The EU's Court of Justice has overturned the European Commission's decision to block the merger of O2 UK and 3 UK in 2016. Following an appeal from 3 UK's parent company CK Hutchison, the court found the Commission did not prove sufficiently that the merger would have a negative effect on competition.
Hutchison welcomed the ruling in a statement, saying the Commission had been "guided by a misconceived default view" that the market must maintain four mobile network operators. "The Commission’s approach has unfortunately acted as a brake on, or in a number of cases prevented, vital industry consolidation in Europe which would have resulted in significant new investment, innovation and benefits for European consumers and industry."
Hutchison and O2's parent Telefonica were forced to abandon the merger plans after the Commission's decision. Telefonica has more recently announced plans to pursue a merger in the UK with Virgin Media, which has only a MVNO and not its own mobile network.
The Commission's decision was based on the expectation of reduced competition after the merger. One competitor would be eliminated, the new entity would be less aggressive and this would likely lead to higher prices.
The court found that merely reducing competitive pressure on the remaining players in the market was not enough to justify blocking the merger. The Commission did not show that 3 UK was a significant competitive force on the market, nor a strong player on the MVNO wholesale market, and its quantitative analysis did not point strongly enough to a big increase in prices.
The court also looked at the impact on the existing network-sharing agreements, between 3 UK and EE on the one hand, and O2 and Vodafone UK on the other. Again, it found the Commission failed to make its case that the network partners would end up in a weaker position, harming the development of mobile infrastructure in the UK.
CK Hutchison said the decision means the Commission "will need to fundamentally revisit its approach to merger reviews in this key sector". The company said it would study the court ruling before commenting further.
