The German Federal Cartel Office (FCO) has issued a statement of objections, outlining why it intends to prohibit the takeover of Tele Columbus by Kabel Deutschland (KDG) if sufficient remedies cannot be found.
The merging parties have the opportunity…
The German Federal Cartel Office (FCO) has issued a statement of objections, outlining why it intends to prohibit the takeover of Tele Columbus by Kabel Deutschland (KDG) if sufficient remedies cannot be found.
The merging parties have the opportunity to offer improved commitments to address the concerns, and KDG said it is willing to offer remedies.
Deadline for a final decision is 16 January.
The FCO’s current view is that the cable market is dominated by KDG and Liberty Global’s Unitymedia, specifically with regards to the delivery of services to housing associations. The merger of Tele Columbus and KDG would further increase this dominant position of only two players.
The regulator noted that the merger could not be compared to last year’s Liberty Global/Kabel BW transaction. While Liberty and Kabel BW operated in different German regions, Tele Columbus and KDG have direct geographical overlaps. A merger of the two would therefore eliminate competition in affected regions.
On the upside the regulator noted that Tele Columbus also has regional overlaps with Unitymedia and that it is examining if a stronger Tele Columbus – if backed by KDG – could compete more efficiently with Unity in those regions.
Unlike most antitrust regulators internationally, including the European Commission, the German FCO is allowed to weigh pro- and anti-competitive arguments of mergers. It can clear transactions if it believes that pro-competitive arguments in one market are more important than negative effects of a deal in a different market.
KDG pointed out that after the merger the company would enter the market in the federal states of Hesse and North Rhine-Westphalia “and thus increase competitive choice for consumers and housing associations.”
It described the statement of objections as “not an unusual step in German M&A proceedings”.
Last year, the FCO conditionally cleared the takeover of Kabel BW by Liberty Global. After a five months long investigation, the regulator allowed the transaction to go ahead, following agreement on far-reaching remedies. Those included special contract termination rights for housing associations, enabling them to change to a competing cable provider. To address concerns on the feed-in market, Liberty also had to stop encrypting digital free TV programmes, thereby making it easier for rivals to compete for retail TV service contracts.
