CELEX: 31994M0489
Language: en
Date: 1994-09-06 00:00:00
Title: COMMISSION DECISION of 06/09/1994 declaring a concentration to be compatible with the common market (Case No IV/M.489 - Bertelsmann / News International / Vox) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Avis juridique important

|

31994M0489

COMMISSION DECISION of 06/09/1994 declaring a concentration to be compatible with the common market (Case No IV/M.489 - Bertelsmann / News International / Vox) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 274 , 01/10/1994 P. 0009

 COMMISSION DECISION of 06/09/1994 declaring a concentration to be compatible with the  common market (Case No IV/M.489 - Bertelsmann / News International / Vox) according to  Council Regulation (EEC) No 4064/89  (Only the English text is authentic).  The paper version of the decision is available through the sales offices of the Office of Official  Publications of the European Communities. PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) DECISION Registered with advice of delivery To the notifying parties Dear Sirs, Subject:<ind> Case No. IV/M.0489 - Bertelsmann/News International/Vox <ind> Your notification of 4.8.1994 pursuant to Article 4 of Council Regulation <ind> No. 4064/89 1.<ind> This operation concerns the acquisition by News International of a 49.9% stake in Vox, a  German general interest TV channel.  The notification is being made jointly with Bertelsmann, who  owns 24.9% of the shares of Vox.  The reminder of the shares are spread between a number of other  shareholders. 2.<ind> After a preliminary examination of the notification, the Commission has concluded that the  operation falls within the scope of Council Regulation No 4064/89 and does not raise serious doubts  as to the compatibility with the common market and the EEA agreement. I<tab> THE PARTIES 3. <ind> News International plc (which is controlled by News Corporation Limited) is a UK based  company.  It has interests in printing and publishing of national newspapers in the UK, development  and sale of conditional access software, warehousing, transportation, and the provision of satellite  television in the UK and Republic of Ireland.  News Corporation has interests in the production and  distribution of filmed entertainment; television broadcasting; book, newspaper, magazine and insert  publishing and data processing. 4.<ind> The Bertelsmann Group is active in book and magazine publishing, book clubs, publishing  and distribution of music records and private television.  Its businesses in the electronic media sector  are held by UFA.  UFA is owned by Bertelsmann (50%) and Gruner & Jahr (50%).  Bertelsmann has  a stake of 74.9% in Gruner & Jahr with the remaining 25.1% being held by the Jahr family. 5.<ind> Vox is a general interest free access TV channel broadcasting in Germany focussing in  particular on information and entertainment ("infotainment").  It has been experiencing financial  difficulties and requires a substantial capital injection to enable it to continue broadcasting. II<ind> THE OPERATION 6.<ind> The operation involves the acquisition by News International of a stake of 49.9% in Vox.  In  order to achieve this, News International and UFA have drawn up an agreement by which UFA will  obtain for News International shares amounting to this stake.  The purchase price which News  International will pay for this stake is [deleted as a business secret] a nominal amount of DM1.   Bertelsmann will retain 24.9 % of the shares. The remaining 25.2% is currently held by a trustee  (14.5%) and other small shareholders (some of whom may have released  part of their stake to News  International via UFA).  The 25.2% not owned by News International or Bertelsmann is also likely  to be sold to another third party by the trustee and the other minor shareholders. III<ind> CONCENTRATION <ind> Joint control 7.<ind> Under the terms of the shareholders agreement between News International and UFA any  shareholder with 24.9% or more of the shares of Vox has veto rights over the adoption and  amendment of the business plan, the hiring of the Managing Director and other senior personnel and  any changes in programme concept or strategy which departs from the business plan.   In addition,  all other decisions require a majority of 80% of the shares.  News International and UFA will  therefore both enjoy veto rights over all issues and will therefore jointly control Vox. <ind> Autonomous economic entity 8.<ind> Vox has been in operation since 1991. It is required under German law to be separate from  its parents and to have its own staff, resources and licence.  It will acquire licences in its own name  for the programmes it will broadcast and will act in other ways independently on the TV market in  Germany. Advertising will - as previously - be sold through Vox itself except for the Munich area  where Vox acts through an agent. <ind> Absence of scope for co-ordination of competitive behaviour <ind> (a) News International - Bertelsmann 9.<ind> There is no possibility of News International and Bertelsmann co-ordinating their  competitive behaviour as News International does not operate on the same (German free access TV)  market apart from through Vox.  <ind> (b) Vox - RTL 10.<ind> Under German media law, a company can only own less than 50% of any general interest  TV station and if it holds a stake of 25% or more in one then it can only have stakes of less than  25% in up to two other general interest TV stations.  Bertelsmann is already in the market for free- access TV through its stake in RTL (37.1% held by UFA), RTL2 (7.8% held by UFA) and by the  24.9% stake in Vox. 11.<ind> The Commission has considered whether Bertelsmann can co-ordinate the competitive  behaviour of Vox, with that of RTL and RTL2. News International is entering the German free  access TV market through its purchase of the stake in Vox. The position of Bertelsmann in the joint  venture with regard to Bertelsmann's interests in Vox and other TV channels does not change as a  result of the proposed concentration (which is the acquisition by News International of a stake in  Vox). In addition to that, News International as an entrant in the German market is likely to have  different interests to Bertelsmann regarding the business strategy of Vox and consequently will not  allow Bertelsmann to co-ordinate competitive behaviour across the three channels. The  concentration will therefore not give rise to coordination of the competitive behaviour between Vox  and Bertelsmann. <ind> (c) Film production/film rights 12.<ind> Both Bertelsmann and News Corporation (through Twentieth Century Fox) have  operations in film production and the trading of film rights in Germany.  According to the parties,  Bertelsmann is active primarily in the field of television sports rights and has only recently started to  extend its activities to fiction and non-fiction television rights. Its total market share for all rights is  less than 10%. News Corporation has a market share for foreign-language film and TV  programming on the German market of less than 10%. Given that Vox's licence requires it to be an  information and entertainment channel and could not purchase significant amounts of sports  programming, its low market share on the German free access TV market and the existence of other  considerably more powerful players on the German market for film rights including the Kirch  Group, it is unlikely that there is a risk of coordination between News International and Bertelsmann  through Vox. Whilst News Corporation (through Fox) has a distribution agreement with Kirch, this  agreement expires at the end of 1995 for new programming. <ind> (d) Pay-TV and pay-TV technology 13.<ind> News International recently created a joint venture (Selco)  with Pro 7 which is owned,  inter alia, by Thomas Kirch (47.5 %), the son of Leo Kirch. Selco will provide services for pay-TV  and will market pay-TV programmes in Germany. Bertelsmann and Taurus (which belongs to the  group of Leo Kirch) are shareholders of Premiere, which is the only pay-TV channel in Germany,  and of MSG Media Service which will - provided that its creation is authorized by the Commission -  offer administrative and technical services for digital pay-TV and other TV communication services.   Even though Selco not only provides services for pay-TV but markets pay-TV programmes in  Germany and could therefore be seen as a competitor of Premiere on the German pay-TV market,  there is no real risk of coordination through Selco and Premiere because Selco will only provide  foreign language programmes in Germany which represent a small market segment or even a  separate market. Furthermore, programmes provided by Selco are exclusively transmitted via  satellite and not by cable whereas Premiere transmits by cable and satellite. Selco rather competes  with English language programmes transmitted via Satellite from the UK than with Premiere. At  present and since Selco has even not yet started its activities, there are no concrete indications that  Selco might offer German language programmes in future.  <ind> As to pay-TV technology, Selco will operate on an analogue basis and with an encryption  system ("Video Crypt") that is different from that to be developped for the digital services of MSG. It  appears unlikely that News International and Bertelsmann will coordinate their development of  future encryption systems through Selco and MSG. <ind> Conclusion 14.<ind> In conclusion, the operation is a concentration within the meaning of Article 3 of the  Merger Regulation, because the joint venture between News International and Bertelsmann will  perform on a lasting basis all functions of an autonomous economic entity and there is no scope for  coordination of the competitive behaviour of the parents between themselves and with the joint  venture. IV<ind>  COMMUNITY/EEA DIMENSION 15.<ind> The concentration has a Community dimension. The combined aggregate worldwide  turnover of News Corporation and Bertelsmann in 1993 exceeded 5.000 million ecus. The aggregate  Community-wide turnover of each of at least two of the undertaking was more than 250 million  ecus. In addition the parties did not achieve more than two-thirds of their Community-wide turnover  in one and the same Member State.  16.<ind> The concentration is not an EEA "cooperation" case. The combined turnover of the  undertakings concerned in the territory of the EFTA States does not equal 25% or more of their total  turnover in the EEA territory. None of the undertakings concerned have turnover exceeding 250  million ecus in the territory of the EFTA States.  V<ind>  COMPETITIVE ASSESSMENT <ind> Relevant product market 17.<ind> This operation concerns the market for advertising in television broadcasting, and more  specifically, the segment of that for free access TV and for film rights. While the parties suggest that  TV advertising forms part of a wider advertising market, the Commission considers that TV  advertising has different characteristics from other media, inter alia in terms of prices (see decision  of the Commission of 13.1.1992 - IV/M. 176 Sunrise).  18.<ind> Free access TV should be regarded as distinct from pay TV for two main reasons. First,  free-access television is financed by advertising revenue, and/or by other means (eg the TV licence  fee in Germany and the UK) depending on whether the channel in question is state-owned or a  private commercial one, whereas pay-TV is primarily financed by subscription fees. Although a pay- TV channel may take advertising, it is of lesser importance. <ind> Secondly, free access TV offers a different programme mix from pay-TV.  Pay-TV can offer a  more specialised programme-mix in order to meet the requirements of a target audience. This can  include live coverage of sport events or first television screenings of recent films. 19.<ind> The above factors seem to lead to the conclusion that free access TV and pay-TV represent  separate markets. However, some substitutability exists between free access TV and pay-TV, since  the value of the latter depends directly on the alternative viewing possibilities. In any event, the  present case does not raise competition concerns even in the narrowest possible market.  Consequently, the precise definition can be left open. <ind> Relevant geographic market 20.<ind> The television broadcasting market is undergoing a strong process of development and  geographical expansion. This trend is in particular due to the growing importance of satellite  television, which enables viewers (through a cable network or a dish) to have access to a greater  range of television channels than when only terrestrial broadcast is available. Notwithstanding these  technical advances, conditions of competition in this sector seem to vary considerably from one  Member State to another for different reasons, e.g. language differences which influence the  purchase of programme rights, different rules on time "windows" for release of new films in  cinemas, video, pay-TV and free access TV, and varying programme mixes on the basis of the  cultural interests of a national or regional audience (see decision of the Commission of 5.8.1994 -  IV/M.410 Kirch /Richemont/Telepiù).  <ind> In the light of these considerations, it can be concluded that although technical advances have  significantly contributed to a gradual process of internationalisation, television broadcasting markets  remain mainly national or regional (language-based).  21.<ind> However, since the operation does not raise serious doubts as to the compatibility  with the  common market even on the basis of the narrowest market definition the question of the precise  relevant geographic market can be left open. <ind> Compatibility with the common market <ind> Horizontal effects 22.<ind> The main measurement of market share is by advertising revenue. However, the audience  share can also be used as a secondary measure, since the revenue by advertising and the prices for  advertising spots entirely depend on the share of audience for a channel or for a certain  programme. <ind> (a) Advertising market shares 23.<ind> According to the parties, Vox has a market share of  [deleted as a business secret - less  than 2.5%] of the advertising turnover of all general interest TV channels.  This compares with  market shares of 35% for RTL, 27% for SAT1, 9% for ARD and 7% for ZDF.  RTL2, in which  Bertelsmann also has a stake, has a share of  1%.  These figures are similar whether or not agency  commissions are included.   <ind> (b) Audience market shares 24.<ind> According to the parties and on the basis of statistics covering approximately 32 million  German households, Vox had a market share of 1.8% in 1993.  Further market share figures for the  first half of 1994 suggest that Vox's viewing figures have remained under 2%.  According to the  1993 figures, Vox is the ninth largest free access TV station in Germany.  ZDF have 17.8%, RTL (in  which Bertelsmann has a stake) 17.5%, ARD 16.8% and SAT 1 14.7%.  RTL2, the other station in  which Bertelsmann have a stake has an audience market share of 3.3%. 25.<ind> News International has no presence on the German free access TV market.  Therefore, the  acquisition of Vox will not create a dominant position for News International.  Since it is unlikely  that News International would have launched a German language programme on its own, News  International cannot be regarded as a potential competitor of Vox who would disappear as a  consequence of the concentration. Bertelsmann already has a stake in Vox so there is no change to  its market position.  Even given the financial strength of News International and the possibility for  Vox to improve its market position following the completion of the operation the market figures and  the number of other channels in the free access TV market prevent that the proposed concentration  will create or strengthen a dominant position on the German market for advertising in television  broadcasting. <ind> Vertical effects 26.<ind> Both News Corporation and, to a limited extent, Bertelsmann have film production and  trading activities. As to the purchase of film rights by Vox from News International and its affiliates  (which would include News Corporation's subsidiary Fox), it is true that the Fox film and  programme library is an important source of programmes for TV channels. However, many other  sources exist both for foreign (in the case of Fox mainly English) and German language  programmes.  There will be no foreclosure of the market for programmes through the proposed  operation.   VI<ind> PARTICIPATION AGREEMENT 27.<ind> In the list of prints to be included in the Shareholders' Agreement / Limited Partnership  Agreement and such other Charter Documents of Vox as necessary, the following clause is  included: <ind> [deleted as a business secret.  News International has agreed to offer Bertelsmann certain  participation rights in its future activities in Germany].  <ind> This clause cannot be considered as an ancillary restriction to the concentration within the  meaning of the Commission notice regarding restrictions ancillary to concentrations as it is not  directly related to the concentration [deleted as a business secret] nor is it necessary for the  implementation of the concentration [deleted as a business secret]. VII<ind> CONCLUSION 28.<ind> Based on the above information, the concentration will not create or strengthen a dominant  position as a result of which effective competition will be significantly impeded in the common  market or in a substantial part of it. For the reasons outlined above, the Commission has decided not to oppose the concentration and to  declare it compatible with the common market and with the functioning of the EEA agreement. This  decision is adopted in application of Article 6(1)(b) of Council Regulation 4064/89. For the Commission