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EU Merger Control in the Media Sector

EU Merger Control in the Media Sector. Jürgen Mensching European Commission DG Competition. Dual Nature of the Media Sector. Cornerstone of democratic process, plurality of the media, cultural diversity Commercial activity in technologically fast moving environment.

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EU Merger Control in the Media Sector

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  1. EU Merger Control in the Media Sector Jürgen Mensching European Commission DG Competition

  2. Dual Nature of the Media Sector • Cornerstone of democratic process, plurality of the media, cultural diversity • Commercial activity in technologically fast moving environment

  3. Variety of legal instruments • Art. 10 European Convention of Human Rights, Art. 11 Charter of Fundamental Rights, Art. 11(2) Constitutional Treaty, „Amsterdam Protocol“ • Internal Market: TV without Frontiers and Cable and Satellite Directive • State Aid rules (Art. 87 et seqq.) • Special rules for public enterprises (Art. 86) • Antitrust rules: Art. 81, 82 of the Treaty • Merger Control Rules: Reg. No. 139/2004 of 20 January 2004

  4. Control of media concentrations • Merger rules to meet competition concerns (maintaining effective competition) • Sector specific rules to meet media pluralism concerns (plurality of opinion) • Distinction recognised in Art. 21(4) Merger Regulation Notwithstanding paragraphs 2 and 3, Member States may take appropriate measures to protect legitimate interests other than those taken into consideration by this Regulation and compatible with the general principles and other provisions of Community law. Public security, plurality of the media and prudential rules shall be regarded as legitimate interests within the meaning of the first subparagraph.

  5. Essentials of the EU Merger Regulation • One-stop-shop principle • Scope: only mergers with a Community dimension Three cumulative requirements: • combined worldwide turnover of more than 5 billion € • Community-wide turnover of more than 250 million € of at least 2 undertakings • the undertakings concerned do not achieve more than two thirds of their Community-wide turnover within one and the same Member State • Mechanism for referral to Member States • Objective: maintaining effective competition • New test: significant impediment of effective competition, in particular as a result of the creation or strengthening of a dominant position

  6. Commission’s Merger Decisions in the Media Sector Some statistics • 10 second phase decisions • one clearance decision without conditions or obligations • 4 clearance decisions with conditions or obligations • 5 prohibition decisions

  7. RTL/Veronica/Endemol M.553 – RTL/Veronica/Endemol – 1996 • Merger of the Dutch channels RTL 4 and 5 with the Dutch public broadcaster Veronica and Endemol, the biggest independent tv producer in the Netherlands Effects of the merger: • Horizontally: dominant position in the advertising market with market shares of around 60% • Vertically: preferred access to content produced by Endemol Prohibition decision

  8. Bertelsmann/Kirch – Telekom/BetaResearch M.993 – Bertelsmann/Kirch/Premiere – 1998 M.1027 – Deutsche Telekom/BetaResearch – 1998 • Parallel transactions and proceedings • Content side: joint control by Kirch and Bertelsmann of the merged pay-tv operators Premiere, DF1 and DSF • Joint control by Kirch and Bertelsmann of Beta Digital (playout centre for satellite-transmitted digital tv) and BetaResearch (holder of licenses for encryption technology for d-box decoders) • Technical side: Telekom acquires control of BetaResearch, establishes a technical platform of digital distribution of pay-tv via cable and enters into a mutually exclusive agreement for the use of the access technology developed by Beta

  9. Bertelsmann/Kirch – Telekom/BetaResearch Consequences of the transactions: • Merger to monopoly of the only pay-tv providers in Germany • Access of Premiere to programme resources in an unparalleled manner through its two parent companies: no newcomer could have competed with this programme platform • d-box as technical platform would have been the de-facto standard for provision of pay-tv in Germany • No alternative access technology could have been used in the cable networks of Deutsche Telekom • Unique market power in transport and content Two prohibition decisions

  10. Telepiù/Stream - Companies • Acquisition of sole control by Newscorp of Telepiù from Vivendi and subsequent merger with Stream, Newscorp’s Italian pay-tv platform • Both undertakings active in the transmission of pay-tv via satellite transmission

  11. Telepiù/Stream – Effects • Horizontally: Near monopoly in the Italian pay-tv market • Vertically: gatekeeper function in respect of technical satellite platform • Foreclosure of premium content

  12. Telepiù/Stream - Assessment • Commission took account of the financial difficulties of both companies, of the specific features of the Italian market, and of the disruption of possible closure of Stream • Regulated monopoly better than unregulated monopoly

  13. Telepiù/Stream - Commitments • Competitors’ access to the Newscorp platform • Access to premium content (sports, films) • Divestiture of Newscorp’s digital terrestrial television (“DTT”) activities and undertaking not to enter into DTT in the future

  14. Lagardère/Editis (former Vivendi Universal Publishing or VUP) • Editis leader in the publishing, marketing and distribution of French language books • Lagardère, via its subsidiary Hachette Livre, number 2 in these markets • Acquisition of Editis by Lagardère: new group overall heavily dominant with a turnover representing seven times that of its nearest rival • Merger analysis relevant market by relevant market. Some examples: • general literature - in large and pocket format, in different distribution channels • children‘s books, guides and manuals for the sale to hypermarkets and to wholesalers • Remedy: Overall divestiture of Editis with the exception of dictionary publisher Larousse, professional and academic publishers Dalloz et Dunod, Spanish publishing group Anaya

  15. Conclusions • Competition and pluralism regulation are two separate issues • Member States best placed to safeguard pluralism • Free and open markets are instrumental for innovation in emerging sectors • Effective competition on open media markets tends to foster pluralism

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