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CMA says that the EU Competition watchdog should stop merger between Three and O2

Jonny Clark

11th April 2016

The Competition and Markets Authority (CMA) has told European regulators that they should block the merger of mobile phone network providers O2 and Three in the UK. For those of you looking for an example of arguments for a reduction in competition in a market this may be another interesting case. This link will take you to an article on the proposed merger and this link to another that argues that the merger is a positive thing. Ofcom have recently reported that they are not in favour of the merger.

The CMA argues that reduced competition could lead to higher prices or a reduction in quality of service (or both). As a Three customer there was a bit of me that was looking forward to the merger. Three doesn't provide 4G coverage where I live, but O2 does. I could move to O2 but... meh (yes, I'm a living, breathing example of customer inertia!). I have family who live in a rural location who constantly bemoan the poor mobile reception in their region - perhaps this would be solved if a merged firm saw a greater potential for profit from supplying to a market where there is less competition?

What's absolutely fascinating about this story, however, is the tie in with the EU regulatory body. If the UK was not a member of the EU the CMA would have a larger say in whether the merger took place. However, by having an over-arching EU regulator, competition in different EU countries can be monitored and controlled to ensure that one country does not allow the growth of a super-huge company that can start to aggressively buy out firms in other countries. I've just checked - it doesn't tell you that in David Cameron's £9m Pro-EU pamphlet. You're welcome!

Jonny Clark

Jon Clark has been teaching economics and business studies for over 25 years primarily in the Further Education sector. Before joining tutor2u, he was a senior manager at South Cheshire College in Crewe.

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