The Danish Competition Council has approved the merger between Norlys Tele Service A/S and Verdo Tele A/S subject to remedies
On 14 March 2022 the Danish Competition and Consumer Authority (”DCCA”) received a complete notification of the merger between Norlys Tele Service A/S (“Norlys”) and Verdo Tele A/S (“Verdo”). The merger was referred to the DCCA by the Danish Business Authority and was approved by the Danish Competition Council (“DCC”) subject to remedies on 25 May 2022.
Norlys, who is part of the Norlys Group, owns optical fiber infrastructure – mainly in Jutland. Norlys provides internet access to retail suppliers of broadband connections and TV services (“service providers”), including Norlys Group’s own retail supplier, Stofa A/S (“Stofa”), through the Norlys Group’s subsidiary OpenNet A/S (“OpenNet”).
Verdo is a subsidiary of Verdo a.m.b.a. (75 %) and Norlys (25 %). Verdo owns optical fiber infrastructure in the area in and around the Danish cities Randers and Hobro. Prior to the merger, Verdo entered into a service provider agreement with Stofa, and Stofa has so far been the sole service provider using Verdo’s infrastructure.
In December 2020, Verdo entered into an agreement with OpenNet in order to provide other service providers access to Verdo’s infrastructure. In 2021, Verdo initiated negotiations with two service providers on terms and prices for access to Verdo’s infrastructure.
The DCCA consider that the merger entails a risk of enabling Norlys to foreclose input (access) to the downstream market. Input foreclosure only entails restrictions on competition if the input is significant for the product concerned on the downstream market. This is the case due to the fact that service providers are not able to supply broadband connections in the retail market without internet access at the wholesale level, there are no real alternatives to Verdo’s infrastructure and finally there are significant barriers to entry to the wholesale market.
The DCCA also considered that Norlys would have an incentive to raise prices for competing service providers, who wanted access to Verdo’s infrastructure, as Norlys then would be able to shield the Norlys Group-subsidiary Stofa from the competition from other service providers.
The DCCA found that input foreclosure would significantly impede effective competition on the markets for retail provision of TV services and fixed broadband connections.
Based on an overall assessment the DCCA considered that the merger would give rise to unilateral, vertical effects on the market for wholesale of internet access in the area of Verdo’s infrastructure.
The DCCA’s investigations showed that despite the fact that both Norlys and Verdo own optical fiber infrastructure in Jutland, there is no overlap wihtin their ‘footprints’. Thus, there are no horizontal concerns in relation to the merger.
To address the DCCA’s concerns for unilateral, vertical effects, Norlys offered commitments. Norlys offered to ensure that service providers, who wants access to Verdo’s infrastructure will be granted access on equal terms compared to the Norlys-Group-subsidiary, Stofa. Furthermore, Norlys committed to offer all interested service providers the same wholesale and campaign prices that Verdo had already negotiated with the two third party service providers up to three years after the DCC’s decision.
The DCC assessed that the remedies offered were sufficient to address the unilateral effects identified by the DCCA.