers,

and by

EE Ltd, established in Hatfield (United Kingdom), represented by A. Lindsay, Barrister, C. Chapman and J. Hulsmann, Solicitors,

interveners,

APPLICATION under Article 263 TFEU for the annulment of Commission Decision C(2016) 2796 final of 11 May 2016 declaring incompatible with the internal market the concentration resulting from the acquisition of Telefónica Europe Plc by Hutchison 3G UK Investments Ltd (Case COMP/M.7612 — Hutchison 3G UK/Telefónica UK),

THE GENERAL COURT (First Chamber, Extended Composition),

composed of M. van der Woude, President, E. Buttigieg, P. Nihoul, J. Svenningsen and U. Öberg (Rapporteur), Judges,

Registrar: S. Bukšek Tomac, Administrator,

having regard to the written part of the procedure and further to the hearing on 2 and 3 May 2019,

gives the following

Judgment

I. Background to the dispute

1 On 11 September 2015, the European Commission received notification, in accordance with Article 4 of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (OJ 2004 L 24, p. 1), of a proposed concentration whereby CK Hutchison Holdings Ltd was to acquire, through the intermediary of its indirect subsidiary Hutchison 3G UK Investments Ltd, which is now the applicant, CK Telecoms UK Investments Ltd, in the manner described in Article 3(1)(b) of the abovementioned regulation, sole control over Telefónica Europe Plc (‘O2’).

2 At the time of the facts which gave rise to this case, there were, on the retail market for mobile telecommunication services in the United Kingdom (‘the retail market’), four mobile network operators: EE Ltd, which is a subsidiary of BT Group plc, acquired by BT Group plc in 2016 (together ‘BT/EE’), O2, Vodafone and Hutchison 3G UK Ltd (‘Three’), an indirect subsidiary of CK Hutchison Holdings, whose market shares, in terms of subscribers, were approximately [between 30 and 40%], [between 20 and 30%], [between 10 and 20%], and [between 10 and 20%] respectively. The concentration which is the subject of the present dispute (‘the operation’, ‘the concentration’ or ‘the transaction’) would have enabled the entity resulting from the concentration, a merger of Three and O2 (together ‘the parties to the concentration’) to account for approximately [between 30 and 40%] of the retail market and thus to become the main player on that market, ahead of the former legacy operator BT/EE and Vodafone.

3 In addition to these mobile network operators, the retail market also included several mobile virtual network operators, such as Tesco Mobile, Virgin Mobile and TalkTalk, which do not own the networks they use in order to provide mobile services to United Kingdom consumers and which had therefore concluded agreements with one or other mobile network operator so as to have access to its network at wholesale prices. Tesco Mobile is owned in equal shares by Tesco and O2. The retail market also included branded resellers (together with the mobile virtual network operators referred to as ‘non-MNOs’) and independent retailers, such as Dixons.

4 One particular characteristic of the retail market was that BT/EE and Three, on the one hand, and Vodafone and O2, on the other, had shared their networks through network-sharing agreements. This has enabled BT/EE and Three (under the MBNL joint venture, ‘MBNL’) and Vodafone and O2 (under the so-called ‘Beacon’ agreements, ‘Beacon’), to share the costs of rolling out their respective networks while continuing to compete on retail trade.

5 On 2 October 2015, the United Kingdom requested, through the intermediary of its national competition authority, the Competition and Markets Authority, that the concentration be referred to it, pursuant to Article 9(2)(a) of Regulation No 139/2004. In that request, the United Kingdom expressed the view that the concentration threatened significantly to impede competition on the retail market and on the market for wholesale access and call origination on public mobile networks in the United Kingdom (‘the wholesale market’). The United Kingdom also considered that it was the best placed to deal with the concentration.

6 On 4 December 2015, the Commission adopted Decision C(2015) 8534 final concerning Article 9 of Regulation No 139/2004 in Case M.7612 Hutchison 3G UK/Telefónica UK, by which it rejected that referral request. In that decision, it considered in particular that it was necessary for it to ensure a coherent and consistent approach when assessing mergers in the telecommunications sector in various Member States and it also referred to the considerable expertise it had gained in the assessment of concentrations in the European mobile telecommunications markets.

7 After the phase I investigation, the Commission concluded that the transaction raised serious doubts as to its compatibility with the internal market and on 30 October 2015 it adopted a decision to initiate the procedure under Article 6(1)(c) of Regulation No 139/2004.

8 On 4 February 2016, on the basis of the phase II investigation, which supplemented the findings of the phase I market investigation, the Commission issued a Statement of Objections. The applicant submitted its written observations on the Statement of Objections on 26 February 2016.

9 In order to address the competition concerns identified in the Statement of Objections, the applicant submitted a first set of commitments on 2 March 2016

10 At the applicant’s request, an oral hearing was held on 7 March 2016.

11 On 15 March 2016, the applicant submitted revised commitments (‘the Second Commitments’). On 18 March 2016 the Commission launched a market test of the Second Commitments, in which it consulted, first, current and potential providers of mobile telecommunication services in the United Kingdom, providers of infrastructure services in the mobile telecommunications sector, and the associations MVNO Europe and iMVNOx and, second, national telecommunications regulators, including the United Kingdom telecommunications regulatory authority (‘Ofcom’). In addition, the national competition authorities of the United Kingdom, Germany, and the Netherlands provided their views on the Second Commitments.

12 On 17 and 23 March 2016, the Commission sent the applicant letters in which it pointed to additional evidence in its file in support of the preliminary findings of the Statement of Objections. On 29 March 2016 and 4 April 2016 the applicant submitted written observations on the letters of facts of 17 and 23 March 2016 respectively.

13 On 6 April 2016, following the market test, the applicant submitted a further revised set of commitments

14 The Advisory Committee on Concentrations discussed the draft of the Commission’s decision on 27 April 2016 and issued a favourable opinion.

15 On 11 May 2016, the Commission adopted Decision C(2016) 2796 final declaring the concentration incompatible with the internal market (Case COMP/M.7612 — Hutchison 3G UK/Telefónica UK) (‘the contested decision’).

16 A summary of the contested decision was published on 29 September 2016 in the Official Journal of the European Union (OJ 2016 C 357, p. 15).

II. Contested decision

17 In the contested decision, the Commission defined the two relevant markets: the retail market and the wholesale market.

18 The Commission developed three theories of harm, all of which were based on the existence of ‘non-coordinated’ effects on an oligopolistic market.

19 The first two theories of harm relate to the retail market, while the third relates to the wholesale market.

20 More specifically, the first theory of harm relates to the existence of non-coordinated effects on the retail market arising from the elimination of important competitive constraints. In essence, according to the Commission, the sharp reduction in competition which would have resulted from the operation would probably have led to an increase in prices for mobile telephony services in the United Kingdom and a restriction of choice for consumers.

21 According to the second theory of harm, which relates to the existence of non-coordinated effects on the retail market relating to network sharing, the transaction would also be likely to have a negative influence on the quality of services for United Kingdom consumers, hindering the development of mobile network infrastructure in the United Kingdom.

22 The third theory of harm relates to the...

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