Denouement in the “Belgian Towercast Case”: the Belgian Competition Authority terminates its proceedings against Proximus following the divestiture of EDPnet to Citymesh

On 6 November 2023, the Belgian Competition Authority (“BCA”) announced that it had closed its investigation into a possible abuse of dominance by Proximus following the sale of EDPnet to Citymesh. The BCA had opened an ex officio investigation in March 2023 based on the recent Towercast ruling of the European Court of Justice (“ECJ”), which confirmed that mergers that are not subject to prior control can be assessed ex post under Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) prohibiting abuses of dominance. In April 2023, the BCA’s Prosecutor General requested that the BCA impose interim measures, which were subsequently adopted in June 2023. On 6 November 2023, Proximus and Citymesh executed and completed an agreement under which Proximus divested EDPnet Belgium to Citymesh. Following this agreement, the BCA decided that the case no longer warranted investigation and announced the termination of its ongoing proceedings.

Introduction

EDPnet is the main alternative telecommunications operator providing wholesale and retail broadband internet access services at national level in Belgium, and is the only effective competitor to Proximus on copper and fibre networks, serving tens of thousands of customers, notably residential customers.

In early 2023, EDPnet experienced financial difficulties and became the subject of judicial reorganisation proceedings before the Ghent Enterprise Court, Dendermonde section. Various undertakings submitted a bid to acquire EDPnet’s activities, including Proximus and Citymesh. Citymesh is the upcoming fourth telecommunications operator in Belgium and is currently developing its fixed and mobile services for broadband internet access together with its Romanian partner, DIGI.

On 21 March 2023, the Ghent Enterprise Court decided to order the transfer of EDPnet’s activities to Proximus because the latter had offered the highest bid price. Citymesh appealed that decision to the Ghent Court of Appeal.

The BCA opened an investigation following Towercast

On the same day, the BCA opened ex officio proceedings under Article IV.39, 2° of the Code of Economic Law (“CEL”) regarding Proximus’ takeover of EDPnet’s assets within the framework of the judicial reorganisation proceedings. Indeed, serious indications of substantial obstacles to competition were brought to the BCA’s attention because of Proximus’ takeover of EDPnet’s activities, among others by the Belgian Institute for Post and Telecommunications (“BIPT”). The purpose of the proceedings was to determine whether Proximus’ acquisition of EDPnet’s activities constituted an infringement of Article 102 TFEU and its Belgian equivalent Article IV.2 CEL, which prohibit abuses of dominance.

In its long-awaited Towercast ruling of 16 March 2023, the ECJ confirmed and clarified that the prohibition of abuse of dominance under Article 102 TFEU applies to mergers that are not subject to prior merger control. In other words, according to the ECJ the EU Merger Regulation does not preclude a national competition authority (and national courts) from regarding a concentration that does not meet merger control thresholds as constituting an abuse of dominance.[1] Even if Proximus’ acquisition of EDPnet’s activities did not have to be notified for prior merger control clearance (because EDPnet’s turnover did not reach the thresholds for compulsory merger control under Belgian law), the BCA was nevertheless competent to assess its compatibility with Articles IV.2 CEL and 102 TFEU post-transaction.

Interim measures

On 12 April 2023, for the first time in the BCA’s history, the BCA’s Prosecutor General requested, on his own initiative, interim measures be imposed on Proximus, in accordance with Article IV.72 CEL. The interim measures requested aimed to ensure EDPnet’s independence during the time the BCA continued to investigate Proximus’ acquisition, while maintaining EDPnet’s operational and commercial independence from Proximus pending the outcome of the investigation on the merits. 

On 21 June 2023, the BCA’s Competition College made its decision no. ABC-2023-RPR-17 in which it held that the Prosecutor General had prima facie demonstrated the existence of an abuse of a dominant position on Proximus’ part resulting from EDPnet’s takeover, due to the EDPnet’s elimination as an independent alternative operator active on both the wholesale and retail broadband Internet markets. The Competition College thus considered that it was urgent to adopt interim measures to avoid a situation likely to harm the general economic interest, which could occur if Proximus’ acquisition of EDPnet became irreversible.

The interim measures imposed on Proximus consisted of:

(i) the obligation to maintain EDPnet’s viability and competitiveness; 

(ii) the obligation to segregate the activities of Proximus and EDPnet under the supervision of a manager designated by Proximus amongst EDPnet’s staff; 

(iii) the obligation to ensure that Proximus could not obtain any confidential information relating to EDPnet. 

In its decision, the Competition College also confirmed the BCA’s ability to apply the concept of abuse of a dominant position to non-notifiable mergers, without having to establish any additional restriction distinct from the transaction in question, in accordance with the ECJ’s recent Towercast ruling. Proximus appealed the decision imposing interim measures on it before the Brussels Court of Appeal, Market Court section.

Divestiture of EDPnet’s activities from Proximus to Citymesh

After the interim measures were imposed on Proximus in June 2023, the BCA continued its investigation on the merits. However, on 6 November 2023 the BCA was informed of the conclusion and completion of an agreement under which Proximus divested EDPnet Belgium to Citymesh. Further to this agreement, the BCA has decided to terminate its abuse of dominance proceedings, opened in March 2023, concerning Proximus’ takeover of EDPnet’s assets. Proximus and Citymesh have also agreed to withdraw their respective appeals before the Market Court and the Ghent Court of Appeal.

On this occasion, the BCA’s Prosecutor General Damien Gerard stated that “the divestiture of EDPnet to Citymesh will preserve and strengthen competition in the Belgian telecommunications sector, by guaranteeing the continuity and competitiveness of EDPnet and facilitating the emergence of a new operator, to the benefit of Belgian consumers and businesses”.[2] 

The BCA’s press release further states that EDPnet’s takeover by Citymesh, the new entrant in the Belgian telecoms sector together with its partner, DIGI, is likely to preserve and strengthen competition in the future, to the benefit of consumers and businesses, and so meets the Prosecutor General’s concerns that gave rise to the opening of the ex officio proceedings and the request for interim measures.

The BCA further considered that the restoration of competition and its possible improvement in the future because of the terms and structural nature of the agreement concluded between Proximus and Citymesh outweigh the interest of establishing the existence of an abuse of a dominant position on the merits and of imposing, where appropriate, a remedy and/or fine at a later stage.

Finally, the BCA held that the agreement reached between Proximus and Citymesh will enable it to save significant resources and thus increase the effectiveness of its action. In accordance with Article IV.45, para. 1, 3° CEL, the BCA therefore considered that the case no longer warranted investigation for priority and procedural economy reasons, and therefore decided to terminate its ongoing proceedings. It is worth noting that the BCA’s decision to close its ongoing investigation is without prejudice to the qualification of the practice in question under Articles IV.2 CEL and 102 TFEU.

Cooperation between the BCA and the BIPT

In its press release announcing the closing of its investigation, the BCA also stressed “the BCA’s decisive action” in this matter, together with the BIPT’s full cooperation and the collaboration of the companies involved.

This reflects the BCA’s intention, as expressed in its Communication on enforcement priorities of the BCA for 2023,[3] to exercise its competences in full independence, but to do so in close contact with the parties involved and the national and international governmental institutions concerned.

As a reminder, the BIPT is the federal regulatory body responsible for regulating the electronic communications market, the postal market, the electromagnetic spectrum of radio frequencies as well as the audiovisual media services and the video-sharing platform services in the bilingual Brussels-Capital Region. One of the BIPT’s notable competences is to ensure the fostering of competition in the telecommunications field on the Belgian market. In this context, the BIPT and the BCA are often brought to communicate and cooperate on market developments or trends to warrant effective competition and take action where needed.

Conclusion

The BCA’s proceedings in this case fall within one of the BCA’s priorities to tackle distortions of competition in the telecommunications sector. This sector has been and remains a priority for the BCA. The BCA has noted in particular that the degree of concentration in this sector keeps increasing and announced for 2023 that any further consolidation in the telecommunications markets would be the subject of an in-depth investigation, in close collaboration with the European Commission and BIPT. In the same vein, the BCA very recently confirmed that it would examine any agreement or draft cooperation agreement between telecommunications operators aimed at mutualising the deployment of fibre infrastructure. As was the case in the conduct of the proceedings against Proximus, the BCA intends to do so in full collaboration with the BIPT.

The exofficio proceedings opened by the BCA against Proximus following its acquisition of EDPnet’s assets is the first application in Europe of the recent ECJ Towercast ruling. National competition authorities’ prerogatives to review transactions even after they have closed, creates significant legal uncertainty and risk for dominant businesses, as well as opportunities for rivals and customers to challenge such transactions. It is also noteworthy that this case was the first time ever in the BCA’s history that the Prosecutor General has used its legal prerogative to request the imposition of interim measures himself.

Altius has assisted Citymesh in the various legal proceedings of the so-called “Belgian Towercast Case”, including the proceedings before the Ghent Enterprise Court and the Ghent Court of Appeal as well as the proceedings relating to the BCA’s investigation on the merits, the request for interim measures and the appeal lodged by Proximus before the Brussels Market Court against those interim measures.

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[1] Case C-449/21, Towercast, 16 March 2023, OJ C 452, 8.11.2021.

[2] BCA’s Press release of 6 November 2023, https://www.belgiancompetition.be/sites/default/files/content/download/files/20231106_Press_release_51_BCA.pdf

[3] BCA Enforcement Priorities for 2023, https://www.belgiancompetition.be/sites/default/files/content/download/files/2023_enforcement_priorities_BCA.pdf

Written by

• Carmen Verdonck

  Partner

• Nina Methens

  Associate