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Qualcomm’s Acquisition of NXP Receives Antitrust Clearance by the European Commission, Subject to Commitments

By Kletia Noti

Introduction

On 28 April 2017, the European Commission (“Commission”) received, pursuant to the EU Merger Regulation[1], notification of a proposed concentration involving the acquisition, within the meaning of Article 3(1)(b) of the EU Merger Regulation, of NXP Semiconductors N.V., a Dutch global semiconductor manufacturer headquartered in Eindhoven, Netherlands, by Qualcomm Incorporated, a United States company world leader in 3G, 4G and next-generation wireless technologies, through its indirect wholly owned subsidiary Qualcomm River Holdings B.V.[2].

On 9 June 2017, the Commission announced that it was launching an in-depth market investigation (Phase II review). The investigation rests, at least in part, on the basis of conglomerate theories of harm (as will be better seen infra) that resulted from the Commission’s initial market investigation during Phase I.[3] To do away with the Commission’s concerns, Qualcomm submitted a series of commitments (see infra).

On 18 January 2018,[4] the Commission announced that it would clear the proposed transaction, as modified by the commitments, on the ground that it would no longer raise competition concerns[5]. The Commission’s clearance decision is conditional upon Qualcomm’s full compliance with the commitments.

At present, Qualcomm has already received approval from eight of nine required global regulators to finalize the acquisition of NXP. The only exception is China, where clearance is currently pending,[6] amid USA-China trade tensions[7]. Should all the regulatory approvals not be in place by the deadline of 25 July, 2018, Qualcomm’s holding company, Qualcomm River Holdings B.V., will pay NXP a termination fee[8].

 

A background: the companies

Qualcomm Incorporated (Qualcomm) is engaged in the development and commercialization of a digital communication technology called code division multiple access (CDMA). Qualcomm is mostly known for mainly developing and supplying baseband chipsets for smartphones, i.e. chips that allow smartphones to connect to cellular networks.

Qualcomm is divided into two main segments: (i) Qualcomm CDMA Technologies (‘QCT’) and; (ii) Qualcomm Technology Licensing (‘QTL’). QCT is a supplier of integrated circuits and system software based on CDMA, Orthogonal frequency-division multiple access (OFDMA), one of the key elements of the LTE standard, and other technologies for use in voice and data communications, networking, application processing, multimedia and global positioning system products. QTL grants licenses or otherwise provides rights to use portions of Qualcomm Incorporated’s intellectual property portfolio, which, among other rights, includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products[9].

NXP Semiconductors N.V. (NXP) is active in the manufacturing and sale of semiconductors, in particular integrated circuits (‘ICs’) and single unit semiconductors. NXP sells broadly two categories of products, standard products and high performance mixed signal (“HPMS”) devices. NXP’s HPMS business includes application-specific semiconductors and system solutions for: (i) Automotive; (ii) Secure Identification Solutions; (iii) Secure Connected Devices; and (iv) Secure Interfaces and Power[10]. The semiconductors supplied by NXP, including near-field communication (NFC) and secure element (SE) chips for smartphones, are chips enabling short-range connectivity, which are used in particular for secure payment transactions on smartphones.

NXP has also developed and owns MIFARE, a leading technology used as a ticketing/fare collection platform by several transport authorities in the European Economic Area (EEA).

On October 2016, Qualcomm and NXP announced a definitive agreement, unanimously approved by the boards of directors of both companies, under which Qualcomm would acquire NXP by way of a share purchase acquisition carried out through Qualcomm River Holdings B.V.[11] On May 11, 2018, Qualcomm Incorporated announced that Qualcomm River Holdings B.V. has extended the offering period of its previously announced cash tender offer to purchase all of the outstanding common shares of NXP Semiconductors N.V. (NASDAQ: NXPI) until May 25, 2018.[12]

 

The Commission’s concerns and the in-depth investigation

Following its initial market investigation, the Commission had several concerns about semiconductors used in mobile devices and the automotive industry.

Concerns in the markets for chipsets used in mobile devices

Conglomerate effects’ theory of harm

More specifically, the Commission’s market investigation showed that, since the merged entity would hold strong market positions within both baseband chipsets (mainly developed and supplied by Qualcomm) and near field communication (NFC)/secure element (SE) chips (supplied by NXP), it would have had the ability and incentive to exclude Qualcomm’s and NXP’s rival suppliers from the markets (through practices such as bundling or tying).

Concerns in the merged entity’s licencing practices related to parties’ significant intellectual property portfolios

Since the merged entity would have combined the two undertakings’ significant intellectual property (IP) portfolios, in particular with respect to the NFC technology, the Commission was additionally concerned that, post-merger, the Commission would have had the ability and incentive to modify NXP’s current IP licensing practices, in relation to NFC’s technology, including by means of bundling the NFC IP to Qualcomm’s patent portfolio.

According to the Commission, this could have caused the merged entity to avail itself of a stronger buying power vis-à-vis customers than absent the transaction. The Commission opined that this would have led to anticompetitive effects in the relevant market, including by means of higher royalties for the NCF patent licences and/or competitors’ foreclosure.

 

Concerns in the markets for semiconductors used in the automotive sector

An additional Commission concern was that the merged entity resulting from the proposed acquisition would have removed competition between in the markets for semiconductors used in the automotive sector, and, more specifically, the emerging Vehicle-to-Everything (“V2X”) technology, which will play an important role in the future development of “connected cars” (through which cars can “talk” to other cars).

Phase II investigation

On 21 June 2017, the Commission launched its Phase II market test.

The Commission’s in-depth market investigation during Phase II of the merger review confirmed some of its initial concerns.

Concerns related to MIFARE

One of the Commission’s concerns was that the merged entity would have had the ability and incentive to make it more difficult for other suppliers to access NXP’s MIFARE technology (a contactless security technology platform used as a ticketing/fare collection platform by EEA transport authorities) by possibly raising licencing royalties and/or refusing to licence such technology, thus resulting in potential anticompetitive foreclosure effects for competitors.

Concerns related to interoperability

In addition, the Commission also noted that, due to Qualcomm’s strong position in the supply of baseband chipsets and NPX’s strong position in the supply of near field communication (NFC)/SE chips, the merged entity would have had the incentive and ability to reduce interoperability of such chipsets with those of rival supplies. The Commission feared that this, in turn, could have resulted in competitors’ foreclosure.

Concern related to the merged-entity’s licencing practices

Finally, the in-depth investigation also confirmed concerns that the merged entity would have had the ability and incentive to modify NXP’s current IP licensing practices for NFC technology, which could have led the merged entity to charge significantly higher royalties.

By contrast, the Commission’s initial concerns concerning the markets for semiconductors in the automotive sector were not confirmed.

 

Qualcomm’s commitments

Qualcomm offered the following remedies[13] in order to address the Commission’s concerns[14]:

Concerns related to MIFARE

As seen above, some of the Commission concerns related to possible rivals’ foreclosure effects through actual or constructive refusal to supply of the MIFARE technology.

To address the Commission’s concerns, Qualcomm committed “from the Closing Date and for a period of eight (8) years thereafter, upon written request by any Third Party, to grant any such Third Party a nonexclusive MIFARE License also involving the use of MIFARE Trademarks on commercial terms (including with regard to the fee, scope and duration of the license) which are at least as advantageous as those offered by NXP in existing MIFARE Licenses on the Effective Date”.

Qualcomm also committed “to offer to MIFARE Licensees, on commercially reasonable and nondiscriminatory terms, the extension of the MIFARE Licenses for MIFARE Implementation in an Integrated Secure Element.”

Concerns related to interoperability

A second element of the Commission’s concerns related to the merged entity’s ability and incentive to degrade interoperability of Qualcomm’s baseband chipsets and NPX’s products.

In this respect, Qualcomm also undertook “from the Closing Date, on a worldwide basis and for a period of eight (8) years thereafter to ensure the same level of Interoperability, including, but not limited to, functionality and performance, between: (a) Qualcomm Baseband Chipsets and NXP Products, and the Third Party’s NFC Chips, Secure Element Chips, Integrated Secure Element or NFC/SE or Secure Element Technology; and (b) NXP Products and the Third Party’s Baseband Chipset or Applications Processor as will exist at any point in time between Qualcomm’s Baseband Chipsets and NXP’s Products, unless Qualcomm demonstrates to the Commission by means of a reasoned and documented submission to the Trustee that there are technical characteristics of the Third Party’s products that do not allow Qualcomm to achieve the same level of Interoperability, such as generational differences between Qualcomm’s and the Third Party’s respective chips”.

Concern related to the merged-entity’s licencing practices

The market analysis confirmed the Commission’s initial competition concerns with respect to the licensing of NXP’s NFC patents as a result of the transaction, as seen supra.

Qualcomm committed to not acquire NXP’s NFC standard-essential patents (SEPs) as well as certain of NXP’s NFC non SEPs.  NXP undertook to transfer the abovementioned patents that Qualcomm commits not to acquire to a third party, which would be under an obligation to grant a worldwide royalty free licence to such patents for a period of three years. At the same time, with respect to some of NXP’s NFC non-SEPs that Qualcomm would have acquired, in order to do away with the Commission’s concerns, Qualcomm committed, for as long as the merged entity would own these patents, not to enforce rights with respect to these patents vis-à-vis other parties and to grant a worldwide royalty licence with respect to these parties.

 

Clearance decision

On 18 January 2018,[15] the Commission rendered public its decision to clear the proposed transaction, as modified by the commitments submitted by Qualcomm, on the grounds that such commitments would suffice to do away with its competition concerns.[16]

The Commission’s clearance decision is rendered conditional upon Qualcomm’s full compliance with the commitments. A Monitoring Trustee, namely one or more natural or legal person(s) who is/are approved by the Commission and appointed by Qualcomm, has the duty to monitor Qualcomm’s compliance with the obligations attached to this Decision.[17]

Pending sign-off from China’s regulator, the transaction remains incomplete. At Qualcomm, hopes remain high that the situation will be finalized soon.

[1] Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EU Merger Regulation) (Text with EEA relevance) Official Journal L 024 , 29/01/2004 P. 0001 – 0022. Under Article 4(1), It is mandatory to notify concentrations with an EU dimension to the European Commission for clearance.

[2] See prior notification of a concentration (Case M.8306 — Qualcomm/NXP Semiconductors), OJ C 143, 6.5.2017, p. 6–6.

[3] After notification, the Commission has 25 working days to analyze the deal during the Phase I investigation. If there are competition concerns, companies can offer remedies, which extends the phase I deadline by 10 working days. At the end of a phase I investigation: (a) the merger is cleared, either unconditionally or subject to accepted remedies; or

(b) the merger still raises competition concerns and the Commission opens a Phase II in-depth investigation. If Phase II is opened, the Commission has 90 further working days to examine the concentration. This period can be extended by 15 working days when the notifying parties offer commitments. With the parties’ consent, it can be extended by up to 20 working days.

[4]Brussels, 18 January 2018, press release, “Mergers: Commission approves Qualcomm’s acquisition of NXP, subject to conditions”, available at: http://europa.eu/rapid/press-release_IP-18-347_en.htm

[5]Under Article 6(2) EUMR, “Where the Commission finds that, following modification by the undertakings concerned, a notified concentration no longer raises serious doubts within the meaning of paragraph 1(c), it shall declare the concentration compatible with the common market pursuant to paragraph 1(b). The Commission may attach to its decision under paragraph 1(b) conditions and obligations intended to ensure that the undertakings concerned comply with the commitments they have entered into vis-à-vis the Commission with a view to rendering the concentration compatible with the common market.”

[6]On request of China’s commerce ministry (MOFCOM), just days before the regulator’s April 17, 2018 deadline to decide on whether to clear the transaction expired, Qualcomm withdrew its earlier application to MOFCOM on April 14, 2018, and, in concomitance with such withdrawal, it re-filed a new application to obtain clearance of the proposed transaction. See M.Miller, April 16, 2018, Qualcomm to refile China antitrust application for $44 billion NXP takeover: sources, available at: https://www.reuters.com/article/us-china-qualcomm-antitrust/qualcomm-to-refile-china-antitrust-application-for-44-billion-nxp-takeover-sources and Qualcomm Press Release, Qualcomm and NXP Agree, at MOFCOM Request, to Withdraw and Refile Application for Chinese Regulatory Approval, April 16, 2018: https://www.qualcomm.com/news/releases/2018/04/19/qualcomm-and-nxp-agree-mofcom-request-withdraw-and-refile-application.

[7] A. Barry, “Stock Selloff Hurts Arbitrage Traders”, 3 May 2018, https://www.barrons.com/articles/stock-selloff-hurts-arbitrage-traders-1525369030

[8] Qualcomm Press Release, Qualcomm and NXP Agree, at MOFCOM Request, to Withdraw and Refile Application for Chinese Regulatory Approval, April 16, 2018: https://www.qualcomm.com/news/releases/2018/04/19/qualcomm-and-nxp-agree-mofcom-request-withdraw-and-refile-application.

[9] Id.

[10] Id.

[11] Qualcomm Press Release, Qualcomm to acquire NXP, 27 October 2016, available at:   https://www.qualcomm.com/news/releases/2016/10/27/qualcomm-acquire-nxp.

[12] Qualcomm Press Release, Qualcomm extends cash tender offer for all outstanding shares of NXP, May 11, 2018, available at: https://www.qualcomm.com/news/releases/2018/05/11/qualcomm-extends-cash-tender-offer-all-outstanding-shares-nxp

[13] See, for a non-confidential interim text of the commitments, Case M.8306 – QUALCOMM / NXP SEMICONDUCTORS, Commitments to the European Commission, published on 24 January 2018, available at: http://ec.europa.eu/competition/mergers/cases/additional_data/m8306_3395_3.pdf

[14]Brussels, 18 January 2018, press release, “Mergers: Commission approves Qualcomm’s acquisition of NXP, subject to conditions”, available at: http://europa.eu/rapid/press-release_IP-18-347_en.htm

[15]See above, foonote 4.

[16] Under Article 6(2) EUMR, “Where the Commission finds that, following modification by the undertakings concerned, a notified concentration no longer raises serious doubts within the meaning of paragraph 1(c), it shall declare the concentration compatible with the common market pursuant to paragraph 1(b). The Commission may attach to its decision under paragraph 1(b) conditions and obligations intended to ensure that the undertakings concerned comply with the commitments they have entered into vis-à-vis the Commission with a view to rendering the concentration compatible with the common market.”

[17] http://ec.europa.eu/competition/mergers/cases/additional_data/m8306_3444_3.pdf

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The Italian Competition Authority Authorizes the Acquisition of Two Data Center and Cloud Computing Services Companies

By Valerio Cosimo Romano

With the decision No. 46741, published on 2 October 2017, the Italian Competition Authority (“ICA”) authorized the acquisition of Infracom Italia S.p.A. (“Infracom”) and MC-Link S.p.A. (“MC-Link”) by F2i SGR S.p.A. (“F2i”).

 

The Parties

F2i is an asset management company, owned by institutional investors, which controls two closed-end investment funds and mainly invests in Italian infrastructures. Infracom is a company which provides (i) data center and cloud computing services, which are part of the broader ICT market; (ii) telecommunication services, both wholesale and retail; and (iii) enterprise resource planning services. MC-Link is a publicly listed company which mainly offers data center services (inter alia housing, co-location and server renting).

The transaction was structured as follows: 2i Fiber, a newly incorporated company whose 80% of shares are owned by one of two of F2i’s funds, acquired the exclusive control of Infracom (and, consequently, indirect control of its subsidiaries Softher S.à.r.l. and Multilink Friuli S.r.l., and 89% of MC-Link), and of MC-Link.

 

Relevant markets

The transaction involves the information and communications technology (“ICT”) sector. Coherently with the European Commission’s precedents, the Authority determined that the ICT services market shall be considered individually, without further segmentation. The market separation in smaller divisions, for example co-location provided by data centers, would be unjustified, given the differentiation within the ICT offer itself. Indeed, the ICT offer is usually tailored upon very specific needs of the market base and therefore may change and spread to other markets very easily. The ICA specified that even by ‘unbundling’ the relevant market in smaller segments, there would be no dominance by the new entity.

The ICA further added that, under a geographical point of view, data center and cloud computing services have specific economic characteristics confined to a local market, generally defined by a metropolitan city, given that the client base tends to demand these services within 50 kilometers from its activity. This is due to the fact customers need a signal latency not exceeding certain thresholds, and this is why companies operating in this sector tend to position their facilities in the proximity of urban areas.

According to the ICA, the transaction also involves marginal effects on two other markets: i) wholesale access to fixed public telephone network services; and ii) retail telecommunication on fixed network services, where Infracom owns marginal quotas. However, such markets are generally characterized by the presence of an incumbent operator (Telecom Italia S.p.A.) holding a preeminent position.

 

ICA’s conclusions

ICA concluded that the transaction will not have an impact on competition in the markets of telecommunications and ICT services, with reference to data center and cloud computing services. The Italian Authority for Communications Guarantees (AGCOM) concurred with ICA’s opinion. The transaction was therefore authorized.

Dow/DuPont Merger Cleared by EU Commission

By Maria E. Sturm

On March 27, 2017 the EU Commission cleared the merger of two U.S. chemical companies – The Dow Chemical Company (Dow) and E.I. du Pont de Nemours and Company (DuPont) according to the EU Merger Regulation. The Commission opened the investigation already in August 2016. The reason for the merger being cleared only now, were strong concerns of the EU Commission, which is the highest antitrust regulating authority in the EU. The EU Commission has the competence and duty to control mergers that exceed the thresholds laid down in Article 1 of the Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (EU Merger Regulation). The merger creates the largest crop protection and seed company in an already highly concentrated market. The field of business of Dow and DuPont is particularly sensitive, as farmers strongly depend on seeds and crop protection at affordable prices.

There were three main issues of concern: The EU Commission expected (1) higher prices, (2) less choice for consumers and (3) substantially less innovation.

Both companies operate in two areas: pesticides and petrochemical products.

 

Pesticides

Concerns:

Pesticides comprise herbicides, insecticides and fungicides. Due to the very high market share of Dow and DuPont, after their merger hardly any competitors would be left on the market. This development would most probably lead to higher prices and less choice for consumers. Furthermore, the merger would have detrimental effects on the innovation efforts in the pesticide branch. Globally, only five enterprises (BASF, Bayer, Syngenta, Dow and DuPont) participate in the research and development activity with regard to pesticides, because only those enterprises have the capacity to do large scale research on all three fields of pesticides. Other competitors in this area have no or only very limited research and development capacities and therefore cannot trigger innovation activity on the market. However, innovation is essential to develop pesticides that are less nocuous, more effective or can help when vermin have developed resistances.

Solutions:

Dow and DuPont agreed on selling the worldwide herbicide and insecticide production of DuPont, the worldwide research and development capacities of DuPont and the exclusive license for a DuPont fungicide for rice crop for the European market.

 

Petrochemical products

Concerns:

Dow and DuPont are both in the acid copolymers business. Their merger would reduce the number of competitors in this business from four to three. Furthermore, DuPont has a dominant position in the ionomers business.

Solutions:

Dow sells both its production facilities in Spain and the United States. Furthermore, it terminates its contract with a ionomer provider from whom Dow received the ionomers it sold to its customers.

Dow and DuPont were able to clear initial concerns of the EU Commission about nematicides and seeds. These areas are therefore not affected by the merger decision.

Further mergers are planned in the agro-chemical sector. However, due to the “priority rule” the commission assesses every merger in the order of its notification according to the current market situation. It will be interesting to see, how later mergers will be affected by the Dow/DuPont decision.

European Commission approves the acquisition of LinkedIn by Microsoft, subject to commitments

By Valerio Cosimo Romano

On 6 December 2016 the European Commission (the “Commission”) approved the acquisition of LinkedIn by Microsoft, conditional on compliance with a series of commitments.

Microsoft is an U.S. technology giant. LinkedIn is a company based in the US, operating a social network dedicated to professionals. The parties operate on complementary areas and have limited overlaps. In its investigation, the European Commission focused on professional social network services, customer relationship management software solutions, and online advertising services.

First, the Commission investigated whether, after the merger, Microsoft could have strengthened LinkedIn’s position by pre-installing and integrating the social network on its systems. The European watchdog came to the conclusion that such measures could significantly enhance LinkedIn’s visibility to the detriment of competitors. Second, the Commission investigated the area of customer relationship management software solutions and found that the networking service does not appear to be a must-have, and access to its database is not essential to compete on the market. The Commission therefore concluded that the transaction would not enable Microsoft to foreclose this market. Third, the Commission found that after the transaction a large amount of user data would still be available on the market. Thus, it concluded that there were few competition concerns arising from the combination of the parties’ online non-search service activities and data to be used for advertising purposes. Lastly, even though privacy concerns do not fall within the scope of EU competition law, the Commission analyzed the potential impact of data concentration on the market as a result of the merger. The European competition watchdog concluded that data privacy is an important parameter of competition between professional social networks, which could have been negatively affected by the transaction.

In order to address the competition concerns identified by the Commission, Microsoft committed to (i) ensuring that manufacturers and distributors would be free not to install the social network on Windows and allowing users to remove it from devices where pre-installed; (ii) allowing competing professional social network service providers to keep intact their current levels of interoperability with Microsoft’s products and (iii) granting them access to Microsoft’s proprietary application dedicated to software developers.

In light of these commitments, the Commission gave green light to the acquisition.

Gun-jumping: the French Competition Authority issues highest fine ever for premature engagement in post-M&A integration

By Valerio Cosimo Romano

On 8 November 2016 the French Competition Authority (FCA) imposed a whopping EUR 80 million fine on Altice Luxembourg and its subsidiary SFR Group for implementing two notified transactions before obtaining appropriate merger clearance.

In France, the effective implementation of a concentration is suspended until clearance by the FCA. Pending approval, the concerned parties must behave as competitors and not act as a single entity. Violation of the rule triggers the application of  Section II of Article L. 430-8 of the Commercial Code, which provides for a fine of up to the 5 per cent of the notifying parties’ turnover.

In 2014, Altice and its subsidiary Numbericable had notified the Authority about two distinct concentrations: the acquisition of SFR and that of OTL. Both transactions were approved. However, in 2015 the Authority started suspecting an early implementation of the two transactions and raided the companies’ premises. Evidence showed that the behavior implemented by Altice led to the exercise of decisive influence on its targets and allowed the company to access strategic information before getting the green light from FCA.

More specifically, Altice had repeatedly validated a number of SFR’s strategic decisions such as pricing and promotional policy, the participation in a tender, the renegotiation of a contract and the joint preparation of an offer. Further, the two companies had exchanged a large amount of strategic information concerning performances and forecasts at a very senior level.

In the second case, Altice had been involved in the OTL’s operational management, had set up a mechanism which allowed access to commercially sensitive information, and had allowed the participation of OTL’s CEO in the group’s decision-making and periodic reporting of commercial performance.

In the past, the FCA had already fined companies for failing to notify or for breach of commitments, but this is the first case in which it ruled on the early implementation of a merger prior to authorization (so called gun-jumping). The fine is also the highest ever imposed for a gun-jumping offence, and is four times higher than the highest sanction registered in Europe to date. According to the FCA, the high amount of fine is justified by the importance of the acquisitions in terms of purchase price and the impact on the telecommunications industry, the breadth, duration, reiteration and deliberate nature of the conduct. Remarkably, the FCA added that in setting the amount of the sanction it had taken account of the fact that the companies had not questioned the circumstances behind the fine and their legal characterization.

This sanction confirms an increased global attention by competition agencies in challenging the practice of gun-jumping. It also denotes a shift in the enforcement leadership on the matter from U.S. to European competition authorities. On a more practical ground, the judgment contributes to shedding legal certainty on the behavior to be avoided in the no man’s land between antitrust notification and clearance. Also, it opens up the debate on how to immediately achieve all the synergies expected from M&A transactions without violating competition law.

European Commission approves a joint venture between the third and fourth largest telecom operators in Italy, subject to structural remedies

By Valerio Cosimo Romano

On 1 September 2016 the European Commission approved a proposed joint venture between Vimpelcom and CK Hutchison, respectively the owners of Wind and H3G (the third and fourth largest telecom operators active in the Italian market). The approval was conditioned on a divestment of assets, which would enable a new operator to enter the market and roll out its own mobile network.

Earlier in 2016, the European Commission had halted the proposed acquisition of O2 by Hutchison in the UK, citing strong concerns that it would have led to less choice and higher prices for consumers, and that the deal would have harmed innovation in the mobile sector.

Currently, the Italian mobile market has four mobile network operators (MNOs) and a number of mobile virtual operators (MVNOs), which use the networks provided by MNOs at wholesale rates.

Vimpelcom and CK Hutchison notified the EU Commission of the proposed joint venture on February 5, 2016. After an in-depth phase-II review, the EU Commission came to the conclusion that the transaction would have reduced competition in the market. More in detail, the European Commission found that the three resulting operators (TIM, Vodafone and the Wind/H3G joint venture) would have had fewer incentives to compete, resulting in a lessening of choice and a decrease in quality of services for consumers, as well as higher retail mobile prices. Further, the Commission identified the possibility of coordination on a sustainable basis, likely to result in an increase in retail mobile prices for Italian consumers. The European Commission also expressed concern that, following the transaction, the incumbent and entrant MVNOs would have  less choice of host networks and hence a weaker negotiating position to obtain favorable wholesale access terms.

In order to address the Commission’s concerns, the concerned parties offered to divest and share sufficient assets (mobile radio spectrum; mobile base station sites, access to 2G, 3G and 4G, and newer technologies) to allow Iliad to enter the Italian market as a fourth mobile network operator and use the joint venture’s network to offer customers nationwide mobile services until the new mobile network operator has built its own mobile network.

The Commission found that the proposed structural remedies offered by Hutchison and VimpelCom fully address its concerns and will preserve effective competition, maintain incentives to invest in innovative technologies, and ensure that consumers will continue to benefit from effective competition. For the reasons above, the Commission approved the proposed transaction.

Impala criticizes EU decision approving Sony deal with the Michael Jackson estate

By Nicole Daniel

In August 2016 the trade body Impala heavily criticized the European Commission’s decision to clear a deal between Sony Corporation of America and the Michael Jackson Estate, arguing that the deal reinforces Sony’s market power.

Sony Corporation of America plans to buy the Michael Jackson estate’s half of the music-publishing joint venture Sony/ATV Music Publishing.

The Commission conducted a preliminary investigation during which it also examined the views of competitors and consumers. Accordingly, Impala raised concerns that this transaction might lead to a reinforcement of Sony’s market power, thereby creating serious competition issues. Impala even described the buyout as “transformative” and asked the Commission to impose tough remedies or open a Phase 2 investigation.

The Commission, however, was of the opinion that there would be no negative impact in any of the markets for recorded music and music publishing in the EEA from the transaction. Furthermore, the Commission found that compared to the situation prior to the transaction, the merger will not materially increase Sony’s market power as compared to other digital music providers.