Brussels, 30 January 2014
Mergers: Commission continues investigation of Telefónica Deutschland / E-Plus merger without referral to Germany
The European Commission has rejected a request from Germany to refer the planned acquisition of E-Plus by Telefónica Deutschland (Telefónica) to the German competition authority for assessment under German competition law. The Commission concluded that it was better placed to deal with the case because of its experience in assessing mergers in the mobile telecommunications sector and the need for a consistent application of the merger control rules in the EU. The Commission has until 14 May 2014 to take a final decision.
On 31 October 2013, Telefónica notified its plans to acquire sole control of E-Plus to the Commission.
On 20 November 2013, the German competition authority submitted a referral request under Article 9(2)(a) of the EU Merger Regulation. This provision allows the Commission to refer all or part of the assessment of a case to a Member State provided that the competitive effects are restricted to purely national or smaller than national markets.
The German competition authority submitted that the proposed transaction threatened to affect significantly competition in the retail mobile telephony market and in the market for wholesale access and call origination on mobile networks in Germany. It also submitted that it is the most appropriate authority to deal with the case.
In deciding whether to refer a case to a Member State under Article 9(2)(a) of the Merger Regulation, the Commission particularly takes into account which authority is better placed to deal with the case at hand. In light of the need to ensure consistency in the application of merger control rules in the mobile telecommunications sector and given the Commission's experience in assessing cases in this sector1, the Commission concluded that, in the present case, it was better placed to deal with the transaction. The Commission will nonetheless continue to cooperate closely with the German competition authority in the assessment of the proposed transaction.
The Commission will now continue its in-depth investigation into the proposed transaction, opened on 20 December 2013 (see IP/13/1304).
Companies and products
Telefónica and E-Plus are both mobile network operators and provide mobile telecommunications services to end consumers in Germany, as well as in related markets such as the wholesale of network access and call origination. Telefónica is a subsidiary of Telefónica S.A., head-quartered in Spain. E-Plus is a subsidiary of the Dutch operator Koninklijke KPN N.V. (KPN). In Germany, only two other MNOs are present in these markets, namely Deutsche Telekom and Vodafone. In addition to the four MNOs, there are MVNOs and service providers currently active in the market, including Freenet, 1&1 and Drillisch. MNOs furthermore cooperate with branded resellers, who distribute mobile communication services contracts on their behalf.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
There are currently three other on-going phase II merger investigations. The first one concerns the proposed creation of a joint venture between the chemicals companies INEOS and Solvay (see IP/13/1040). The deadline for this investigation is 4 April 2014. The second on-going investigation is the planned acquisition of Telefónica Ireland by Hutchison 3G UK (H3G). It concerns, similarly to the present case, the markets for retail mobile telephony and for wholesale access and call origination in Ireland (see IP/13/1048). The deadline for a final decision in this case is 24 April 2014. In the third on-going phase II case the Commission examines the proposed acquisition of the German cement company Cemex West by its rival Holcim of Switzerland (see IP/13/986). The deadline for this case is currently suspended.
Over the past few years the Commission has assessed merger cases in the mobile telecommunications sector in Austria (see IP/12/1361), the Netherlands (see IP/07/1238) and the United Kingdom (see IP/10/208, IP/12/938), and is currently assessing Hutchison 3G's proposed acquisition of O2 Ireland (see IP/13/1048).