On 21 January 2021, the CMA published its Issues Statement in the phase 2 review of a proposed joint venture between Liberty Global plc and Telefónica S.A. which would see their UK mobile businesses Virgin Media/Virgin Mobile and O2 merged.
The CMA has jurisdiction to review the proposed joint venture following the European Commission’s decision in November to refer the case to the UK under article 9(3)(b) of the EC Merger Regulation. The CMA opened a Phase 1 investigation, and referred the joint venture for Phase 2 review on 22 December 2020.
The Issues Statement sets out the scope of the CMA’s inquiry and their initial theories on how the proposed joint venture could adversely affect competition.
At Phase 2, the CMA is charged with considering whether, on the balance of probabilities, there is a “relevant merger situation”, and whether that relevant merger situation can be expected to result in a substantial lessening of competition, or “SLC” within and market or markets in the UK for goods and services (section 36(1) Enterprise Act 2002).
The Issues Statement indicates that the CMA has particular concerns about the following vertical relationships between the parties:
- O2 supply of wholesale mobile services to companies running mobile virtual networks or “MVNOs”; and
- Virgin’s supply of wholesale leased lines to mobile network operators or “MNOs”.
The theories of harm set out in the Issues Statement indicate that the CMA is concerned about input foreclosure in relation to the supply of wholesale mobile services to MVNOs, and input foreclosure in relation to the supply of wholesale leased lines to MNOs.
The case looks set to revisit, refine, and develop some of the most significant questions in the application of merger law to mobile communications markets, building on the significant precedents in BT/EE and O2/Three. There is much to be debated in how best to achieve pro-competitive outcomes as the shift to 5G gathers pace, and now is the time for interested parties to make their views known to have maximum effect.
Interested parties can make submissions on the Issues Statement to the CMA until a 5pm deadline on 4 February 2021.
More details on the CMA’s inquiry can be found on the case page.
Please contact Tim Cowen if you have any questions relating to the above.