(The authors are Reuters Breakingviews columnists. The opinions
expressed are their own.)
By Olaf Storbeck and Quentin Webb
LONDON, Aug 16 (Reuters Breakingviews) - Liberty Global’s
(LBTYA.O) German M&A upset is problematic. Nearly two years
after the country’s cartel office allowed John Malone’s cable
group to buy local outfit Kabel BW for 3.2 billion euros, a
court in Duesseldorf has overturned that decision. The legal
uncertainty could drag on for several more years. It’s probably
inevitable that the wheels of justice grind slowly. But the
“nein” itself depends on flimsy thinking.
When assessing if mergers will squash competition, it makes
perfect sense to think about how markets will develop in future.
But this ruling, by Duesseldorf judge Juergen Kuehnen, seems to
go a step too far.
That’s because Kabel BW and Liberty’s existing Unitymedia
unit did not compete directly but operated cable networks in
different parts of Germany. For Kuehnen, though, what is
important is that Kabel BW might have entered Unitymedia’s
market within three to five years.
That sounds both speculative and implausible. Kabel BW never
publicly indicated such a move. And expanding a cable network is
very expensive. The investment case, hard at the best of times,
is even trickier if another network is already in the ground.
In addition, the cartel office had extracted significant
concessions before allowing the takeover. And its stance was
backed by Germany’s independent monopoly commission.
For Liberty this lengthy process could eventually prove more
of an annoyance than anything else. The group can still try to
appeal to a higher court. If it loses again, the cartel office
will re-assess the merger. That could prompt new demands, such
as the divestment of a portion of Kabel BW’s subscriber base, or
third-party access to the network. These would probably be
unwelcome but manageable. The worst case would force Liberty to
disentangle and divest Kabel BW. But that seems unlikely.
Any legal system of “merger control” needs checks and
balances, with ways to appeal and reverse bad decisions. But on
the evidence of this case, the judicial bar for overturning
completed deals in Germany should be a bit higher. And focusing
on hypothetical future management decisions introduces too much
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- On Aug. 14, a regional court in Duesseldorf overturned the
2011 decision by Germany’s cartel office to approve Liberty
Global’s 3.2 billion euro purchase of cable firm Kabel BW.
“Potential competition has been eliminated,” said the court’s
presiding judge, Juergen Kuehnen. The cartel office must now
re-examine the case.
- Liberty Global’s Unitymedia arm said it would use all
available legal means to fight the decision.
- Court press release (German) link.reuters.com/syv42v
- Reuters: Liberty's KabelBW deal in jeopardy after court
- For previous columns by the author, Reuters customers can
click on [WEBB/]
(Editing by Chris Hughes and Sarah Bailey)
Keywords: BREAKINGVIEWS LIBERTY/KBW/
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