2007/784/EC: Commission Decision of 18 July 2007 declaring a concentration to be compatible with the common market and the functioning of the EEA Agreement (Case COMP/M.4504 — SFR/Télé 2 France) (notified under document number C(2007) 3443) (Text with EEA relevance)
Date: 2007-07-18
Institutions: European Commission
Subjects: Internet access provider, application of EU law, communications industry, competition law, economic concentration, merger control, mobile phone, radio telecommunications, restrictive-practice authorisation, television

4.12.2007

EN

Official Journal of the European Union

L 316/57

COMMISSION DECISION

of 18 July 2007

declaring a concentration to be compatible with the common market and the functioning of the
EEA Agreement
(Case COMP/M.4504 — SFR/Télé 2 France)

(notified under document number C(2007) 3443)

(Only the French version is authentic)

(Text with EEA relevance)

(2007/784/EC)

On 18 July 2007 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(2) 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
following address: http://ec.europa.eu/comm/
competition/index_en.html

the Directorate-General

for Competition, at

the

(1)

(2)

(3)

(4)

SUMMARY

(Vivendi,

On 28 November 2006 the Commission received a noti-
to Article 4 of Council Regulation
fication, pursuant
a
(EC) No 139/2004 (the Merger Regulation), of
proposed concentration by which SFR S.A.
(SFR,
France), an undertaking jointly controlled by Vivendi
S.A.
plc
(Vodafone, UK), acquires, within the meaning of Article
the
3(1)(b) of
the Merger Regulation, sole control of
Internet access and fixed telephony business of
the
undertaking Télé 2 France (Télé 2, France, a subsidiary
of the Télé 2 group) by way of a purchase of shares. The
transaction does not concern Télé 2’s business in mobile
telephony services.

and Vodafone Group

France)

SFR is a French company operating in the mobile
telephony sector in France. It is controlled by Vivendi
and Vodafone.

is

Vivendi
the parent company of a French group
engaged in the media and telecommunications sectors.
The Vivendi group is chiefly engaged in the pay-TV
(via
interactive
games and telecommunications sectors.

the Canal+ group),

cinema, music,

Vodafone is the parent company of a British group
which is active as an operator of mobile telephony
networks and provider of other
telecommunications
services
in various EU Member States and non-EU
countries.

(6)

(7)

Internet access provision, and also pay-TV since DSL (2)
television services were launched in June 2006. Télé 2 is
also engaged in the mobile telephony sector.

survey showed that

The market
the transaction as
notified is liable to weaken significantly the competitive
pressure exercised by DSL operators on all the pay-TV
markets in France and thus, in the longer term, to raise
the prices and lower the quality of supply. There are
therefore
transaction as
notified might significantly impede effective competition
in the common market or in a substantial part of it. SFR
and Vivendi have, however, proposed appropriate
remedies which overcome these concerns.

concerns

serious

that

the

I. MARKET DEFINITIONS

Introduction

level,

rights

channel producers produce

The transaction at hand concerns the pay-TV sector in
France. This sector is organised essentially as follows.
to broadcast
Upstream are
the holders of
programmes (films, series, sports events, etc.). At
the
their
intermediate
own programmes internally and/or acquire the broad-
casting rights for the programmes (films, series, sports
events, etc.) that are to constitute the channel content.
Downstream, distributors purchase from producers the
right to broadcast their channels and offer subscription-
based pay-TV channel packages. Pay-TV offerings can be
delivered to final consumers by various means, the main
ones in France being cable, satellite, DSL and terrestrial
(analogue and digital).

(5)

Télé 2 France (Télé 2) is the French subsidiary of the Télé
2 group. It is engaged in the sectors of fixed telephony,

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

(2) Digital Subscriber Line. DSL technology makes it possible to signifi-
cantly increase the speed of normal
telephone lines. The most
common DSL technology is ADSL (Asymmetric Digital Subscriber
Line).

L 316/58

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Official Journal of the European Union

4.12.2007

Product markets

‘Upstream’ markets for the acquisition of broadcasting rights

(8)

The main criteria for the breakdown and differentiation
of broadcasting rights are:

(i) the nature of the programme: films and recent series;
sports events; other broadcasting content (stock and
flow programmes);

(13)

(ii) the distribution platform: cable, satellite, DSL and

terrestrial (analogue and digital); and

at the very least, to have a presence on all the broad-
casting platforms through exclusive rights for more than
one platform.

The downstream market
services

for

retail distribution of pay-TV

The Commission’s
consistent practice has been to
consider distribution of pay TV and free TV as two
separate product markets. Pay TV and free TV service
offerings are not very substitutable from the standpoint
of demand. The investigation of the case at hand does
not challenge this basic distinction.

(9)

(10)

(11)

(iii) the

form of delivery:

(linear) TV
channels and ‘non-linear’ TV services (pay per view
(PPV) and video on demand (VoD)).

conventional

On upstream markets, DSL television operators in France
are engaged mainly in the purchase of VoD broadcasting
rights. Although it did not produce a VoD service prior
to the transaction, Télé 2 was nevertheless a potential
entrant to the market for purchase of VoD broadcasting
rights. For purposes of the competition assessment of the
transaction at hand and on the basis of the findings of
the market survey, a separate market must be defined for
the acquisition of VoD broadcasting rights to films.

(14)

The market survey carried out in connection with the
transaction tends to confirm that it is not necessary to
segment the market according to the different means of
broadcasting pay TV (cable, satellite, DSL, terrestrial), par-
ticularly in view of the growing convergence of different
platforms in terms of content. Nor, for the purposes of
the case at hand, is it necessary to give an opinion on
whether the emerging TV services via mobile telephony
platforms form a separate market, since, on the one
hand, SFR is a mobile telephony operator prior to the
transaction and, on the other, Télé 2’s mobile telephony
business is not involved in the transaction.

‘Intermediate’ markets for the distribution of channels

(15)

of
pay-TV
consistently

These intermediate markets bring together TV channel
services.
producers
distributors
and
Commission decisions have
drawn a
distinction between free channels, which are chiefly
financed by advertising revenues (public channels may
also be
and pay-TV
channels, which are mainly financed by the fees paid
by distributors.

financed by public

funds),

The Commission has on several occasions considered a
breakdown based on the themes of
the channels (in
particular premium and sports channels), but has not
yet reached a definite decision on this issue. Although
it is not necessary to reach a definitive conclusion on this
question, the Commission’s analysis is that an attractive
package is a ‘basic’ package made up of several main
themes (premium, film, youth, sport and news) plus a
number of other themes that are more or less substi-
tutable for one another.

(12)

In principle the competition authorities do not apply a
breakdown by technical means of delivery,
i.e. do not
distinguish between different broadcasting platforms
such as cable, satellite or, more recently, DSL, since in
principle producers want their channels to be distributed
as widely as possible in order to maximise revenues and,

Geographic markets

the Commission has

In line with the position consistently taken in its
decisions,
applied a national
dimension to all the markets defined above. As regards
the acquisition of content (rights or channels), the nego-
tiations between providers and customers are organised
on a national basis regardless of whether the rights are
over national or foreign content. With regard to the
the different means of
downstream pay-TV market,
delivery either cover the whole of the national territory
(satellite) or are gradually covering all or a large part of it
(DTT, DSL and cable). It should also be noted that pay-
TV distributors have a uniform tariff policy for the whole
of the country.

II. COMPETITION ANALYSIS

Operation of the market before the notified trans-
action

(16) At present, before the transaction,

the Vivendi group
distributes pay TV in France direct by satellite and by
terrestrial transmission. Vivendi’s channel packages are
also available by DSL. But without
the transaction
Vivendi has no DSL infrastructure of its own, and to
distribute these channels it has to make use of DSL
operators’ networks. Thus the DSL operators act only
as carriers of Vivendi’s packages and never as distributors;
Vivendi keeps the direct commercial relationship with
subscribers to its packages for itself.

4.12.2007

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Official Journal of the European Union

L 316/59

(17) On the pay-TV market, therefore, DSL operators such as
Télé 2 act as distributors only in respect of their own,
‘proprietary’ packages, that is to say packages of channels
and television services for which they themselves acquire
the broadcasting rights from the producers and which
they then offer direct
to the final consumer. These
proprietary packages are marketed as part of what are
known as ‘multiple-play’ offerings, which also include tele-
communications services such as telephone services or
high-speed Internet access.

(18)

The DSL and digital terrestrial television (DTT) platforms
are the most dynamic forms of distribution and the main
vectors of growth in the market for pay TV in France,
while growth in the numbers of satellite and cable
subscribers has been relatively moderate. Given the
increase forecast in the number of households with a
DSL connection in France in the next few years, the
number of subscribers to the DSL operators’ multiple-
play offerings should in the nature of things continue
to grow rapidly.

(22)

Télé 2 has a very small market share, at less than 1 %.
According to the figures supplied by the notifying party,
Télé 2 accounted for less than 2 % of net recruitment
over the whole market in 2006.

(23)

The small size of Télé 2’s market share may be due to its
relatively late entry into the market in pay TV (June
2006), but
that Télé 2
there is nothing to suggest
plays a special role in the market, or that it can be
expected to play such a role in the foreseeable future.
According to the factual evidence provided by the
notifying party and the third parties questioned during
the course of the market survey, Télé 2’s current market
share is generally representative of the competition it
exerts or might come to exert
in the market. The
market
survey showed that Télé 2 has no specific
advantages over other DSL operators, and consequently
that in the absence of the present transaction it could not
be expected to grow more rapidly than the average for
the market.

(19)

The dynamism of
the DSL operators is due to the
comparative advantages they have over other platforms:

(24)

— they have the commercial advantages of multiple-
play, which are not available to satellite and DTT
(high-speed Internet, IP telephone services, television,
and gradually also mobile telephone services);

But the market survey also showed that, if Vivendi were
to give Télé 2 privileged access to programme content,
Télé 2 could strengthen its position in the downstream
market
the distribution of pay TV rapidly and
for
substantially.

Vertical effects

(25)

(26)

— they also have technical advantages,

their
services are provided by conventional telephone line
(copper pair), and they can offer innovative services
such as VoD (unlike satellite and DTT, for want of a
return path) as well as conventional PPV services.

in that

(20) However,

the market

survey showed that

the DSL
operators’ own television packages currently exert only
weak competitive pressure on the Vivendi group’s
offerings as a result of their lack of access to attractive
television content. This
the
is
exclusive contracts concluded by Vivendi with almost
all the producers of the most attractive and best-known
in France, whether outsiders or producers
channels
belonging to its own group.

the direct

result of

Horizontal effects

the information gathered during the
(21) On the basis of
second stage of
the Commission
the investigation,
estimates Vivendi’s share of the market at between [60-
70] % in number of subscribers. In any event, Vivendi’s
market share measured in turnover is very much greater
than its market share measured in number of subscribers,
because of the difference between the selling price of its
offerings and those of its competitors.

to avoid

confirmed

The second stage of the investigation — bearing out the
serious concerns expressed in the decision to initiate
that Vivendi’s
proceedings — clearly
incentive
any particular DSL
favouring
operator in terms of access to content (channels and
programmes) will disappear or will be very substantially
reduced post-merger. Once Vivendi becomes a fully
fledged DSL operator,
its incentive to avoid discrimi-
nating between DSL operators will be removed. It will
have an interest in favouring SFR/Télé 2,
in order to
share possible in the
capture for
growth in the DSL segment of the downstream market
in the distribution of pay TV.

the biggest

itself

it

attractive

to boost

differentiated

Vivendi’s very substantial position in the upstream and
intermediate markets would enable it
the
proprietary package of SFR/Télé 2 considerably by
content
and/or
giving
(channels or broadcasting rights) which is not accessible
to other DSL operators or which is available to them
only on terms less advantageous than those granted to
telecommunications
SFR/Télé
as
component (telephone and Internet) of DSL operators’
multiple-play offerings
such a
strengthening of the television component in Télé 2’s
multiple-play offering would differentiate it
strongly
and would make it a great deal more attractive.

relatively standard,

Insofar

the

2.

is

L 316/60

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Official Journal of the European Union

4.12.2007

(27)

(28)

(29)

These discriminatory measures would bring about a
increase in the attractiveness of Télé 2’s
substantial
offerings, and consequently of its subscriber base, while
competing DSL operators would have no real access to
equivalent content. The position of DSL operators on the
downstream market in the distribution of pay TV would
be significantly weakened, and this would also weaken
their position as potential buyers of rights for the distri-
bution of channels or the broadcasting of
television
programmes. Vivendi’s negotiating position in the
upstream and intermediate markets would be greatly
reinforced by the broadening of its subscriber base.

Conclusion

emerging

the proposed transaction as originally
In conclusion,
notified might weaken the
competitive
pressure exerted by DSL operators on the downstream
market in the distribution of pay TV, which is already
fragile as a result of the very strong position held by
Vivendi
for pay TV in France. The
weakening of potential competition from DSL operators
in the downstream market would produce a corre-
sponding reinforcement of
the very strong positions
held by Vivendi
in the upstream and intermediate
markets.

in all markets

III. REMEDIES

In order to address the risks to competition set out
above, SFR and Vivendi submitted commitments on 13
June 2007. Essentially, the commitments concern access
conditions
channels
types
(commitments 1 and 2), channel packages and mini-
packages (commitment 3) and VoD rights (commit-
ment 4).

content:

three

for

of

(30)

The commitments concern three types of channel:

— ‘Category 1’ channels are ‘linear thematic channels,
i.e. not including VoD and sVoD services, produced
by Vivendi Group’;

— ‘Category 2’ channels are ‘linear thematic channels
produced by third parties (including minority share-
holders in Canal+ France), for which Vivendi Group
holds exclusive xDSL distribution rights’; and

— ‘Category 3’ channels are ‘linear thematic channels
produced by third parties (including minority share-
holders in Canal+ France), for which Vivendi Group
does not hold exclusive xDSL distribution rights’.

(31) Under commitment 1, Vivendi undertakes not to offer
more favourable conditions to SFR/Télé 2 than to other
DSL operators in respect of the channels it produces or

the channels for which it holds or would hold exclusive
commitment,
xDSL distribution rights. Under
Vivendi must
by
SFR/Télé2 to all DSL operators on normal market
less favourable than those
conditions which are not
granted to SFR/Télé 2.

distributed

channels

offer

this

the

(32)

Commitment 1 does not concern the channels referred
to in point 21 of the commitments given by Vivendi and
Canal+ Group to the French Minister
for Economic
Affairs as part of the Canal Satellite/TPS merger. SFR
and Vivendi gave a more specific interpretation of this
commitment in a letter dated 13 June 2007, confirming
that the commitment eliminated any risk of discrimi-
nation in favour of SFR/Télé 2 as regards access to
these seven channels.

(33) Under commitment 2, SFR/Télé 2 undertakes not

to
acquire or make use of exclusive DSL distribution
rights. The importance of this commitment stems from
the fact that Category 3 channels are the only channels
available to DSL operators wishing to differentiate them-
selves from Vivendi’s offerings by developing proprietary
television offerings independently of Vivendi. SFR/Télé 2
would have been able to acquire exclusive DSL distri-
bution rights
channels on the basis of
Vivendi’s strong position in the world channel acquisition
market post-merger.

these

for

(34)

(35)

Commitment 2 includes a revision clause enabling the
Commission to have ex ante control over any possible
acquisition of exclusive DSL rights
for Category 3
channels by SFR/Télé 2 and to ensure that such an acqui-
sition does not in practice deprive other DSL operators of
the possibility of developing their own television offers
independently of Vivendi.

Commitment 3 bars Vivendi from granting SFR/Télé 2
subscribers preferential access to the channel packages it
distributes, namely: Canal+ Le Bouquet (which currently
includes four premium channels, dominated by first
sporting events and films) and the
transmission of
in their
Canal Satellite
and TPS packages, which,
various
thematic
forms, bring together dozens of
channels (youth, news, discovery, repeated films, etc.).
Canal+ Le Bouquet and the Canal Satellite and TPS
packages are premium pay-TV offerings in France, for
which there is no immediate alternative in the French
market. They are therefore an important addition for
subscribers to DSL operators’ multiple-play offers who
wish to have access to a wide-ranging pay-TV offer.

(36)

Commitment 3 is also applicable to PPV services
produced by Vivendi, now or in the future. It therefore
applies to, among others, the PPV service Foot+, which
distributes sport content that is highly attractive (and
therefore important
in terms of winning customers)
and sets the service apart from the rest.

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Official Journal of the European Union

L 316/61

(37) Under commitment 4, Vivendi and SFR undertake not to
acquire exclusive VoD rights to recent American and
French films. The aim of this commitment is to enable
DSL operators competing with SFR/Télé 2 to acquire
inasmuch as they constitute
VoD rights to such films,
important
to distinguish the
various pay-TV offerings. A revision clause has been
introduced in case market practice trends show that
Vivendi’s competitors are acquiring exclusive VoD rights.

content which helps

(38)

commitments

Provisions relating to the application and monitoring of
the
the
commitment proposals and ultimately make them more
effective. In particular, the commitments set up a fast
dispute-resolution procedure (arbitral tribunal).

ensure better monitoring of

(39)

The duration of
the commitments is five years. This
appears sufficient given the dynamics of new technology
markets. This five-year period has the added advantage of
corresponding to the duration of the commitments given

(40)

(41)

to the French competition authorities at the time of the
Canal Satellite/TPS merger.

In the light of the above, it can be concluded that the
commitments
submitted by SFR and Vivendi, once
implemented, are sufficient to remove all the competition
concerns raised by the notified transaction in France’s
pay-TV market.

IV. CONCLUSION

Provided that SFR and Vivendi
fully adhere to their
it can be concluded that the proposed
commitments,
transaction will not significantly impair effective compe-
tition in the common market or a in substantial part
thereof. Consequently, the notified merger, as amended
by the commitments submitted by SFR and Vivendi, is
declared compatible with the common market and the
functioning of the EEA Agreement, in accordance with
Articles 2(2), 8(2) and 10(2) of the Merger Regulation
and Article 57 of the EEA Agreement.