The UK competition watchdog is to ask Brussels for full control over the review of the proposed £31bn merger between Virgin Media and telecoms operator O2, kicking off what is expected to be a fierce battle over which authority gets the ultimate say on the transaction.
Brussels will receive a request from the UK’s Competition and Markets Authority, which will argue that the merger solely affects UK consumers.
“This important merger will only impact consumers in the UK and since any review will likely conclude after the transition period, it is only right for the CMA to request it back now,” the CMA told the Financial Times, referring to the December 31 deadline.
A person familiar with the discussions added: “This is a no-brainer.”
As part of the transition withdrawal agreement there are specific mechanisms for the CMA to take over mergers that affect solely the UK. But British regulators will argue that it would be strange for the EU to examine a deal that is only a UK matter after the transition period.
Ultimately, it is for Brussels to decide whether it wants to claim jurisdiction or not.
However, European officials are expected to want to retain jurisdiction over the mooted tie-up on the grounds that they have historically examined telecoms deals and that the UK is technically still part of the EU during the transition period, according to people familiar with the European Commission’s thinking.
The commission said: “This transaction has not been formally notified to the commission. If a transaction has an EU dimension, it is always up to the companies to notify it to the commission.”
The CMA tried to gain control of the approval process for Three’s proposed £10.25bn takeover of O2 in 2015 on the basis that the combination of the two mobile phone networks would only affect UK consumers.
That request was unsuccessful but the British watchdog put pressure on its EU counterpart by publicly calling on it to block the Three-O2 deal, arguing it would harm consumer interests. The deal was ultimately blocked by Brussels on competition grounds in 2016 — a decision that was annulled this year by the General Court.
The CMA is not the only local regulator to try to wrest control of a takeover decision from Brussels. German antitrust watchdog, the Bundeskartellamt, tried to take control of Vodafone’s acquisition of Unitymedia, a German cable network owned by Liberty Media, in 2018 but was unsuccessful.
Broadly speaking, Brussels has allowed the combination of mobile and cable assets in recent years but has taken a firmer line on mobile-to-mobile tie-ups. Deals in Spain, the Netherlands, Sweden, Germany and eastern Europe have been permitted although often with remedies that have strengthened the hand of smaller challengers.
In the UK, the CMA oversaw BT’s takeover of EE, the mobile phone network that was then owned by Deutsche Telekom and Orange, and approved the deal with no remedies in early 2016.
Executives from Liberty Global and Telefónica, the respective owners of Virgin Media and O2, have expressed confidence in recent weeks that the deal will be cleared by regulators as it does not reduce competition and is in line with previous European convergence tie-ups in telecoms. A person with direct knowledge of the talks said there is hope that clearance would be received by the end of the year if it is handled by Brussels.