COMMISSION DECISION of 20/04/1999 declaring a concentration to be compatible with the common market (Case No IV/M.1455 - GRUNER + JAHR/FINANCIAL TIMES/JV) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Brussels, 20.4.1999

To the notifying parties

Subject: Case No IV/M.1455  GRUNER+JAHR/FINANCIAL TIMES/JV

Notification of 12 March 1999 pursuant to Article 4 of Council Regulation No 4064/89

1. On 12 March 1999, the Commission received a notification of a proposed joint venture between Financial Times Group Limited ("Financial Times") and Gruner + Jahr AG & Co ("Gruner + Jahr") for the purpose of developing and publishing a new German language business and financial daily newspaper to be distributed in Germany, Austria and Switzerland.

2. After an examination of the notification, the Commission has concluded that the notified operation falls within the scope of Council Regulation (EEC) No. 4064/89 and does not raise serious doubts as to its compatibility with the common market and with the EEA Agreement.

I. THE PARTIES AND THE OPERATION

3. Financial Times is a company incorporated in the United Kingdom. It publishes magazines, newsletters and newspapers including the English language business and financial daily newspaper Financial Times. The company also provides related on-line services and a world-wide subscription based dial-up archive service (FT Profile) intended for corporate customers. The company is a wholly owned subsidiary of the international media group Pearson plc.

4. Gruner + Jahr is a German company active in the publishing of magazines and regional newspapers, printing and distribution of publications as well as multimedia and online services. The company is controlled (74.9%) by the media group Bertelsmann AG. Bertelsmann AG is involved in the publishing and printing of books, magazines and journals, book clubs, printing, music and record publishing and distribution as well as television and multimedia activities.

5. The new venture is a 50:50 joint venture between Financial Times and Gruner + Jahr. It will develop and publish a new German language business and financial daily newspaper printed on pink paper, together with a related internet Website. The content of the newspaper will be designed for the German market and it mainly consists of business and financial news but also brief sections on general German news, politics, culture and sports. The newspaper will be distributed in Germany, Austria and Switzerland.

II. CONCENTRATION

Joint control

6. Financial Times and Gruner + Jahr will each have an equal 50% share of the capital of the joint venture. Financial Times and Gruner + Jahr are the Limited Partners of the joint venture, whereas the GmbH is the General Partner entitled and obligated to manage and represent the joint venture. The overall direction, policy and supervision of the joint venture will be exercised by two bodies: the Partners' Meeting and the Limited Partners' Committee.

7. Partners' Meeting has the sole competence to decide on any amendment to the Partnership Agreement, on any material change in the nature or scope of the business of the joint venture and on any merger, any disposal or any transfer of the business of the joint venture or dissolution of the Limited Partnership. The Financial Times and Gruner + Jahr will be represented equally at the Partners' Meeting whereas the General Partner has no vote. All decisions require unanimity.

8. Limited Partners' Committee takes decisions, such as the approval of the annual business plan and budget, transactions going beyond the customary scope of the joint venture's business and certain types of contracts and liabilities. The Committee comprises of six members, whereby each Limited Partner appoints three members ("FT Representatives" and "G+J Representatives" respectively). The chairman of the Committee is appointed by Financial Times for the first year and by Gruner + Jahr for the second year, following which the chairmanship will alternate between the Limited Partners every two years. The Financial Times and Gruner + Jahr have each one vote in the Limited Partners' Committee. All decisions of the Limited Partners' Committee shall be made unanimously by resolution, unless expressly otherwise provided for by the Partnership Agreement. In the case of deadlock recourse would be made to mediation and arbitration procedures. Should, however, the matter remain unresolved for more than [ ], the joint venture shall be dissolved.

9. The Agreements establishing the joint venture thus provide for all important business decisions to be taken unanimously either by the Partners' Meeting or the Limited Partners' Committee. Therefore, the joint venture will be jointly controlled by Financial Times and Gruner + Jahr, as neither of them will be in a position to determine unilaterally its behaviour.

Full functionality

10. The joint venture's objective is to be active in different stages of the publishing of the new German language business and financial daily newspaper from news-gathering, editing and printing to distribution, advertising sales, marketing, merchandising and other related activities. The joint venture has access to sufficient resources including management, finance, assets and staff to conduct its business activities and it operates on the market performing the functions normally carried out by undertakings operating on the same market. The content of the planned newspaper would consist of contributions by the joint venture's own journalists, by news agencies' reports and only to some extent [ ] be translated from the English language edition of the Financial Times. The joint venture is not limited in time and the intention of Financial Times and Gruner + Jahr is that apart from the capital contributions and the additional capital contributions as defined in the Partnership Agreement, the joint venture will be self-financing and obtain any necessary funds from third parties. [ ]

11. As the joint venture is set to become an active new player on the market on its own right, the fact that the new newspaper will benefit from the established "FT" and "Financial Times" trademarks, does not call into question the full function nature of the joint venture. It can therefore be concluded that the joint venture will operate on a lasting basis and will perform all the functions of an autonomous economic entity. Thus, the notified operation involving a setting up of the above-mentioned joint venture, is a concentration within the meaning of Article 3(1) (b) of the Merger Regulation.

III. COMMUNITY DIMENSION

12. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 billion [1](EUR 3,312 million for Pearson plc in 1997 and EUR 11,629 million for Bertelsmann AG in 1998). Each of Financial Times and Gruner + Jahr have a Community-wide turnover in excess of EUR 250 million ([ ] for Pearson plc in 1997 and EUR 6,659 million for Bertelsmann AG in 1998), but they do not achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State. The notified operation therefore has a Community dimension.

[1] Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Notice on the calculation of turnover (OJ C66, 2.3.1998, p25). To the extent that figures include turnover for the period before 1.1.1999, they are calculated on the basis of average ECU exchange rates and translated into EUR on a one-for-one basis.

IV. COMPETITIVE ASSESSMENT

A. Relevant product market

13. The economic sectors involved in the proposed concentration are the daily newspaper publishing and advertising markets including the related online markets.

14. The proposed joint venture will develop and publish a new German language business and financial daily newspaper together with a related internet Website, the content of which is designed for the German market. According to the parties, the relevant product markets are the reader as well as the advertising market for quality national daily newspapers.

15. In previous decisions concerning the newspaper publishing market [2], the Commission has distinguished between the reader and advertising markets. In the market for newspapers the consumers are the buyers of the newspapers as a source of information. In the advertising market, the consumers are the advertisers who buy advertising space to promote the sales of goods or services.

[2] Decision of 1 February 1999, Case M.1401 - Recoletos/Unedisa; Decision of 29 November 1995, Case M.665  CEP/Groupe de la Cité; Decision of 15 March 1994, Case M.423  Newspaper Publishing.

Daily newspaper market

16. From the reader's perspective, a differentiation can be made within the written press between daily newspapers and non-daily (weekly, monthly) magazines. Both products satisfy different information needs of the customers and should be considered as pertaining to different relevant markets. Daily newspapers provide information about events the day after they have taken place while magazines are not capable of providing such immediate coverage. Daily newspapers are also substantially less expensive than magazines.

17. The daily newspaper market can further be divided into national daily newspapers and regional daily newspapers. Regional daily newspapers by definition concentrate on local as opposed to national issues. The national daily newspapers can further be divided into different categories on the basis of the content of the newspaper (daily newspapers for general information, sports papers and financial newspapers) or according to editorial line of the newspaper or the quality of the publication (quality press as opposed to tabloids). Due to possible overlaps of certain information contained in the newspapers, the distinction between different types of newspapers can to some extent become blurred. Differences in the price and selling patterns of such newspapers, however, tend to indicate that they belong to different product markets.

18. In the present case, the distinction between daily press and periodical magazines as well as the distinction between daily newspapers according to different contents appears relevant. The proposed joint venture will develop and publish a new business and financial daily newspaper, the content of which is designed for the German market. The newspaper will, however, also contain brief sections on general German news, politics, culture and sport. It is not necessary, however, in the present case to conclude on the definition of the relevant product markets, since given the nature of the operation even pursuant to the narrowest possible definition of the market as the reader market for quality national daily newspapers, as proposed by the parties, the concentration does not give rise to competition concerns.

Advertising market

19. Newspaper advertisements are intended to promote the sales of goods and services to readers, and their success depends on "targeting" the appropriate socio-economic groupings. For some types of products or services, different media could be seen as substitutable advertising channels while for others, the appropriate channels would be limited to specific media focusing on the target groupings. Therefore, it could be argued, in line with the view taken by the parties, that the relevant product market in the present case is the advertising market for quality national daily newspapers. The Commission has held in a recent case [3] that there can be factors, however, which may speak in favour of considering the sale of advertising space in the written press as a single and thus wider market.

[3] Decision of 1 February 1999, Case M.1401 - Recoletos/Unedisa.

20. Taking account of the nature of the proposed joint venture, the entry of a new competitor in the national daily newspaper advertising market, there is no need to conclude on the precise definition of the relevant markets. Even pursuant to the narrowest possible definition of the market as the advertising market for quality national daily newspapers, the concentration does not give rise to competition concerns.

B. Relevant geographic market

21. According to the view held by the notifying parties and in line with previous Commission decisions, the daily newspaper market as well as the daily newspaper advertising market is generally defined to be national in scope. The present operation, however, concerns a new German language newspaper, the content of which is designed for the market in Germany and which is to be distributed in Germany, Austria and Switzerland. Thus, it could be argued that geographic market is wider comprising Germany, Austria and Switzerland. However, for the purpose of this case the exact market delimitation can be left open as neither under a national definition of the geographic market nor under a wider geographic market comprising also Austria and Switzerland, the concentration gives rise to competition concerns.

C. Assessment

Daily newspaper market

22. If we consider the market for quality national daily newspapers in Germany, to constitute the relevant market in the present case, as proposed by the parties, this new newspaper would compete with Handelsblatt (161,347 sold copies per day), Frankfurter Allgemeine Zeitung (400,307 sold copies per day), Süddeutsche Zeitung (413,587 sold copies per day), Die Welt (218,307 sold copies per day), the Börsenzeitung (estimated 14,000 sold copies per day) and Neue Zürcher Zeitung (estimated 12,000 sold copies per day).

23. The joint venture envisages sales levels to reach [ ] copies per day for the first year of business. The new newspaper will be sold through three channels: news stands ([ ]), subscription ([ ]) and bulk sales ([ ]), whereby in the subsequent years the amount of sales through subscriptions and news stands is expected to rise. The sales in Austria and Switzerland are expected to amount to less than [ ] of the total sales of the newspaper. The estimation is based on corresponding sales figures of Handelsblatt (approximately 5%) and Frankfurter Allgemeine Zeitung (approximately 3%).

24. According to the parties, there are no horizontal affected markets. The joint venture has no market share at present and neither Financial Times nor Gruner + Jahr is present in the markets of the joint venture in Germany, Austria or Switzerland. Nevertheless, there appears to be a small overlap in the market, since Financial Times is involved in the publishing of a daily business and financial daily newspaper in Germany. The company sells 21,475 copies per day of its English language edition of the Financial Times in the German market. The focus of the English language edition is not, however, on the events on the German market and thus it does not necessarily belong to the same market with the new German language business and financial daily newspaper the content of which is designed for the German market.

25. The parties are also of the opinion that there are no vertical affected markets, since any upstream of downstream activities of the parents would amount to market shares of less than 25%. Gruner + Jahr has printing and distribution activities in Germany and owns printing facilities in Berlin and Dresden. It is estimated that the company's market share of the newspaper printing business in Germany amounts to less than [