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The CMA has yesterday referred BT Group plc’s anticipated acquisition of EE Limited for an in-depth phase 2 investigation.

BT and EE are, respectively, the largest suppliers of fixed communications services and mobile communications services in the UK. BT also provides many fixed services to other communications providers, including backhaul services to mobile communications providers, such as EE, O2, Three and Vodafone. These services connect their radio masts to their core network. EE also provides wholesale mobile services to other mobile service providers.

BT submitted a request for a fast track reference to a phase 2 investigation on 15 May 2015. The Competition and Markets Authority (CMA) commenced its phase 1 investigation on 18 May 2015 and issued an ‘invitation to comment’, seeking views on this request.

For a case to be fast-tracked, the CMA must have evidence that it believes objectively justifies a belief that the test for reference to phase 2 is met.

The CMA has found that the transaction meets the test for reference in that it gives rise to a realistic prospect of a substantial lessening of competition in relation to the supply of wholesale access and call origination services to mobile virtual network operators and fibre mobile backhaul services to mobile network operators in the UK. It has therefore decided that it is appropriate to proceed with a fast track reference of the merger to phase 2.

Significant competition concerns were raised during the consultation regarding the impact of the merger on other markets, including the retail mobile market in the UK, but, given that the criteria for a fast track reference were met on the basis of the 2 issues identified above, it was not necessary for the CMA to reach a conclusion at phase 1 in relation to these other concerns.

Third parties will now have an opportunity to present their views on the merger during the phase 2 investigation which will be overseen by a group of independent panel members. The phase 2 investigation will not be restricted to investigating the 2 issues mentioned above.

Andrea Coscelli, CMA Executive Director of Markets and Mergers and decision-maker in this case, said:

BT and EE are leading suppliers of UK telecommunications services and together they will have a strong presence in many telecommunications markets. They also supply important inputs at the wholesale level, which enable other communications providers to compete at the retail level in the provision of mobile services. We have found that there is a real risk that the merger could reduce their incentives to supply these inputs and that this could have a detrimental impact on the retail mobile market.

BT and EE have recognised that the issues in this case are complex and that the test for reference at phase 1 would be met. They therefore requested use of the fast track procedure and, after due consideration, we believe this to be appropriate.

Notes for editors

1. The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. From 1 April 2014 it took over the functions of the Competition Commission and the competition and certain consumer functions of the Office of Fair Trading, as amended by the Enterprise and Regulatory Reform Act 2013.
2. Under the Enterprise Act 2002 (the Act) the CMA has a duty to make a reference to phase 2 if the CMA believes that it is or may be the case that a relevant merger situation has been created, or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
3. Under the Act a relevant merger situation is created if 2 or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million (‘the turnover test’) or as a result of the transaction, in relation to the supply of goods or services of any description, a 25% share of supply in the United Kingdom (or a substantial part thereof) is created or enhanced (‘the share of supply test’).
4. For the CMA to make a fast track reference it must have evidence in its possession at an early stage of the investigation that it believes objectively justifies a belief that the test for reference is met. In addition, fast track cases are likely to be cases where the competition concerns identified would impact on the whole or substantially all of the transaction, and not just one part (that could be resolved through structural undertakings in lieu of a reference).
5. All the CMA’s functions in phase 2 merger inquiries are performed by inquiry groups chosen from the CMA’s independent panel members. The appointed inquiry group is the decision-maker on phase 2 inquiries.
6. The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business. The membership of an inquiry group usually reflects a mix of expertise and experience (including industry experience).
7. The inquiry group may extend the 24-week period within which it is required to publish its report by no more than 8 weeks if it considers that there are special reasons why the report cannot be published within that period.
8. The full text of this decision will be placed on the case page as soon as is reasonably practicable.
9. Enquiries should be directed to Siobhan Allen (siobhan.allen@cma.gsi.gov.uk, 020 3738 6460) or Simon Belgard (simon.belgard@cma.gsi.gov.uk, 020 3738 6472).
10. For information on the CMA see our homepage, or follow us on Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on merger cases.