Thank you for sharing!

Your article was successfully shared with the contacts you provided.
A legal technicality has come back to haunt the European Commission over its 2000 veto of MCI WorldCom Inc.’s $127 billion acquisition of Sprint Corp. The Luxembourg-based European Court of First Instance on Tuesday annulled the decision after concluding that the companies had indeed formally withdrawn the merger as originally notified. The court did not touch on the case’s merits. Besides vindicating MCI WorldCom (now MCI Inc.) at least on one aspect of its multipronged appeal, the case could have broad implications in future merger cases by clarifying the circumstances under which firms can modify a notification once the clock on a commission case has started ticking. “It clarifies a sense of balance in the procedure between the Commission and notifying parties,” said one lawyer. “It puts the timing entirely in the hands of the notifying parties and out of the hands of the commission.” Commission spokeswoman Amelia Torres said: “It’s rather unfortunate that the decision is annulled on a detail,” adding that regulators would review the decision carefully to see whether there were any grounds for appeal. She went on to say that the EU’s merger regime is still relatively young, and therefore there were still a number of aspects that had not yet been tested or confirmed by the courts. In its 23-page ruling, the court held that the commission should not have proceeded after receiving a faxed letter from the companies the day before the decision that the companies no longer planned to implement the envisaged deal in the form originally presented. “By adopting the contested decision when the notifying parties had formally withdrawn their notification and informed the commission of the abandonment of the merger in the form envisaged … that institution exceeded the limits of its powers,” the court held. The judgment comes on top of three merger vetoes overturned in 2002, though the WorldCom case is markedly different because the court did not address any of the companies’ arguments relating to the investigation itself. The last days of the case were turbulent. On June 26, 2000, Competition Commissioner Mario Monti told reporters in Washington, D.C., that he would recommend prohibiting the merger. A day later, the U.S. Department of Justice launched proceedings in the U.S. courts to prevent the merger. Both companies also issued public statements that day indicating they still hoped to merge in one form or another. However, also on June 27, the companies faxed letters to the commission informing it they were withdrawing their notification in the form originally presented. The commission ruled nevertheless, believing that the communications received from the companies were not a formal withdrawal of the merger. Three months later, the companies filed a petition with the court to annul the decision on substantive, procedural and jurisdictional grounds. The appeal was put on hold after MCI WorldCom was put under bankruptcy protection in the United States but resumed once the U.S. courts approved the reorganization of the company. EU regulators had disputed the validity of the faxed letter, which according to the court was relayed to the merger task force at 5:25 p.m. Brussels time June 27. The commission countered that the letter did not constitute a formal notification and went on to the ban the deal a day later. WorldCom filed an appeal with the court challenging the decision, claiming that the merger agreement as originally notified had been formally rescinded. It also disputed the commission’s jurisdiction in the first place, arguing that regulators were wrong to take their Global One joint venture into account when calculating revenues. The companies had pulled out of the venture shortly after announcing the deal in October 1999. WorldCom also asked the court to rule on the commission’s understanding of relevant markets affected by the proposed merger and the assessment of market power after the transaction, but the court on Tuesday addressed only the issue of the contested merger notification withdrawal. “It’s a shame, because some of the other unsettled areas of law would have been nice to have settled,” said Gibson, Dunn & Crutcher’s Miranda Cole, who, with Gibson Dunn partner Peter Alexiadis, assisted Paul Lasok QC of Monckton Chambers in London in representing MCI WorldCom. Copyright �2004 TDD, LLC. All rights reserved.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.