DG Competition005 1

EU Merger Control in the EU Merger Control in the Media SectorMedia Sector

Jürgen MenschingJürgen Mensching

European CommissionEuropean Commission

DG CompetitionDG Competition

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Dual Nature of the Media SectorDual Nature of the Media Sector

Cornerstone of democratic process, plurality of the Cornerstone of democratic process, plurality of the media, cultural diversitymedia, cultural diversity

Commercial activity in technologically fast moving Commercial activity in technologically fast moving environmentenvironment

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Variety of legal instrumentsVariety of legal instruments

Art. 10 European Convention of Human Rights, Art. 10 European Convention of Human Rights, Art. 11 Charter of Fundamental Rights, Art. 11(2) Art. 11 Charter of Fundamental Rights, Art. 11(2) Constitutional Treaty, „Amsterdam Protocol“Constitutional Treaty, „Amsterdam Protocol“

Internal Market: TV without Frontiers and Cable and Internal Market: TV without Frontiers and Cable and Satellite DirectiveSatellite Directive

State Aid rules (Art. 87 et seqq.)State Aid rules (Art. 87 et seqq.) Special rules for public enterprises (Art. 86)Special rules for public enterprises (Art. 86) Antitrust rules: Art. 81, 82 of the TreatyAntitrust rules: Art. 81, 82 of the Treaty Merger Control Rules: Reg. No. 139/2004 of Merger Control Rules: Reg. No. 139/2004 of

20 January 200420 January 2004

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Control of media concentrationsControl of media concentrations

Merger rules to meet competition concerns Merger rules to meet competition concerns (maintaining effective competition)(maintaining effective competition)

Sector specific rules to meet media pluralism Sector specific rules to meet media pluralism concerns (plurality of opinion) concerns (plurality of opinion)

Distinction recognised in Art. 21(4) Merger Distinction recognised in Art. 21(4) Merger RegulationRegulation

Notwithstanding paragraphs 2 and 3, Member States may take Notwithstanding paragraphs 2 and 3, Member States may take appropriate measures to protect legitimate interests other than appropriate measures to protect legitimate interests other than those taken into consideration by this Regulation and compatible those taken into consideration by this Regulation and compatible with the general principles and other provisions of Community law.with the general principles and other provisions of Community law.

Public security, plurality of the media and prudential rules shall be Public security, plurality of the media and prudential rules shall be regarded as legitimate interests within the meaning of the first regarded as legitimate interests within the meaning of the first subparagraphsubparagraph..

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Essentials of the Essentials of the EU Merger RegulationEU Merger Regulation

One-stop-shop principleOne-stop-shop principle Scope: only mergers with a Community dimensionScope: only mergers with a Community dimension

Three cumulative requirements:Three cumulative requirements: combined worldwide turnover of more than 5 billion €combined worldwide turnover of more than 5 billion € Community-wide turnover of more than 250 million € of at least 2 Community-wide turnover of more than 250 million € of at least 2

undertakingsundertakings the undertakings concerned do not achieve more than two thirds of the undertakings concerned do not achieve more than two thirds of

their Community-wide turnover within one and the same Member their Community-wide turnover within one and the same Member StateState

Mechanism for referral to Member States Mechanism for referral to Member States Objective: maintaining effective competitionObjective: maintaining effective competition New test: significant impediment of effective New test: significant impediment of effective

competition, in particular as a result of the creation or competition, in particular as a result of the creation or strengthening of a dominant positionstrengthening of a dominant position

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Commission’s Merger Decisions Commission’s Merger Decisions in the Media Sectorin the Media Sector

Some statisticsSome statistics

10 second phase decisions10 second phase decisions one clearance decision without conditions or one clearance decision without conditions or

obligationsobligations 4 clearance decisions with conditions or obligations4 clearance decisions with conditions or obligations 5 prohibition decisions5 prohibition decisions

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RTL/Veronica/EndemolRTL/Veronica/Endemol

M.553 – RTL/Veronica/Endemol – 1996M.553 – RTL/Veronica/Endemol – 1996 Merger of the Dutch channels RTL 4 and 5 with the Merger of the Dutch channels RTL 4 and 5 with the

Dutch public broadcaster Veronica and Endemol, the Dutch public broadcaster Veronica and Endemol, the biggest independent tv producer in the Netherlandsbiggest independent tv producer in the Netherlands

Effects of the merger:Effects of the merger: Horizontally: dominant position in the advertising Horizontally: dominant position in the advertising

market with market shares of around 60%market with market shares of around 60% Vertically: preferred access to content produced by Vertically: preferred access to content produced by

EndemolEndemol

Prohibition decisionProhibition decision

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Bertelsmann/Kirch – Bertelsmann/Kirch – Telekom/BetaResearchTelekom/BetaResearch

M.993 – Bertelsmann/Kirch/Premiere – 1998M.993 – Bertelsmann/Kirch/Premiere – 1998M.1027 – Deutsche Telekom/BetaResearch – 1998M.1027 – Deutsche Telekom/BetaResearch – 1998 Parallel transactions and proceedingsParallel transactions and proceedings Content side: joint control by Kirch and Bertelsmann Content side: joint control by Kirch and Bertelsmann

of the merged pay-tv operators Premiere, DF1 and of the merged pay-tv operators Premiere, DF1 and DSFDSF

Joint control by Kirch and Bertelsmann of Beta Digital Joint control by Kirch and Bertelsmann of Beta Digital (playout centre for satellite-transmitted digital tv) and (playout centre for satellite-transmitted digital tv) and BetaResearch (holder of licenses for encryption BetaResearch (holder of licenses for encryption technology for d-box decoders)technology for d-box decoders)

Technical side: Telekom acquires control of Technical side: Telekom acquires control of BetaResearch, establishes a technical platform of BetaResearch, establishes a technical platform of digital distribution of pay-tv via cable and enters into digital distribution of pay-tv via cable and enters into a mutually exclusive agreement for the use of the a mutually exclusive agreement for the use of the access technology developed by Betaaccess technology developed by Beta

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Bertelsmann/Kirch – Bertelsmann/Kirch – Telekom/BetaResearchTelekom/BetaResearch

Consequences of the transactions:Consequences of the transactions: Merger to monopoly of the only pay-tv providers in Merger to monopoly of the only pay-tv providers in

GermanyGermany Access of Premiere to programme resources in an Access of Premiere to programme resources in an

unparalleled manner through its two parent unparalleled manner through its two parent companies: no newcomer could have competed with companies: no newcomer could have competed with this programme platformthis programme platform

d-box as technical platform would have been the de-d-box as technical platform would have been the de-facto standard for provision of pay-tv in Germanyfacto standard for provision of pay-tv in Germany

No alternative access technology could have been No alternative access technology could have been used in the cable networks of Deutsche Telekomused in the cable networks of Deutsche Telekom

Unique market power in transport and contentUnique market power in transport and content

Two prohibition decisionsTwo prohibition decisions

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Telepiù/Stream - CompaniesTelepiù/Stream - Companies

Acquisition of sole control by Newscorp of Telepiù Acquisition of sole control by Newscorp of Telepiù from Vivendi and subsequent merger with Stream, from Vivendi and subsequent merger with Stream, Newscorp’s Italian pay-tv platform Newscorp’s Italian pay-tv platform

Both undertakings active in the transmission of pay-Both undertakings active in the transmission of pay-tv via satellite transmissiontv via satellite transmission

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Telepiù/Stream – EffectsTelepiù/Stream – Effects

Horizontally: Near monopoly in the Italian pay-tv Horizontally: Near monopoly in the Italian pay-tv marketmarket

Vertically: gatekeeper function in respect of technical Vertically: gatekeeper function in respect of technical satellite platform satellite platform

Foreclosure of premium contentForeclosure of premium content

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Telepiù/Stream - Assessment Telepiù/Stream - Assessment

Commission took account of the financial difficulties Commission took account of the financial difficulties of both companies, of the specific features of the of both companies, of the specific features of the Italian market, and of the disruption of possible Italian market, and of the disruption of possible closure of Streamclosure of Stream

Regulated monopoly better than unregulated Regulated monopoly better than unregulated monopolymonopoly

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Telepiù/Stream - Commitments Telepiù/Stream - Commitments

Competitors’ access to the Newscorp platform Competitors’ access to the Newscorp platform

Access to premium content (sports, films)Access to premium content (sports, films)

Divestiture of Newscorp’s digital terrestrial television Divestiture of Newscorp’s digital terrestrial television (“DTT”) activities and undertaking not to enter into (“DTT”) activities and undertaking not to enter into DTT in the futureDTT in the future

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Lagardère/Editis (former Vivendi Lagardère/Editis (former Vivendi Universal Publishing or VUP)Universal Publishing or VUP)

Editis leader in the publishing, marketing and Editis leader in the publishing, marketing and distribution of French language booksdistribution of French language books

Lagardère, via its subsidiary Hachette Livre, Lagardère, via its subsidiary Hachette Livre, number 2 in these marketsnumber 2 in these markets

Acquisition of Editis by Lagardère: new group overall Acquisition of Editis by Lagardère: new group overall heavily dominant with a turnover representing seven heavily dominant with a turnover representing seven times that of its nearest rivaltimes that of its nearest rival

Merger analysis relevant market by relevant market. Merger analysis relevant market by relevant market. Some examples:Some examples:

general literature - in large and pocket format, in different distribution general literature - in large and pocket format, in different distribution channelschannels

children‘s books, guides and manuals for the sale to hypermarkets and children‘s books, guides and manuals for the sale to hypermarkets and to wholesalersto wholesalers

Remedy: Overall divestiture of Editis with the Remedy: Overall divestiture of Editis with the exception of dictionary publisher Larousse, exception of dictionary publisher Larousse, professional and academic publishers Dalloz et professional and academic publishers Dalloz et Dunod, Spanish publishing group AnayaDunod, Spanish publishing group Anaya

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ConclusionsConclusions

Competition and pluralism regulation are two Competition and pluralism regulation are two separate issuesseparate issues

Member States best placed to safeguard pluralism Member States best placed to safeguard pluralism

Free and open markets are instrumental for Free and open markets are instrumental for innovation in emerging sectorsinnovation in emerging sectors

Effective competition on open media markets tends Effective competition on open media markets tends to foster pluralismto foster pluralism