EU court adviser throws spanner in the works for telcos consolidation

A top EU lawyer has undermined hopes of consolidation in the telcos sector after it backed a 2016 ruling that blocked a major £10.3bn merger.

It comes after Advocate-General for the EU Court of Justice (ECJ) Juliane Kokott said this morning that a previous ruling involving Telefónica’s O2 and CK Hutchison’s Three, which went against regulators, should “be set aside”.

She said the case should be put back to the General Court, the EU’s second-highest court, for a “fresh ruling”.

The General Court initially said in 2020 that the European Commission had not met the required legal standards to prove that the merger would lead to a rise in consumer prices or would undermine rivals.

Partner at City law firm White & Case Kasia Czapracka said this initial decision had “made quite a few CEOs optimistic about the prospects of consolidation in the telco industry”.

However, Kokott said in her non-binding advice today that there was “no justification for requiring a higher standard of proof” in this instance.

According to Kokott, the Court should not have required the Commission to show “strong probability” that the merger is anti-competitive.”

“We were expecting that the Commission would win on the standard of proof, but Kokott seems to be setting an even lower bar for the Commission than what we’ve seen in the more recent judgments of the General Court,” Czapracka told City A.M.

The case is of particular interest to telecoms firms, which have long called on the EU competition regulator to ease merger rules.

Earlier this month, Vodafone confirmed that it is in talks with Hong Kong-based CK Hutchison about a possible merger of its UK business with Three UK.

Vodafone said the potential deal would involve both companies combining their UK businesses, with Vodafone owning 51 per cent and CK Hutchison owning the remainder of the combined business.

However, Czapracka said it now means that the Commission is likely to go “back to their ‘normal’ toolbox in assessing mobile merger”, making the barriers higher.

Although the court is not technically bound to follow the advocate general’s opinion, it normally does.

A final judgment by the ECJ is expected in the first half of next year.