Freshfields and Hengeler await Cartel Office decision on Liberty

Lawyers fear negative outcome; German Cartel Office ruling due end of February

Regulatory lawyers from Freshfields Bruckhaus Deringer and Hengeler Mueller will not have to wait much longer for the German Federal Cartel Office's decision on whether it rejects the g5.5bn (£3.36bn) bid by Liberty Media Corp for Deutsche Telekom's cable systems. A decision on the huge investment in Germany is likely to be reached on 28 February. Liberty had until 15 February to readjust its position and bow to the Cartel Office's demands and propose fresh concessions, but it refused.
The German broadband cable network is split into nine divisions. Three were sold last year – two to Callahan Associates and the third to eKable. These deals were approved by the Cartel Office. Liberty was to buy the remaining six regions.
Germany has two different operators known as Level 3 and Level 4 Operators. At the same time as Liberty handled the deal for the six regions with Deutsche Telekom, it also acquired Level 4 operator TeleColum-bus from the German company. The Cartel Office is also reviewing this deal.
Deutsche Telekom continues to be represented by its faithful lawyers at Hengeler, led by Christof Jaeckle, who brought in Davis Polk & Wardwell for US advice.

“Either we achieve authority through the normal channels or Liberty will invest its money elsewhere”
Frank Montag, Freshfields Bruckhaus Deringer

Texan firm Baker Botts has been propelled into the limelight on this deal, through longstanding client Liberty. The US firm has acted on almost every Liberty deal in the past 10 years. However, because the firm only has around 20 lawyers in London, another firm had to be written into the equation. Consequently, Freshfields won a significant role.
Freshfields partners Frank Montag and Angela Hildebrand have been working on the regulatory issues ever since. This is the first deal that Freshfields has acted on for Liberty in Germany. One partner involved said: “Freshfields was instructed because of its experience as as expert in the telecoms regulatory field in Germany.”
If the Cartel Office objects to the deal there are two options available to Liberty. The first, already rejected by Liberty, is virtually unprecedented in German law. The parties would have the option of referring the matter to the Ministry of Economics. The ministry could overrule the Cartel Office's decision – if it considered that it was in the national interests of the German economy to push the deal through. This has not happened for around 12 years.
However E.ON has recently filed an application to the ministry to consider its position, after the Cartel Office objected to its intention to take over BP's stake in Ruhrgas.
Montag said: “There would still be constant scrutiny by the Cartel Office if this option was successful. We would still have to live with a hostile cartel.”
The other option would be to use the Court of Appeal in Germany. But Montag said: “The Court of Appeal wouldn't make much sense as it takes too long. The whole economic situation would have changed in Germany by the time the case was heard. Either we achieve authority through the normal channels or Liberty will invest its money elsewhere.”
Many fear that the Cartel Office will adopt too narrow a stance in this case. The awaited decision is by no means certain, but lawyers believe that the Cartel Office's response will be a negative one.