Brussels, 28/06/2000 (Agence Europe) - The European Commission has decided to prohibit the merger between US telecommunications firms MCI WorldCom Inc, the world's leading provider of Internet connectivity, and its biggest rival, Sprint, following in the footsteps of the US Anti-Trust authority which has just blocked the merger. The merger would in fact have created a dominant market position by combining the merging parties' extensive networks and large client bases and led to the creation of such a powerful force that both competitors and customers would have been dependent on the new company to obtain universal Internet connectivity.
The two companies had predicted this outcome and informed the Commission on Tuesday evening that they intended to withdraw their notification of the deal. The Commission felt compelled to take a formal decision as its review had come to an end after five months of investigations, and it can only accept a withdrawal if the deal is no longer legally binding. This is not the case as the two companies have not formally cancelled their merger agreement. Following the Commission's objections, the companies offered on 8 June 2000, the last day for submission of undertakings, to divest Sprint's Internet business from Sprint's other activities. However, the Commission's investigation showed that this proposal was insufficient as it would not re-establish, with enough certainty as to its effect, immediate and effective competition in the market for top-level Internet connectivity. The Commission also studied the impact of the merger in the market for providing global telecommunications services to multinationals. There were concerns that the new company, together with British Telecommunication's Concert alliance with AT&T, would control the market. The Commission concluded that a collective dominant position could not be established between the two companies. The investigation also looked into the potential creation of a joint dominant position in the international voice telephony market, following concerns raised by several US and EU operators. The Commission found that if there was any risk for competition in this market, the effects in the EU would not be immediate or foreseeable, but they asked the US authorities to monitor the situation.
Commissioner Monti praised the excellent cooperation between his services and the US Anti-Trust authorities which had carried out separate and independent investigations, but had nevertheless worked together in a constructive manner towards the common goal: ensuring healthy market competition.
This is the thirteenth time that the Commission has blocked a merger since 1990, when it was given the mandate to review all mergers and acquisitions involving companies with combined global sales in excess of Euro 5 billion and European Union sales of at least Euro 250 billion for each company, irrespective of their nationality.