ACCC Opposes TPG-Vodafone Merger
The Australian Competition and Consumer Commission ("ACCC") has opposed the proposed $15 billion merger of telecom providers TPG Telecom Limited ("TPG") and Vodafone Hutchison Australia Pty Ltd ("Vodafone"). The ACCC's opposition is significant because the parties do not compete in the same markets and neither party is the market leader. Instead, ACCC opposed the merger because of potential competition between the parties.
Given TPG's "proven track record of disrupting established markets," the ACCC alleges that there is a "real chance" that TPG would enter the market for mobile network services absent the merger. TPG would become the fourth mobile network provider in Australia (after Telstra, Optus, and Vodafone) and, according to the ACCC, likely offer cheaper mobile plans than existing mobile providers, enhancing competition.
TPG began work on mobile network infrastructure in 2017, but it ceased the rollout in 2019 due to security guidance from the government. However, the ACCC believes that TPG has the capability and incentive to resolve technical and commercial challenges because of its existing assets, including mobile spectrum assets (purchased for A$1.26 billion), an extensive fiber transmission network, a large customer base, and a well-established brand.
The ACCC also cited Vodafone's entry into fixed broadband services as evidence of potential competition between the parties and the perceived need to compete in both markets. Vodafone first offered broadband services in 2017 in select geographies and has a low market share (approximately one percent).
Both parties indicated that they will not abandon the transaction because of the ACCC's opposition. The parties can either seek a declaratory judgment that the merger is lawful (which is rare) or attempt to close, which could force the ACCC to seek an injunction.
The ACCC's decision is significant, not only because it demonstrates the ACCC's focus on Australia's telecommunication industry, but also because the ACCC rarely opposes a merger that does not involve the market leader. This case signals that the ACCC will aggressively enforce the competition laws in key industries that are concentrated, even if the merging parties are small, if the ACCC believes that the parties will be significant competitors in the future.
Jones Day prepares summaries of significant antitrust enforcement, litigation, and policy events as a service to clients and interested readers, to provide timely insight on antitrust and competition law developments relevant to business, but not as legal advice on any specific matter. Please visit our Publication Request form to add your name to our distribution list.
