By Raffaele Barberio
Open Fiber’s change of control should almost certainly be notified in Brussels.
According to the Italian press, CDP (Cassa Depositi e Prestiti) would rise to over 50% of Open Fiber, gaining the absolute majority (reaching a maximum of 60%) and Macquarie would take over from Enel in the remainder (with a share ranging from 40 to 49%).
In the new shareholding structure, CDP and Macquarie would in any case have “joint control” given that for some relevant decisions, such as investments, the unanimous consent of the parties would be required. The conditional is a must because the details of the governance pact are not yet known.
We talked about it in an exclusive interview with David Cantor, considered to be one of the deans among the telecommunications antitrust lawyers operating in Brussels.
Raffaele Barberio. In case of notification of the transaction in Brussels, since it is a case of concentration, the European Commission has the power to impose “structural” remedies?
David Cantor. Indeed the Commission has authority to impose structural remedies in EU merger cases, as a condition of possible clearance of the proposed concentration. In cases in which a proposed concentration is seen to impede effective competition in a relevant market, structural remedies are generally preferred over behavioral remedies.
Raffaele Barberio. DGComp should assess the presence of CDP in both Open Fiber and TIM shareholders, two companies that currently compete with each other on the Italian market?
David Cantor. Assuming CDP maintains a control position in Open Fiber, and simultaneously that it maintains a seat on the TIM Board, this would be highly problematical –- since TIM (via its controlled affiliate FiberCop) and Open Fiber are the two competitors in a duopoly wholesale market for provision of Italian fiber broadband infrastructure. In this situation it is presumable that CDP would be involved in fundamental company decisions of each of the two duopoly competitors and -– at minimum -– have access to key strategic information underlying those respective market decisions. It’s a textbook case of impermissible horizontal coordination adversely impacting effective competition: absent official intervention, the resultant market structure is tantamount to an intolerable monopoly.
Raffaele Barberio. The European Commission could impose CDP to sell its stake in TIM or the rights connected to its (minority) stakes in TIM? Would CDP in any case be required to renounce to sit on the TIM board of directors, to renounce the rights of veto and also of information?
David Cantor. Assuming that CDP maintains a position of (sole or joint) control over Open Fiber, while simultaneously a minority shareholder occupying a seat on TIM’s Board, it’s conceivable the Commission might condition potential clearance of a CDP/Macquarie merger in Open Fiber on CDP’s divestiture of its pre-merger stake in TIM; at minimum, it would seem necessary for CDP to surrender its Board seat in TIM.
A counter-argument could be that CDP’s position as a TIM shareholder or Board member does not arise as a consequence of the CDP/Macquarie merger in Open Fiber, and is therefore not implicated in Commission scrutiny of the CDP/Macquarie concentration subject to EU merger review. On this theory, however, the issue of anti-competitive coordination based on CDP’s control position in Open Fiber, while simultaneously occupying a TIM Board seat, would remain subject to scrutiny and objection under Article 101 TFEU –- at the initiative of the Commission, the AGCM or in the Italian courts.