The European Commission has approved under the EU Merger Regulation the proposed acquisition of Telecity, a provider of data centre services headquartered in the United Kingdom by rival operator Equinix Inc. of the United States. The approval is conditional upon full implementation by Equinix of a number of commitments to ensure effective competition in data centre colocation markets in Amsterdam, London and Frankfurt.
Commissioner Margrethe Vestager, in charge of competition policy, said: "With the ever growing economic importance of 'cloud' services, it is crucial to maintain competition between data centres. The Commission is satisfied that the commitments offered by Equinix will ensure that companies continue to have a choice for hosting their data at competitive prices."
The transaction will bring together two of the largest providers of data centre colocation and related services in Amsterdam, London and Frankfurt. Colocation services providers rent out floor space and power in purpose-built data centre facilities to customers who install there their servers and data storage equipment. The Commission's investigation found that Equinix and Telecity are currently important players for colocation services in these three metropolitan areas where they frequently compete against each other for customer contracts.
The Commission had concerns that the transaction, as initially notified, would have eliminated an important competitor. This could have led to higher prices of colocation services in the Amsterdam, London and Frankfurt metropolitan areas.
The Commission's findings showed, in particular, that Equinix and Telecity are perceived as close competitors in Amsterdam, London and Frankfurt and that the remaining competitors would have been unlikely to replace the competitive pressure currently exercised by Telecity. In addition to this, new players would have faced significant difficulties to enter the market due to the high investment and deployment times needed to build new data centres of competitive size and characteristic. As a result, only a very limited number of large and established providers of highly-connected, retail data centres would have been left in the Amsterdam, London and Frankfurt areas.
To address the Commission's concerns, Equinix submitted commitments, offering to divest a number of data centres in Amsterdam, London and Frankfurt. The acquisition of these data centres by a new player or by an existing competitor would ensure that competition in colocation services is not diminished in these metropolitan areas. In particular, Equinix will divest two data centres in Amsterdam, five in London and another one in Frankfurt.
The remedies offered by the parties address the Commission's competition concerns. The decision is conditional upon full implementation of the commitments.
The transaction was notified to the Commission on 24 September 2015, following a referral from the competition authorities of Germany, the Netherlands and the United Kingdom, as provide for in Article 4(5) of the Merger Regulation. The companies offered a first set of commitments of 22 October 2015 and a revised set of commitments on 12 November 2015.
Equinix provides colocation services in 33 metropolitan areas worldwide.
Telecity operates data centres in 12 metropolitan areas in the European Economic Area (EEA) and Turkey.
The activities of Equinix and Telecity overlap in the four EEA metro areas Amsterdam, Frankfurt, London and Paris.
Merger 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 (35 working days if commitments are offered) to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).