The CMA's notice of possible remedies on the Vodafone Three merger - Which? response

We agree with the CMA’s provisional findings that, absent any remedies, the merger of two close competitors will likely lead to horizontal unilateral effects and higher prices for consumers. These could be at least partially offset by higher investment from the merged entity and rivalry-enhancing efficiencies (REEs), but the CMA is rightly sceptical of the parties’ stated plans for investments post-merger and it is not yet clear whether, even if fully implemented, those plans would be enough to lead to overall welfare gains.

Nonetheless, we support the CMA looking into whether a package of remedies can be found which would credibly tackle the potential SLCs identified, while ensuring that efficiencies and higher investment delivers overall benefits for consumers. However, we share the CMA’s general cautiousness with regard to behavioural remedies, and in summary have the following concerns on the risks involved with those outlined in the notice:

• Monitoring and enforcement risks. Having Ofcom oversee and enforce remedies may be preferable, but will not be sufficient in itself to ensure compliance. Mechanisms should be put in place to reimburse customers if remedies are breached, and a bespoke penalties regime may be needed to incentivise compliance.
• Specification risks. It is not yet clear how the CMA can design remedies which would effectively tackle the SLCs and REEs. There is considerable heterogeneity in customer contracts that could make any single retail remedy difficult to specify, while investment commitments may be difficult for Ofcom to monitor and enforce against.
• Distortion risks. There is some risk that time-limited retail protection could have distortive effects on competition. Protections shouldn’t only apply on long contracts, and the CMA must be mindful of the risk of all providers raising prices on expiry of time-limited commitments.