Europe’s new antitrust stance


Financier Worldwide Magazine

May 2015 Issue

May 2015 Issue

Antitrust regulation is a serious and ever evolving consideration for companies. In the European Union over the last 12 months, there has been a number of important developments which reflect the region’s strengthening antitrust resolve.

In November 2014, the EU Council of Ministers formally adopted the European Commission’s Directive on antitrust damages. The implementation of the directive by the EU will standardise a number of different aspects of competition regulation across the EU. One of the key tenets of the Commission’s new directive is the creation of an acknowledgment that victims of anti-competitive behaviour have a right to compensation, although the directive does stipulate that compensation does not include punitive, multiple or over-compensatory damages. The Commission has gone to great lengths to ensure that a US style approach, one that is believed to encourage litigation, is avoided. The new directive, expected to be implemented over the next two years, is likely to generate a substantial increase in potential cases going forward.

The EU also published a Recommendation on Collective Redress, a further significant move in 2013. The EU Merger Regulation has been another important landmark which has helped to streamline the review procedure.

Equally significant has been the appointment of Europe’s new antitrust chief, former Danish finance minister Margrethe Vestager. Recent consolidation within the telecoms industry has presented the EU and Ms Vestager with a timely opportunity to reinforce the EU’s stance against price rises.

The implementation of the directive by the EU will standardise a number of different aspects of competition regulation across the EU.

The pace of telecoms consolidation has picked up considerably of late. In the UK, Hutchinson Whampoa, owner of mobile phone network Three, agreed to acquire rival network O2 for around $15bn, although the deal is still subject to regulatory consent. Meanwhile, phone giant BT has agreed to buy the EE network, itself an amalgamation of rival companies Orange and Vodafone, for around £12.5bn. Cross-platform communications heavyweight Sky and internet provider TalkTalk have announced their intention to enter the mobile space through MVNOs which will utilise O2’s network.

Away from the UK, significant telecoms transactions have been announced in Austria, the Republic of Ireland, Germany and Spain. However, Commissioner Vestager has warned that the recent spate of deals should not serve as a precursor to considerable price rises. Speaking to the Financial Times, Ms Vestager said: “I have one interest and that is to make sure that European consumers – citizens or businesses – can enjoy relatively innovative markets at affordable prices”. Equally she is keen to avoid a replication of the US telecommunications sector in which consumers have “little choice and higher prices than we do in Europe”. Seemingly, the Commission is likely to be resolutely against a further round of major industry consolidation, though antitrust assent has been given to similar deals in Germany and Ireland over the last 12 months.

Ms Vestager’s reaction to M&A in the European telecoms industry will be interesting to observe. Political pressure from notable European politicians, including German chancellor Angela Merkel and president of the European Commission Jean-Claude Juncker, will weigh heavily on the Commission’s future decisions. Both Ms Merkel and Mr Juncker are believed to support greater consolidation in the telecoms industry, given that curtailed competition can often lead to increased investment, more jobs and improved economic performance.

But telecoms will not be the only battleground for Ms Vestager. The Commissioner will also face important decisions over the future roles of powerhouse corporates such as Google and Gazprom. Ms Vestager, who took office in November, is leading the EU into an increasingly uncertain environment.

Ms Vestager met with Google’s executive chairman Eric Schmidt in early March, and though the reason for the meeting has not yet been disclosed, it is likely that the discussion was focused on Goolge’s ongoing issues with the EU. Unlike in the US, Google’s dominance in Europe is almost unchallenged; accordingly, the Commission has faced a great deal of pressure to break up its European operations. Investigations into Google’s search function are focused on the notion that the company’s dominance in the region is having a detrimental effect on competition across the EU. Indeed, regulators have previously pointed to the preferential treatment afforded to Google’s own products within its search function – services such as Google Maps and Gmail – as a sign that Google is repressing competition within the EU.

Should Google be found guilty of engaging in anticompetitive practices, the corporation could be fined the equivalent of 10 percent of its overall revenue, or billions of dollars, by the Commission. Equally, there are some within the European Parliament who believe that Google’s search unit should be spun off from the rest of the business. In November, the Parliament passed a resolution calling on Ms Vestager to consider the breakup of Google. With political pressures on both sides of the Atlantic increasing, 2015 will likely be an interesting year from a European regulatory standpoint on competition.

© Financier Worldwide


Richard Summerfield

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