EU & Competition Law Update

EU & Competition Law Update June 2014 For further details on these articles and other No single market in telecoms? European Commission developments please assess Hutchinson-O2 Ireland merger on a national basis contact one of the On 28 May 2014, the European Commission conditionally approved the following authors or your acquisition of Telefonica (which operates under the “O2” brand) by Hutchinson usual Bryan Cave contact: 3G Ireland (which operates under the “3” brand). The merger is of note not only because the Commission has allowed the reduction of major competitors on the Robert Bell Partner - London Irish market from four to three but also due to the way the effect of the merger was assessed. Eckart Budelmann Partner – Hamburg The Commission (and the national Irish telecoms regulator who allegedly does Kathie Claret not support the proposed commitments) had several concerns regarding the Partner – Paris merger. These were: Anita Esslinger Partner – London & O2 Ireland is currently the second largest major network provider in Ireland Washington D.C. whilst Hutchinson is the fourth largest. Their merger is creating the joint Luigi Zumbo largest provider with 40% alongside Vodafone, whilst Eircom has around a Partner – Milan* 20% market share. Bryan Cave's That the removal of one of the major operators would further concentrate alerts/bulletins/briefings are available online. an already concentrated market with high barriers to entry. This Client Bulletin is published for the clients and friends of Bryan Cave LLP. Information contained herein is not to be considered as legal advice. This Client Bulletin may be construed as an advertisement or solicitation. Bryan Cave LLP. All Rights Reserved. *Affiliated Firm. Bryan Cave LLP America | Europe | Asia www.bryancave.com Given these concerns, the Commission referred the merger for a thorough Phase II investigation on 6 November 2013. This investigation has now concluded and has conditionally approved the merger on the grounds that certain commitments are fulfilled by Hutchinson. The two main commitments are: 1. Hutchinson must sell 30% of it’s capacity in voice and data capacity to allow the entry of two new mobile virtual network operators. To show it’s commitment to a competitive market, Hutchinson must approve a five year deal with at least one of these new competitors before the O2 merger may complete. Furthermore, the Commission must approve the new entrant to ensure that they will carry out the commitments and provide genuine competition to the merged entity and other operators as a new market entrant. At the time of writing, these new entrants are rumoured to be Liberty Global and the Carphone Warehouse Group. Interestingly for those companies that operate in the telecoms industry, the Commission was keen to allocate these new entrants a fixed capacity from the merged entity rather than a pay as you use approach depending how much voice and data traffic their subscribers had used. Presumably this is to give the entrants certainty and establish a sizeable competitor from the outset. 2. Hutchinson has committed to continue network sharing with Eircom on improved terms. This was especially important given that network sharing agreement sustains one of both O2’s and Hutchinson’s major rivals. This merger is of note for two reasons. Not only has the Commission allowed a merger that to many consumers will initially appear to be a concentration of an already concentrated market but also in the way the Commission has assessed the market for telecoms. The Commission acknowledges that any assessment of the merger and its effect can only be done on a national basis, even though the merger is of a size to trigger EU merger control thresholds. By doing so the Commission acknowledges the reality that there is no single market for telecoms. The existence of a national regulator for every Member State allocating capacity and creating differing regulation will mean that in effect the telecoms market is still 28 national markets. The other question is what the effect of these approved commitments will be on other Member State markets. For instance, O2 and 3 both operate on the UK market. Given their success in Ireland, will the two now look to merge and argue in front of the Commission that it must accept similar commitments to the ones it has agreed to in Ireland? Irish consumers may also be sceptical as to whether a merger of rivals approved on the basis of the creation of new smaller rivals will get them a fair deal. If anything, many facing mobile phone and other telecoms costs each month would argue that operators would be better broken up with forced divestments to create more operators rather then permitting two of four rivals to merge. The success of this merger and the effect of the commitments on the Irish market will no doubt be studied closely by regulators and operators alike including the proposed merger of Telefonica Germany and Royal KPN NV’s E-Plus. Bryan Cave LLP America | Europe | Asia www.bryancave.com French competition and consumer frauds authorities take aim at on-line Key Contacts travel agencies’ parity clauses and unfair conditions Facing pressure from certain hotel owners and consumers, France has taken action in response to certain marketing policies and practices that on-line travel agencies (OTAs) are imposing. Last week, the French Minister of Economy Arnaud de Montebourg, revealed that a lawsuit has been filed in February 2014 before the Paris Commercial Court against the OTA Booking.com for alleged abusive clauses in its standard contracts with hotels. The main clause in contention was the parity clause whereby the hotel undertakes to provide the OTA with prices equal or better than any prices charged directly by the hotel to consumers or to other OTAs. The Booking case, based largely on investigations carried out by the consumer frauds authority (DGCCRF), follows a similar action against Expedia, which was sued by the French Government in November 2013. Both the Booking.com and Expedia cases follow an earlier action when the Paris Commercial Court in 2011 ordered Expedia, Tripadvisor and Hotels.com to pay several thousands of euros in damages to the Union of Hotel Professionals (Syndicat National des Hôteliers, Restaurateurs, Cafetiers et Traiteurs) for deceptive and misleading commercial practices (leading consumers to believe that no room were available at hotels which refused to contract with these OTAs). The French Competition Authority (FCA) is closely looking at these practices as well. In July 2013, the Confederation of Independent Hotel Professionals (Confédération des professionnels indépendants de l’hôtellerie or CPIH) and the Hotel industry professionals union (Union des Métiers et des Industries de l’Hôtellerie or UMIH) complained to the FCA about the parity clause and other allegedly restrictive practices (including extremely large commissions) implemented by Booking.com, Expedia and HRS. They claimed that the latter appear to have violated: (i) Articles L. 420-1 of the French Commercial Code and Article 101.1 of the Treaty on the functioning of the European Union (TFEU) (the prohibition of anti-competitive agreements) by imposing parity clauses; and (ii) Articles L. 420-2 of the French Commercial Code and Article 102 of the TFEU (the prohibition against abuse of a dominant position) by abusing their collective dominant position to impose unfair conditions on the hotels with which they contract. On 16 September 2013, the French Commercial Practices Commission (Commission d’examen des pratiques commerciales or “CEPC”) published an advisory opinion to the effect that parity clauses imposing an automatic alignment of the conditions offered to competitors were against the law and should be considered null and void. It remains to be seen what the actual decision of the FCA will be. The FCA decision is expected by the end of 2014. This French case follows similar regulatory concerns and actions across the EU including the UK, as reported here: http://www.eu-competitionlaw.com/on-line-hotel-bookings-commitments-offered/ Bryan Cave LLP America | Europe | Asia www.bryancave.com MyFerrylink: the saga continues as French and English competition authorities reach differing views In 2012, the French company SeaFrance SAS (SeaFrance), formerly engaged in the maritime transport of passengers and freight transportation between France and England, was subject to a French liquidation procedure. After having examined several purchase offers, the Paris Commercial Court designated the Eurotunnel SA Group (Eurotunnel), a Franco-British company concessionaire of the Channel tunnel, as the buyer of SeaFrance’s assets (including 3 ferries) and in August of 2012, Eurotunnel created a cross-Channel ferry service called MyFerryLink. The French Competition Authority (FCA) was consulted as the acquisition could have an impact on competition in the passengers and freight France/England transport market. In its investigation, the FCA found that the operation could raise competition issues notably if Eurotunnel were to use its strong position on the market to offer tickets combining ferry and train to favour MyFerryLink over ferry only competitors. As a result, Eurotunnel undertook, for a period of five years, not to grant any discount on its train transportation offer tied to the customers’ use of its maritime offer and notably not to take into account MyFerrylink’s freight volume in the course of its annual train transportation tariff. Eurotunnel committed to enter into separate contracts for its maritime and train offers which were to be managed by distinct commercial teams. The FCA found that the commitments offered constituted sufficient remedies and cleared the acquisition of certain SeaFrance SAS assets by Eurotunnel (FCA’s decision 12DCC-154 dated November 7, 2012). However, the considerations and findings differed on the other side of the Channel. Indeed, in June 2013, the UK Competition Commission (now the Commission and Markets Authority or “CMA”) considered that allowing Eurotunnel to buy SeaFrance’s assets (3 ferries) and to run a ferry service would give it a majority of the local cross-Channel market and would lead to an increase of prices.

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