EU court adviser suggests Hutchison ruling reversal, in potential blow for telcos

By Foo Yun Chee

LUXEMBOURG (Reuters) -In a potential setback for the telecoms industry, an adviser to Europe’s top court said a ruling by a lower tribunal annulling an EU antitrust veto of CK Hutchison Holdings Ltd’s bid for O2 UK should be dismissed and the case should be re-heard again.

Hutchison, owned by billionaire Li Ka-shing, in 2020 successfully challenged the European Commission’s veto of its planned 10.3 billion pound ($11.5 billion) purchase of O2 UK from Spain’s Telefonica at the General Court. The European Commission subsequently appealed.

The case is being closely watched by telecoms companies, which have long urged the EU competition enforcer to ease merger rules for the sector, especially for deals which reduce the number of players from four to three.

Advocate-General Juliane Kokott at the Court of the Justice of the European Union (CJEU) said in a non-binding opinion on Thursday that the General Court ruling should be dismissed and the case referred back to it to provide a fresh ruling on the dispute.

In 2020, the Court ruled that the EU watchdog had failed to prove that the merged company would harm competition or raise prices. Judges raised the bar for the Commission to block mergers that hinder competition, a ruling that regulators said imposes an extremely high burden of proof on them.

But Kokott said: “There is no justification for requiring a higher standard of proof in the case of concentrations giving rise to non-coordinated effects on oligopolistic markets than in the case of concentrations giving rise to ‘conglomerate’ or ‘collective’ type dominant positions.”

This could potentially be good news for the Commission, said Jens Peter Schmidt, a partner at law firm Noerr.

“The advocate general’s opinion is a setback for the General Court as it rejects the high burden of proof standard established by the General Court,” he said.

“If the CJEU follows the opinion, the Commission will (re-)gain considerable margin to decide complex mergers. Hence, it may get more difficult (again) to obtain clearances in consolidated industries,” Schmidt said.

Telecoms lobbying group ETNO underlined the importance of mergers in the sector.

“We trust that the final decision will establish the importance of consolidation in securing high-quality investment in 5G and fibre, while providing the legal certainty we urgently need,” a spokesperson said.

The CJEU, Europe’s top court, which usually follows most of such non-binding opinions, will decide on whether to dismiss the General Court ruling in the coming months.

The case is C-376/20 P Commission v CK Telecoms UK Investments.

($1 = 0.8922 pounds)

(Reporting by Foo Yun Chee, additional reporting by Bart Meijers in Amsterdam; Editing by Edwina Gibbs and Tomasz Janowski)