European Court annuls EC approval of VodafoneZiggo JV

The European Union General Court has annulled the European Commission’s approval of the merger of Vodafone and Ziggo in the Netherlands following an appeal by KPN.

The European Commission approved the creation of the VodafoneZiggo joint venture between Vodafone and Liberty Global’s Dutch unit in 2014 after Liberty Global agreed to divest premium film channel Film1 and agreed to terminate any agreement with broadcasters that restricted their ability to offer channels and content via OTT TV services, and not to conclude any such exclusive agreements in the future.

The divestment of Film1 was seen to eliminate the horizontal overlap between the parties’ activities in premium pay TV film channels and the concern that rivals might be prevented from having access to the leading premium film channel, while the EC accepted that the commitment regarding broadcast contracts would eliminate competition concerns related to OTT TV.

KPN contested the decision on the three grounds: first, that the EC had made an error regarding the possible vertical effects of the combination on the market for premium sports – as opposed to film – channels; second, that the EC had failed in its duty to state reasons for the lack of any analysis of this; and third, that it had made a “manifest error of assessment” of John Malone’s influence over Liberty Global and Discovery, which is not part of Liberty Global but which is active in the wholesale supply of channels in the Netherlands, including Eurosport.

The court accepted the second of the three grounds, namely that the EC had failed to provide an analysis to back up its assertion that the merger did not raise competition concerns in the market for premium sports channels. Among other things, it said that the EC’s defence that Liberty did not have market power in premium sports because Sport1 had an effective competitor in the shape of Fox Sports was not backed up by a market analysis.

“Even though the Commission puts forward numerous arguments in the context of the first plea in the present action in order to show that Liberty Global did not, owing to the presence of Fox Sports, have the ability to engage in a foreclosure strategy and would not have the incentive to do so, the fact remains that those arguments are not set out in the contested decision,” the court noted.

The court did not consider the other points raised by KPN. “Since the contested decision is vitiated by a failure to state reasons, there is no need to examine the first and third pleas in law, both of which relate to alleged manifest errors of assessment,” it said.

Liberty Global said it was confident that it would be able to obtain clearance of the merger, despite the setback.

“We note the EU General Court’s decision, which has no impact on the day-to-day operations of Vodafone Ziggo. The Court’s ruling does not question the substance of the Commission’s decision to approve the UPC and Ziggo merger, but rather annuls it on procedural grounds.  We will discuss practical steps with the European Commission over the coming weeks and we are confident of obtaining clearance in due course,” the company said.

“The Court’s decision has no bearing on the Commission’s subsequent clearance of the merger of Vodafone and Ziggo.”