Returning to the starting point, the Court of Justice of the European Union has on Thursday annulled the decision that granted clearance for the Telefónica Europe acquisition by Hutchison 3G UK, now operating as Three. The case is returned to the General Court for a fresh assessment of the transaction, effectively ordering a full retrial of the matter. In its ruling, the European Court noted several errors in the prior judgment and determined that the General Court must reexamine the decision from scratch.
Back in May 2016, the European Commission blocked the proposed takeover of Telefónica Europe by Hutchison 3G UK under the merger regulation, and challenged the Commission’s stance in the General Court, seeking its annulment. Four years later, the General Court granted the appeal and reversed the Commission’s decision, inviting a further challenge. In the latest decision, the CJEU annulled the initial ruling and mandated a new trial after confirming the presence of error in the original assessment.
The Court of Justice explains that the General Court put an evidentiary standard on the European Commission that does not find support in the merger regulation. It also states that the first-instance judges erred in law by interpreting the regulation in a way that demanded proof of a dominant position or an expansion of market concentration before any finding of a potential barrier to effective competition could be deemed significant. According to the judges, the existence of a substantial barrier to effective competition required the Commission to show two cumulative elements—the removal of robust competitive pressures between the concentrating parties and the reduction of competition pressure on the remaining rivals.
The EU’s top court argues that this restrictive interpretation clashes with the merger regulation’s objective, which is to ensure effective scrutiny of all concentrations that could create a meaningful barrier to competition within the internal market or a substantial portion of it, including effects that are uncoordinated. This approach is viewed as insufficient to capture the full spectrum of potential competitive harms arising from large-scale mergers.
major obstacles
The CJEU further finds that, while the General Court did not exceed its jurisdiction, it misrepresented the Commission’s decision and the Community Executive Board’s procedural documents and incorrectly compared the case with other merger matters. It also notes that the Commission did not conduct a comprehensive assessment of the relevant factors and findings to verify whether a significant barrier to effective competition existed.
Because of the breadth and depth of the errors identified in the General Court’s reasoning, the Court of Justice overturns the decision on appeal. Yet given the lack of complete elements to issue a final ruling on all grounds raised by the first-instance court, the matter will be referred back to the General Court for a renewed examination and decision based on precise observations from the present ruling.