Good news for investors in telecom bad boy MCI (NASDAQ:MCIP): Over in Luxembourg, the European Court of Justice's Court of First Instance ruled in MCI's favor on an appeal of an antimonopoly ruling Tuesday. The court opined that European regulators, which refused to permit MCI to acquire Sprint (NYSE:FON) back in 2000, lacked jurisdiction over the case.
For those who have given up trying to follow the mysterious workings of the European Commission's competition bureau, here's a brief review of the facts. MCI's predecessor, WorldCom, wanted to acquire long-distance telecom rival Sprint in a $130 billion merger four years ago. The EU, worried that this merger would limit the choices available to European Internet customers, wanted to review the deal. Problem was, the regulators had to stretch their regulations a bit to give themselves jurisdiction to review it.
For one thing, in order for jurisdiction to attach, the regulations required that both merging companies have 250 million euro in revenue derived from European sources. WorldCom did. But Sprint didn't. In order to secure jurisdiction, the regulators added to Sprint's own revenues one-third of the revenues from its one-third interest in Global One (a joint venture with France Telecom and Deutsche Telekom (NYSE:DT)). Because Sprint lacked control over the joint venture, attributing even part of the joint venture's revenues to Sprint was arguably mistaken.
MCI's second argument, and its ultimate winner, was that both WorldCom and Sprint called off the merger one day before the Commission issued its decision back in June 2000 -- depriving the Commission of anything to have jurisdiction over in the first place. Yesterday, the Court ruled that when the two companies called off the merger, the Commission should have closed its review without issuing a decision.
This, of course, does not mean that MCI will now be buying Sprint. Far from it -- MCI is reportedly shopping itself around as an acquisition target. To tell the truth, I don't see a whole lot of logic in MCI's appeal at all, given that it had little to gain other than a moral victory. That said, it's probably safe to say that MCI's victory is now being cheered by a whole host of companies that have tangled with EU regulators in the past -- Income Investor pick Sonoco (NYSE:SON) for one; Intel (NASDAQ:INTC) and General Electric (NYSE:GE) for two more -- or that will likely be doing so in the near future (Oracle (NASDAQ:ORCL), anyone?). For while the Court's decision was just a moral victory for MCI, for all these other companies, it's a slap on the wrist to Europe's antimonopoly regulators. And one that may make them think twice about "finding" jurisdiction where it doesn't exist next time around.
For more Foolish news and commentary on the doings of Europe's antimonopoly tsars, read:
- Microsoft's European Catch-22
- Europe's New War With America
- Can Sonoco Roll Up Europe?
- Europe Hunts Intel
Fool contributor Rich Smith has no interest in any of the companies mentioned in this article. The Fool has a disclosure policy .
