Source: EURLEX
Language: en
Format: md

[**Avis juridique important**](../../../editorial/legal_notice.htm)

*|*

# 31998J0011

**COMMISSION DECISION of 15/09/1998 declaring a concentration to be compatible with the common market (Case No IV/JV.11 - \* . HOME BENELUX B.V.) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)** 
  
*Official Journal 178 , 23/06/1999 P. 0017 - 0017*

  

COMMISSION DECISION of 15/09/1998 declaring a concentration to be compatible with the common market (Case No IV/JV.11 - \* @ HOME BENELUX B.V.) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Brussels, 15.09.1998

To the notifying parties

Dear Sirs,

Subject: Case No. IV/JV.11 - @Home Benelux B.V.

Your notification of 17 August 1998 pursuant to Article 4 of Council Regulation No. 4064/89

1. On 17 August 1998, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EEC) No. 4064/98 (1), as last amended by Regulation (EC) No 1310/97 (2), by which the undertakings At Home Corporation (At Home), through @Home, Edon Beheer B.V. (Edon), Mega Limburg Telediensten N.V. (Mega Limburg) and N.V. Pnem Teleservices (Pnem Teleservices) will acquire, within the meaning of Article 3 (1) (b) of the Regulation, joint control of the undertaking @Home Benelux B.V. (@Home Benelux), by way of purchase of shares in the newly created company constituting a joint venture.

(1) OJ L 395, 30.12.1989, p. 1; corrigendum: OJ L 257, 21.9.1990, p. 13.

(2) OJ L 180, 9.7.1997, p.1; corrigendum: OJ L 40, 13.2.1998, p. 17.

2. After examination of the notification, the Commission has concluded that the operation falls within the scope of the Merger Regulation and does not raise serious doubts as to its compatibility with the common market and the EEA agreement.

I. THE PARTIES

3. The parties involved in this case are: (1) At Home, a US company engaged in the marketing and provision of enhanced Internet access and services in the United States and Canada for both residential and business clients. At Home is controlled by Tele-Communications, Inc. (TCI) which holds 39 % of equity and 72 % of voting rights in At Home through an affiliate. TCI is a holding company which specialises in the operation of cable television. The joint venture @Home has recently been created for the purpose of participating in the joint venture company. (2) Edon, a subsidiary of the holding company N.V. Edon Groep which is owned by local governments mainly from the Northeastern part of the Netherlands. Edon is active in the production and distribution of energy, the collection, processing and recycling of waste, and the provision of cable and telecommunications networks and services. Edon also provides Internet services in the Netherlands through its affiliate N.V. CasTel (CasTel) in which all cable and telecommunications activities of the Edon Groep have been accommodated. (3) Palet Kabelcom B.V. (Palet Kabelcom), in which Mega Limburg and Pnem Teleservices (both belonging to the Pnem/Mega Groep which is owned by several local and regional Dutch administrations located in the Southern part of the Netherlands) integrated their cable and telecommunications activities. Palet Kabelcom is an affiliate of Mega Limburg and a wholly owned subsidiary of the Pnem/Mega Groep. The Pnem/Mega Groep also concentrates on the production and distribution of energy and the collection, processing and recycling of waste.

II. THE OPERATION

4. @Home Benelux is created as a wholly owned subsidiary of Edon, Palet Kabelcom and @Home. Edon and Palet Kabelcom will each own 45 % of the share capital of the joint venture company, and @Home the remaining 10 % of shares. The joint venture company's activities consist in the provision of Internet access and related services to consumers, and the provision of Internet content including services requiring a large bandwidth. Internet access will be provided via the new nation-wide broadband network of @Home Benelux consisting of partly the joint venture's own equipment and partly the to be upgraded networks of the cable operators involved.

III. CONCENTRATION

Joint control

5. The seven-member Supervisory Board of @Home Benelux will be composed of [ ] appointed by the General Meeting of Shareholders [ ] of [...] appointed [ ] and of [ ] appointed with [ ].

6. Among the essential business decisions entrusted to the Supervisory Board, an extensive number of issues relevant for the strategic commercial behaviour of the new company will require a majority of at least [...] of its members, thereby giving all shareholders a veto right. These strategic decisions requiring de facto the unanimous agreement of the controlling parties include inter alia: [ ].

7. In addition, for the first [ ] years of operation, a business and financial strategy has already been agreed upon by all shareholders. This combination of far-reaching veto rights and a consensus on the initial business plan go beyond what is normally accorded to minority shareholders in order to protect their financial interests.

8. Therefore the joint venture cannot act on certain critical issues except with the consent of all the parties. Consequently, the joint venture will be subject to joint control by @Home, Edon and Palet Kabelcom.

Full function entity

9. The joint venture will operate in the market as a provider of enhanced Internet access, performing all the functions normally carried out by an Internet Service Provider (ISP). @Home Benelux will initially have around [ ] staff. The parents of the joint venture will contribute to its capital by paying for its shares, and have already committed themselves to grant loans. Some of these financial resources will be dedicated to set up the necessary service infrastructure. At Home Corporation will license the intellectual property rights and know-how required to provide the envisaged services for a period of more than [ ] years, with automatic prolongation.

10. Although content for the enhanced interactive services is likely to be predominantly bought from the parent companies during the start-up period, it is agreed that the joint venture shall market also content produced by third parties. Also the joint venture's initial reliance on transmission capacity provided by Edon and Palet Kabelcom will decrease after the start-up period as it is intended to enter into distribution agreements with other cable operators and as alternative new transmission technologies become available. All transactions with its parent companies will be conducted at arm's length. The joint venture will accordingly perform on a long-lasting basis all the functions of an autonomous economic entity.

IV. Community dimension

11. The combined aggregate world-wide turnover of the undertakings concerned in 1997 exceeded 5 billion ECU. The relevant world-wide turnover for At Home encompasses the world-wide turnover of TCI as it is the company 'having the power to exercise more than half the voting rights' in At Home, within the meaning of Article 5 (4) (c) and (b), second indent, of the Merger Regulation. At Home including TCI reach a world-wide turnover of 6,706 MECU, the Edon Groep 1,392 MECU, and the Pnem/Mega Groep 2,224 MECU. The Edon Groep and the Pnem/Mega Groep each have an aggregate Community-wide turnover of more than 250 million ECU. While both the Edon Groep and the Pnem/Mega Groep achieve at least two-thirds of their aggregate Community-wide turnover within one and the same Member State, i.e. the Netherlands, At Home or TCI did not achieve any turnover in that Member State. The concentration therefore has a Community dimension within the meaning of Article 1 of the Merger Regulation.

12. The notified transaction does not constitute a concentration to which the co-operation procedure provided for in Articles 57 and 58 and Protocol 24 of the EEA Agreement applies.

V. RELEVANT PRODUCT MARKET

13. In their notification, the parties identify the provision of Internet services (including the provision of access to the Internet, of e-mail, hosting facilities, news groups and other Internet related applications), to residential customers as a relevant product market.

14. However, taking account of the decisions in the cases IV/JV.1 -Telia/Telenor/Schibsted of 27.5.1998 and IV/JV.5 - Cegetel/Canal+/AOL/Bertelsmann of 4.8.1998, it appears that the Internet can be divided into the following activities which appear to constitute separate markets and which are relevant to this case:

\* (dial-up) Internet Access for residential and for business customers

\* Internet Advertising

\* Paid-for content provision

15. This division is based on the assumption that these different activities earn revenue in different ways and from different sources (i.e. Internet access is paid for by the subscribers to the access provider, advertising is paid for by the advertiser to the providers of web-sites, paid-for content is paid for by the subscribers to the content providers). Whether the provision of Internet access for residential customers and for business customers could be regarded as separate product markets can be left open in the present case since even on the narrowest possible definition the transaction does not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market, the EEA or a substantial part thereof, as it is set out in the competitive assessment under point VII. below.

16. In their notification, the parties also identify the market for telecommunication infrastructures as a relevant product market. Access to the Internet can be achieved by several means i.e. by means of the telephone infrastructure, the cable TV network, by using a wireless infrastructure (e.g. GSM, DCS-1800, satellite) or by electricity lines. Different means of access do not necessarily constitute separate product markets. However, the precise product market delimitation in this case can be left open since even on the narrowest possible definition the transaction does not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market, the EEA or a substantial part thereof, as it is set out in the competitive assessment under point VII. below.

VI. RELEVANT GEOGRAPHIC MARKET

17. According to the notifying parties, the geographic scope for the market for Internet access is national. This is based on the fact that Internet Service Providers (ISPs) still depend on national telecommunications infrastructures and, in this case, cable infrastructures. The market for advertising will normally have to be regarded as national, considering the adaptations to which publicity campaigns are subject when used on different national markets. Regarding paid-for content, ISPs must offer a service with which the user can identify linguistically and culturally, which is normally done on a national basis.

18. The relevant geographic scope of the markets identified above could either be national or extend to all Dutch-speaking regions, in particular in Belgium. Taking account of the regulatory environment and the structure of the cable networks involved, the relevant markets could also be considered as national or even geographically more limited in scope namely as the territory covered by the cable infrastructure provider. However, in the light of the fact that the operation does not raise any competition concerns, the relevant geographical market definitions can be left open.

VII. COMPETITIVE ASSESSMENT

A. Dominance

19. For the provision of Internet access, Edon through CasTel provides access to the Internet since 1 January by way of 'Free Access', an Internet access service for residential customers over KPN telephone lines. CasTel will retain its activity after the concentration and at this moment has a market share of [ below 10%] of the total Dutch market for Internet access. Palet Kabelcom is currently conducting a limited number of technical trials with respect to the distribution of Internet services via its cable network in which [ ] customers are involved. According to the notifying parties, Palet Kabelcom will cease its current activities as soon as @Home Internet services will be made available by the Joint venture, and/or transfer such activities to the joint venture. At Home Corporation is not active on the Dutch Internet access market. @Home Benelux is expected to have a market share of less than 5% in the territories covered by Palet Kabelcom and CasTel by the year [ ]. Therefore, the joint venture will not create or strengthen a dominant position.

20. As cable operators i.e. distributors of TV and radio signals, CasTel and Palet Kabelcom together have a market share in the Netherlands exceeding 15%. As providers of Internet access to consumers via the cable network in the near future however, there is no indication that their combined market share would result in a dominant position, even if the market would be considered as being regional in scope and irrespective of whether this market were to be considered as a separate product market, given the strong competition they will mainly face from the providers of Internet access via the telephone infrastructure.

21. As regards Internet advertising, both CasTel and Palet Kabelcom are active on the Dutch market at present. CasTel will retain its activities after the concentration while Palet Kabelcom for the moment is only conducting a limited number of technical trials. In any case, taking into account the amount of content which includes advertisements available on the world wide web (www), the number of actual and potential providers of Internet content, and the expected market share of the joint venture (which would account for less than 5% of the total Dutch Internet advertising market), there is no indication that the transaction would result in the creation of a dominant position on this market where a considerable number of other competitors are active.

22. As regards the provision of paid-for content, the size of the market for paid-for content is currently extremely small. None of the parent companies are at present active on the Dutch paid-for content market. There is a vast array of information providers that develop content and make content available. No single provider, including the joint venture, will account for more than 5% of the content available. Therefore, the joint venture will not create or strengthen a dominant position.

23. In the light of the above information, and even based on the narrowest market definition, the operation will not create or strengthen a dominant position on any market.

B. Co-ordination of Competitive Behaviour

24. Pursuant to Article 2 (4) of the Merger Regulation a joint venture having as its object or effect the co-ordination of the competitive behaviour of (at least two of) its parent companies has to be appraised in accordance with the criteria of Article 85 (1) and 85 (3) of the EC Treaty. In order to establish a restriction of competition in the sense of Article 85 (1) of the EC Treaty, it is necessary that the co-ordination of the parent companies' competitive behaviour is likely and appreciable and that it results from the creation of the joint venture, be it as its object or its effect.

Definition of candidate markets for co-ordination

25. According to Article 2 (4) of the Merger Regulation, the Commission shall, when making the said appraisal, take into account in particular whether two or more parent companies retain to a significant extent activities in the same market as the joint venture, or in a market which is downstream or upstream from that of the joint venture or in a neighbouring market closely related to this market. Therefore, candidate markets for co-ordination are those on which the joint venture and at least two parent companies are active, or upstream, downstream or closely related neighbouring markets where at least two parent companies remain active.

Relevant product markets

26. The joint venture will be active in the provision of various services linked to the use of the Internet (Internet access for residential customers, advertising over the Internet and paid-for content) which are described above (Section V).

27. Besides the joint venture markets, the notifying parties Edon and Palet Kabelcom, are providing cable network services in the Netherlands. The notifying parties submitted that the joint venture would not lead to co-ordination in these markets nor in the joint venture's markets.

The joint venture's markets

Internet access services

28. Concerning the provision of Internet access, and as set out above in Section VII.A only Edon through CasTel will retain activities on the same market as the joint venture in the Netherlands at the time of the creation of the joint venture. As Edon will be the only parent company to remain active on the market for Internet access for residential customers, this market cannot be considered as a candidate market for co-ordination.

Advertising over the Internet

29. Edon, through CasTel will remain active on the same market as the joint venture in the Netherlands for providing free Internet content, and is therefore on the Internet advertising market. Furthermore, it can be stated that the two other parent companies, could also be considered to be potential competitors on the Dutch Internet advertising market through own web-sites. Therefore, this market can be considered as a candidate market for co-ordination.

Paid-for content provision on the Internet

30. Although, according to the notifying parties, it is intended to offer paid-for content in the Netherlands only through the joint venture, it can be stated that after the creation of the joint venture, all three parties and the joint venture are also potential competitors on the paid-for content market, either because they currently develop content or are active in the traditional media market, and are therefore likely to use proprietary content to provide paid-for content. Therefore this market can also be considered as a candidate market for co-ordination.

Closely related markets

Network distribution services

31. As the Commission noted in Case IV/JV.5 - Cegetel/Canal+/AOL/Bertelsmann of 4.8.1998, besides the traditional telephone network, alternative means of accessing the Internet, such as electricity lines, cable and other broadband systems (broadband wireless local loop and network, GSM, satellite, digital terrestrial broadcasting etc.) are being developed and introduced. The provision of these different alternative means of linking an ISP to the customer can be considered as constituting a closely related market or closely related markets to that of the Internet access market for consumers. Both CasTel and Palet Kabelcom are providing cable networks in the Netherlands. Although the companies are providing such networks in different parts of the country they could extend their network operation into each others areas. Therefore this market can be considered as a candidate market for co-ordination.

Relevant geographical market

32. As discussed in section VI above, the geographic scope for the market for Internet access services, for provision of Internet advertising and for paid-for content on the Internet are at least national.

33. Regarding network distribution services, as the current means of distribution may be limited due to national infrastructures and national licensing schemes, the relevant geographical market is at least national.

34. However, as the formation of the joint venture does not lead to an appreciable restriction of competition, the candidate geographical market definitions can be left open.

Assessment under Article 2 (4)

35. There are no clear indications to prove that the creation of the joint venture has the object of co-ordinating the competitive behaviour of the parent's companies on any of the markets to be considered here. However, it might be the effect of the operation to give way to co-ordination of competitive behaviour. This question has to be examined separately for the Internet advertising market, the paid-for content market and the network distribution services market.

Advertising over the Internet

36. In so far as this market is concerned, the possibility that the present concentration will entail a co-ordination between the parties appears remote, given that the sheer number of sites available on the www limits the relevance of any one site as an advertising medium. In any event, the level of the parties' combined market share on the market for Internet advertising in the Netherlands would be rather modest and below 5%. This would not allow the conclusion that any restriction of competition is appreciable.

Paid-for content

37. As set out above, the size of the market for paid for content is currently extremely small. Even if all three parties were active on this market, given the fact that there is a vast array of information providers that develop and make content available, no single provider accounts for more than a small part of the content available. Therefore, even if the parties were to co-ordinate on this market, it could not lead to any appreciable restriction of competition.

Network distribution services

38. On the cable network segment of the infrastructure market Palet Kabelcom holds a market share of 11.8% and CasTel of 11.6%. Also the current market structure, which is largely dominated by KPN, the operator of the nation-wide public telephone network, is relevant when assessing the risk of co-ordination between the two parties, and possible consequent restrictions of competition. Also relevant is the fact that according to the parties, the joint venture will not be the main customer for the network distribution services provided by these parent companies. Their infrastructures are used primarily for telecommunications and TV/radio distribution and not for Internet access service (which would account for less than 5% of the total number of their cable-subscribers by the year [ ], respectively, so that this service will not create economically meaningful incentives for co-ordination in network distribution services.

39. In any event, and given their market position, even if the parent companies were to co-ordinate their activities on the market for network distribution services, this co-ordination could not lead to an appreciable restriction of competition.

40. In the light of the above analysis, on all of the above markets, even if there were to be a likelihood of co-ordination, there would be no appreciable restriction of competition. It is therefore not necessary to establish a causal link between the creation of the joint venture and the behaviour of the parent companies outside the joint venture on these related markets.

VIII. ANCILLARY RESTRAINTS

41. The notifying parties have identified two restrictions in their agreements which they consider to be directly related and necessary to the implementation of the concentration:

[Top](#document1)