Compass Lexecon Client Prevails in VHA/TPG Merger

Compass Lexecon Expert Dr. Jorge Padilla Testifies Successfully at Trial

On 13 February 2020, the Federal Court of Australia ruled in favor of Vodafone Hutchison Australia Pty Limited (VHA) and TPG Telecom Limited (TPG) against the ACCC, concluding that the proposed AUD15 billion ($10.1 billion) VHA/TPG merger should be permitted to proceed.

VHA is one of Australia's three mobile network operators. TPG is primarily active in fixed-line services, but also sells some mobile services relying on access to VHA’s network. In April 2017, TPG announced plans to roll-out its own mobile network in parts of Australia but later abandoned its plans due to commercial and regulatory challenges.

After a lengthy review, the ACCC blocked the merger, arguing that there was a “real chance” (as defined by case law) that TPG would roll-out its own mobile network and compete to build its customer base. The ACCC contended that future competition would be stronger without the merger than with the merger.

Compass Lexecon’s Senior Managing Director Dr. Jorge Padilla testified at the trial in Melbourne, providing expert economic testimony on the likelihood that future competition in Australia’s mobile retail markets would be more intense with the merger than without the merger. Dr. Padilla’s testimony focused on the analysis of the competitive dynamics of Australia’s retail mobile market, including whether the combination of the parties’ assets would make for a more effective competitor to the benefit of consumers than if the parties remained as separate entities.

The Court concluded that the merger would not have the effect, nor be likely to have the effect, of substantially lessening competition. Justice Middleton found that TPG was extremely unlikely to roll out a mobile network or become an effective competitor absent the merger and that the merged entity would be a stronger competitive force against the two main mobile network operators in Australia, Telstra, and Optus.

Dr. Padilla and Compass Lexecon were retained by Fiona Crosbie, Chris Prestwich, Robert Walker and Anita Thompson of Allens, acting for VHA. Dr. Padilla was supported by a Compass Lexecon team that included Executive Vice President Thilo Klein, Senior Vice President Paul Reynolds, and Senior Economist Cecilia Nardini.