2006/171/EC: Commission Decision of  3 May 2005  declaring a concentration compatible with the common market and the functioning of the EEA Agreement (Case COMP/M.3178 — Bertelsmann/Springer/JV)  (notified under document number C(2005) 1368)   (Text with EEA relevance)
Date: 2005-05-03
Institutions: European Commission
Subjects: audiovisual industry, economic concentration, merger control, press

2.3.2006

EN

Official Journal of the European Union

L 61/17

COMMISSION DECISION

of 3 May 2005

declaring a concentration compatible with the common market and the functioning of

the

EEA Agreement
(Case COMP/M.3178 — Bertelsmann/Springer/JV)

(notified under document number C(2005) 1368)

(Only the English text is authentic)

(Text with EEA relevance)

(2006/171/EC)

On 3 May 2005 the Commission adopted a Decision in a merger case under Council Regulation (EC)
No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (1), and in
particular Article 8(1) of that Regulation. A non-confidential version of the full Decision can be found
in the authentic language of the case and in the working languages of the Commission on the website of
the Directorate-General
following address: http://europa.eu.int/comm/
the
competition/index_en.html

for Competition, at

(1)

(2)

(3)

(4)

On 4 November 2004, the Commission received a noti-
fication under Article 4 of Council Regulation (EC) No
139/2004 (‘the Merger Regulation’) a proposed concen-
tration by which the German undertakings Bertelsmann
AG (‘Bertelsmann’),
controlled subsidiary
solely
Gruner+Jahr AG & Co. KG (‘G+J’), and Axel Springer
AG (‘Springer’), would acquire joint control of
the
German undertaking NewCo (‘NewCo’) by way of
purchase of shares in a newly created company consti-
tuting a joint venture. Bertelsmann (and G+J) and
Springer are collectively referred to as ‘the Parties’.

its

the

On 29 November 2004 the German competition
Bundeskartellamt,
authority,
the
Commission that
the proposed concentration would
threaten to affect significantly competition, either in the
German market for rotogravure printing, or, in the alter-
native in the German market
time-critical print
products, in particular magazines.

informed

for

By decision dated 23 December 2004, the Commission
found that the notified operation raised serious doubts as
to its compatibility with the common market and the
functioning of
the EEA Agreement. The Commission
accordingly initiated proceedings in this case pursuant
to Article 6(1)(c) of the Merger Regulation and decided
that it should, by virtue of Article 9(3)(a) of the Merger
Regulation,
itself deal with the aspects raised by the
German competition authority.

Its
Bertelsmann is an international media company.
printing activities are concentrated in its
subsidiary
Arvato AG (‘Arvato’), which controls the German roto-
gravure printer maul-belser
the offset
printer Mohn Media in Guetersloh and various other
printers in Europe, such as the rotogravure printers Euro-

in Nuremberg,

(UK)
Furthermore, Bertelsmann’s

gravure S.p.A. in Italy and Eurohueco S.A. in Spain. In
addition, Arvato plans to start up a new rotogravure
printing facility in Liverpool
two
controlled
years.
publishing arm G+J, active in the publishing, printing
and distribution of newspapers and magazines, has two
rotogravure printing facilities in Germany,
located in
Itzehoe (near Hamburg) and Dresden.

in the next
solely

(5)

(6)

(7)

(8)

Springer is active in the publishing, printing and distri-
bution of newspapers and magazines, and holds shares in
television and radio broadcasters. Springer operates two
rotogravure printing facilities in Germany, namely in
Ahrensburg (near Hamburg) and in Darmstadt. It also
operates three off-set printing facilities which print exclu-
sively newspapers.

The concentration consists in the contribution to NewCo
of Arvato’s, G+J’s and Springer’s five German rotogravure
facilities and of Arvato’s planned rotogravure printing
facility in the UK. Following the transaction, Bertelsmann
and G+J will each hold an interest of 37,45 % in NewCo
and Springer will hold the remaining 25,1 %, with veto
rights relating to strategic decisions. NewCo constitutes a
full-function joint venture and is jointly controlled by
Bertelsmann and Springer.

The Advisory Committee on Concentrations, at its 131st
meeting on 22 April 2005, with majority supported the
Commission’s proposal to issue a clearance decision (2).

in a report dated 27 April 2005,
The Hearing Officer,
took the view that the right of the parties to be heard
had been respected (3).

(1) OJ L 24, 29.1.2004, p. 1.

(2) OJ C 52, 2.3.2006, p. 2.
(3) OJ C 52, 2.3.2006, p. 3.

L 61/18

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Official Journal of the European Union

2.3.2006

I. THE RELEVANT MARKETS

Relevant Product Markets

(9) With respect

to the relevant product markets,

the
Commission’s market
investigation focused on the
question whether and to what extent rotogravure and
offset printing
and
the different printing applications, namely
whether
constitute
magazines,
separate product markets.

and advertisements

interchangeable

techniques

catalogues

are

(10) The market

investigation has shown that rotogravure
printing can generally not be substituted by offset
printing. Rotogravure printing is mainly used for large-
volume print orders, i.e. print orders with a big number
of copies and pages while the use of the offset method is
largely restricted to smaller volumes. The costs of a
printing process strongly deviate for offset and roto-
gravure depending on the volume of a print order.
While rotogravure presses are characterised by compara-
tively higher fixed costs, they have a bigger capacity and
higher performance and can therefore process
large
cost-efficiently.
numbers of pages
Offset printing presses are, moreover, more limited in
the number of different pages they can print in one
print-run (maximum 72 pages as compared to up to
192 pages in rotogravure). The market investigation has
confirmed that offset printing does not constitute a
competitive
rotogravure printing of
for
magazines with more than 64 pages and more than
360 000 copies as well as for catalogues and adver-
tisements with more than 64 pages and more than
450 000 copies.

faster and more

constraint

least

(11) A rotogravure printing press can print magazines, adver-
for
tisements and catalogues. Nevertheless, at
magazines a separate product market exists. Magazines
are generally more time-critical than advertisements or
catalogues due to the topicality of
their content and
the late deadlines for the insertion of advertisements.
Magazine printing is, moreover, connected to higher
requirements with respect to the finishing process,
in
particular for inserts and add-ons of sample products.
The relevant
finishing machines are in most cases
installed at the printing site or close to it in order to
allow for a timely finishing of the magazines whereas the
finishing of catalogues for example is more often done
by third parties. Furthermore, the distribution system for
magazines differs considerably from the distribution of
catalogues and advertisements, and the printing process
has thus to be adapted to these specific requirements of
magazines. With respect
and adver-
tisements,
it can be left open whether they constitute
one single or separate product markets as no competition
concerns arise under any market delineation.

to catalogues

Relevant Product Markets

(12) At least for Germany, a national geographic market for
magazine printing has to be assumed. For the rest of the
EEA, the geographic market for magazine printing can be
left open since even under the narrowest market defi-
nition (national markets) no competition concerns arise.

(13) German magazines are almost exclusively printed in
Germany. One reason for this is the time-criticalness of
magazines as the risk of delays in delivery increases with
the distance between the printing site and the distri-
bution area. Moreover, many printers abroad currently
encounter some difficulties to supply German publishers.
The German magazine distribution system is compara-
tively complicated due to its decentralised structure (as
opposed to the French one, for example, where Paris is
the centralised distribution hub). In addition, publishers
divide Germany into different so-called ‘Nielsen-areas’
target groups
which exhibit different compositions of
to be
for advertisement. The printing process has
adjusted accordingly which is difficult for many printers
located outside of Germany.

(14) As to catalogues, the market investigation showed that
print orders are regularly split among several printers in
order to ensure security of supply and a timely delivery
of the required high volumes. It was broadly confirmed
that not only catalogue customers in other countries
import printing services, mostly from Germany, but
also German customers regard foreign printers as viable
for cata-
alternatives. The relevant geographic market
logues can be defined as Germany plus the neighbouring
countries
(France, Belgium, Netherlands, Luxemburg,
Switzerland, Austria, Czech Republic, Poland, Denmark)
as well as Italy and Slovakia, covering the large foreign
printers in this areas such as Quebecor, RotoSmeets,
Mondadori, Ilte, Rotocalcografica and Ringier.

(15) Advertisement

to a

printing
large

is
for German customers
in Germany.
extent done
apparently
However,
in spite of a lower import ratio for adver-
tisement printing than for catalogue printing, German
customers can easily turn to credible foreign printers.
The printing of advertisement does not create any
specific difficulties comparable to those in the magazine
printing market, such as the special finishing or specific
conditions of distribution. Moreover, advertisements are
generally not as time-critical as magazines. Since most
publishers of main catalogues also issue advertisements,
it would in addition be easy for them to use their already
existing links to foreign printers also for advertisement
orders. For this reason,
the
for rotogravure advertisement printing can be
market
considered to be
i.e.
comprising Germany,
its neighbouring countries, and
Italy and Slovakia.

the geographic scope of

catalogues,

same as

the

for

2.3.2006

EN

Official Journal of the European Union

L 61/19

the EEA the geographic market

for
For the rest of
catalogue and/or advertisement printing can be left
open since
geographic
market definition (national markets) no competition
concerns arise.

the narrowest

even under

printer RotoSmeets. In other affected national markets in
the EEA the market shares of the joint venture do not
give
the
Commission only analysed the German market.

to competition concerns. Therefore,

rise

II. ASSESSMENT

(19)

(16) The proposed joint venture will be active in the markets
for the rotogravure printing of magazines, catalogues and
advertising in a number of countries belonging to the
EEA. The most serious effects of the proposed concen-
tration — due to the location of the five exiting printing
facilities contributed to the joint venture — will be felt in
Germany.

1. Market for the rotogravure printing of catalogues
and advertising

In a German market
rotogravure printing of
for
magazines, customers (the publishers) could be harmed
if NewCo were able to raise prices and customers were
not able to counter such price increases by switching to
other printers due to a lack of available capacity. The
volume supplied by the parties to the merchant market
amounted to [150-200 kt] (*)
for
Bertelsmann; [45-50 kt] (*) for Springer) in 2003, and
further
supply have become
captive in the meantime due to the acquisition of
publishing houses by the parties. Taking this
into
account,
the volume supplied by the parties to the
merchant market totalled [100-150 kt] (*).

[10-15 kt] (*) of

([100-150 kt] (*)

this

in the market

catalogues and advertising,

the parties on the basis of

shares of NewCo would amount
including Germany,

for roto-
(17) The Commission found that
the
gravure printing of
to [20-
market
25] % (*) on a market
its neigh-
bouring countries, and Italy and Slovakia according to
the estimations of
the
volumes for 2003. On the basis of distinct markets for
catalogues and advertising, the proposed joint venture
would have a share of [15-20] % (*)
in a market for
catalogue printing and of [20-25] % (*) in one for adver-
tising printing. For Bertelsmann’s rotogravure printing
activities remaining outside the joint venture, an addi-
tional [0-5] % (*) have to be added to each of
these
market shares. On separate markets as well as on a
combined catalogue and advertisement market, Schlott
and Quebecor would follow in short distance with
market shares between [10-15] % (*) and [10-15] % (*)
and TSB with approximately [10-15] % (*). On such a
market, competition concerns therefore neither arise for
a market combining catalogue and advertising prints nor
and advertising
for distinct markets
printing. Apart from this, in all other possible geographic
markets in the EEA the market shares of the joint venture
do not give rise to competition concerns (1).

catalogue

for

2. Market for the rotogravure printing of magazines

(18) The market share of the joint venture in the German
merchant market for rotogravure printing of magazines
will be around [0-50] % (*). The next players are TSB and
Schlott with around [20-25] % (*) each and Burda with a
share of
[0-5] % (*),
which are to a very considerable extent supplied by
Burda’s printing facilities
in Vieux-Thann/France and
Bratislava/Slovakia. Apart from these imports only one
German magazine is printed abroad by the Dutch

Imports account

[0-5] % (*).

for

(*) Parts of this text have been edited to ensure that confidential infor-
mation is not disclosed; those parts are enclosed in square brackets
and marked with an asterisk.

(1) Even on a hypothetical national German market

for catalogues
and/or advertisements the joint venture would reach market shares
between 22 % and 35 % but would be smaller than the leader on
these markets, Schlott.

(20) The Commission has analysed whether: (1) competitors
currently have sufficient spare capacity to replace these
sales to a significant extent; (2) competitors could make
such capacity available by shifting their capacity to the
printing of magazines;
(3) planned capacity extensions
will make available additional capacity; and (4) whether
potential
to making
available further capacity for the printing of magazines
in case of a price increase.

could contribute

competitors

(21) Current spare capacity: Capacity utilisation was quite high
in this industry in recent years. On the basis of a careful
approach of a maximum capacity utilisation of 95 % and
the figures submitted for 2003, it appears safe to assume
a spare capacity for magazine printing of the German
competitors of 17 kt.

and volume of

(22) Capacity by shifting: Rotogravure printers can switch their
capacity from catalogue and advertising printing to
magazine printing only to a limited extent. This results
in particular from the differences in periodicity, printing
the different print products.
time
Magazines are printed periodically (weekly,
fortnightly
or monthly). Due to their long-term and periodical publi-
cation, they constitute the ‘base load’ for the printing
facility which fills the presses over the entire year. By
contrast, catalogues for mail-order companies or tour
operators etc are usually released only twice per year
with very high printing volumes (number of copies as
well as number of pages) and longer printing times (up
to several weeks). They are normally printed in May/June
and October till December and constitute a ‘peak load’
for the printing presses. The third category of print
the
products, advertising,
printing
printing
seasons and on the days of
the week when fewer
magazines are to be printed. Due to these time charac-
teristics,
the majority of printing companies indicated
that an unlimited switch from catalogues/advertisements
to magazines would not be feasible.

in essence used to fill

is
between

catalogue

capacity

the

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Official Journal of the European Union

2.3.2006

(23) As

a

the

their

results of

and catalogues

competitors who replied to the
result,
Commission’s market
investigation by stating a figure
indicated switching rates from the printing of adver-
to magazines of up to
tisements
capacity. One German
total
[15-20] % (*) of
printer did not provide any figure; as a cautious
approach and in line with the other
the
market investigation, the Commission assumed that this
printer, who currently has a comparatively low share of
magazine printing, could dedicate another [10-15] % (*)
of its capacity to magazine printing. On this basis, the
three German printers could make available together
for magazine printing which
approximately 130 kt
would account
the entire
capacity used by the parties for printing third parties’
magazines
2003). Magazine
kt] (*)
printing is generally more profitable than both adver-
tisement printing and a mixture of advertisement and
catalogue printing. The competitors would therefore not
only have the possibility but also the incentive to shift
their capacity to magazine printing.

for a very large share of

([150-200

in

(24)

(25)

Planned capacity extensions: The parties’ three main compe-
titors in Germany, Schlott, TSB and Burda, are planning
to increase their net capacity by at least 50kt over the
next two to three years. In addition, they could further
increase their net capacity, at least on a temporary basis,
in deferring the planned gradual dismantlement of older
but still operative presses.

Potential competition: The likelihood of a price increase on
for magazine printing is further
the German market
limited by the presence of several credible potential
competitors,
(Netherlands),
in particular RotoSmeets
Quebecor (France), Mondadori
(Italy), and to a lower
extent Ringier
(Switzerland) who have printing sites
which are fairly close to the German border. As a conse-
quence, these printers would be able to meet the time-
constraints in the printing of magazines at least when
using the sites closest
to the German border. The
differences
in the distribution system and in the
methods of finishing would require some adjustment of
the foreign printers and close cooperation with German
clients. The example of RotoSmeets who currently is the
only foreign printer who prints a German magazine
possible.
shows
RotoSmeets, Quebecor and Mondadori have currently at
least 32 kt of free capacity which they could readily
dedicate to German magazine publishers. Additional
capacity could be provided shortly following planned
capacity extensions and shifts in the production mix.

adaptation

process

that

this

is

(26)

Further competitive harm, apart from capacity consid-
erations, could theoretically arise from the elimination
of a competitor by the concentration. The concentration
will
remove Springer as an independent competitor.
However, even if only the German rotogravure printers
are considered, customers can still turn to three other
significant players Schlott, TSB and Burda with a large
installed capacity. In addition credible potential compe-
titors as mentioned above can enter the market.

(17 kt

(27) On the basis of the above calculations, the three most
important German competitors, namely Schlott, TSB and
Burda, would be able to offer approximately additional
197 kt
capacity, 130 kt production
spare
for magazine
shifting, 50 kt net capacity extension)
printing in response to a potential price increase for
the printing of German magazines while the Parties’
merchant market
[100-150 kt] (*).
Moreover, RotoSmeets, Quebecor and Mondadori can
be
to
which German magazine customers could turn if the
joint venture should undertake to raise prices.

credible potential

considered as

competitors

volume

equals

3. Coordination on the market

for magazine

publishing

(28) The Commission also assessed under Article 2(4) of the
Merger Regulation whether the creation of
the joint
venture would lead to the coordination of the compe-
titive behaviour of Bertelsmann (including G+J) and
Springer’s competitive behaviour on the downstream
market for magazine publishing. In view of the compara-
tively low part of printing costs in the total costs of a
magazine and in view of the pre-eminent importance of
the Parties’ magazine publishing business as compared to
their
the Commission
concluded that coordination in magazine publishing
was not likely.

rotogravure printing business,

III. CONCLUSION

(29)

For the reasons set out above, the Commission concluded
that the proposed concentration does not significantly
impede effective competition in the common market or
a substantial part of it,
in particular as a result of the
creation or strengthening of a dominant position, and
competition within the
that
meaning of Article 2(4) of the Merger Regulation and
Article 81 of the Treaty. The concentration is therefore
to be declared compatible with the common market
pursuant to Article 8(1) of the Merger Regulation and
with the EEA Agreement pursuant to Article 57 thereof.

it does not

restrict