KDG withdraws its application at the Bundeskartellamt for takeover of ish, KBW and iesy

Kabel Deutschland GmbH has informed the Bundeskartellamt that it will not further pursue its proposed merger with the three regional cable network companies Kabelnetz NRW HoldCo GmbH (ish), Cologne, Kabel BW Holdings GmbH (KBW), Heidelberg, and iesy Repository GmbH (iesy), Frankfurt, and has therefore withdrawn its notification of this project.

On 23 August 2004 the Bundeskartellamt had issued a warning letter to the company as according to its preliminary assessment the project would have strengthened KDG’s dominant position in the input market, i.e. vis-à-vis TV programme providers. Nevertheless, in order to have the project cleared the parties, with reference to the balancing clause under competition law, submitted commitments which in particular provided for an upgrading of network level 3 for Internet services. The Bundeskartellamt issued a further warning letter dated 10 September because the commitments offered had not eliminated its grounds for prohibiting the project.

According to the balancing clause the concentration in question must be the decisive factor for creating improved conditions of competition which outweigh the disadvantages of market dominance. The parties have not proved that improvements in the Internet market would only be created as a result of the concentration. The Bundeskartellamt assumes that the concentration is not necessary for introducing the Internet via broad-band cable and that the cable network operators ish, KBW, iesy and KDG can each offer broad-band Internet services and telephony. The proposed commitments were therefore not appropriate to fulfil the requirements of the balancing clause.

Ultimately the commitments were not acceptable because these involved investment and behavioural commitments which require constant control. Such commitments are incompatible with the objective based on the competition authority’s decision of maintaining or creating structures from which competition can develop without the need for further intervention beyond abuse control. They are therefore inadmissible also from a legal perspective.

The President of the Bundeskartellamt, Dr Böge, stated: “Up to now technical progress in the cable network has been made rather by the smaller cable network companies, which are definitely more active than the KDG in upgrading the network and in their investment planning for fast internet access and telephony. The creation of a cable monopoly is more likely to slow down this development.”