CELEX: 31991M0037
Language: en
Date: 1991-01-10 00:00:00
Title: COMMISSION DECISION of 10.01.1991 declaring a concentration to be compatible with the common market (Case No IV/M.0037 - MATSUSHITA / MCA) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31991M0037

COMMISSION DECISION of 10.01.1991 declaring a concentration to be compatible with the common market (Case No IV/M.0037 - MATSUSHITA / MCA) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 010 , 18/01/1991 P. 000

 COMMISSION DECISION of aaa declaring a concentration to be compatible with the common market (Case  No IV/M.037 - MATSUSHITA / MCA) 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 party Dear Sirs, Subject:<ind> Case No. IV/M037 - Matsushita/MCA <ind> <ind> Notification of 3.12.1990 pursuant to Article 4 of Council Regulation No 4064/89  1. The above notification concerns the acquisition of the whole of MCA Inc. (MCA) by Matsushita Acquisition  Corp., a subsidiary of Matsushita Electrical Industrial Co. Ltd. (MEI). Excluded from the acquisition are the  American television station WWOR-TV and the concessioner of Yosemite Park, the Yosemite Park and Curry  Company.  2. After full examination of the notification, the Commission has come to the conclusion that the notified  operation falls within the scope of Council Regulation No 4064/89 and does not raise serious doubts as to its  compatibility with the common market.  I. Concentration  3. The acquisition of the whole of MCA by MEI through an agreed bid is a concentration within the meaning of  Article 3 (1)(b) of Regulation No. 4064/89.  II. Community dimension  4. The combined turnover of MEI and MCA in the last financial year was 43 billion Ecu. Both undertakings  concerned meet the requirements of Article 1(2)(b), MEI and MCA each having an aggregate Community-wide   turnover of more than 250 million Ecu, of which not more than two thirds is achieved in one and the same  Member State.  The proposed concentration therefore has a Community dimension.  III.<ind> Compatibility with the common market  <ind> 1.<ind> Main characteristics of the proposed concentration  5. With regard to horizontal relationships, the activities of MEI and MCA do not overlap. MEI manufactures  consumer electronic products ("Technics", "Panasonic", "JVC"), and consumer household electric appliances, as  well as communication and industrial equipment, electronic components, kitchen-related products and batteries.  MCA's activities are filmed and music entertainment ("Universal Pictures", "Universal Television", "MCA  Records"), book publishing, retail and mail order and other businesses including theme parks. (Its broadcasting  and cable business will be spun-off and not be taken over by MEI.  The Yosemite Park and Curry Company will  according to the parties, be sold to an American buyer after the closing of the acquisition).  6. The most important aspect of the proposed concentration is the possibility that the combination of the massive  resources of MEI with the market position of either party might create considerable competitive advantages.   These structural characteristics and their possible impact on competition have also to be appraised according to  Article 2 (1)(b) of Regulation No. 4064/89 with regard to the market position of the undertakings concerned and  their economic and financial power, their access to markets and any barriers to entry, in order to establish  whether or not the concentration is compatible with the common market.  <ind> 2.<ind> The relevant markets  7. Both parties hold significant market positions.  MEI is one of the leading producers of consumer audio and  video equipment.  The company is especially strong in video equipment where it leads the world production of  home-use video cassette tape recorders (VCR's) and related products; on these markets MEI has significant  market shares within the Community.  In VCR's, for instance, MEI's market share amounts to 15% Community- wide and from 7% to 34% according to the Member State in question. Furthermore, as far as the Commission is  aware the VCR's produced within the Community under the VHS standard are produced under the licence of  MEI, or in joint ventures with MEI.   8. MCA is a major producer of motion picture films for theatrical release, television, pay television, cable and  home video with market shares below or slightly above 10% in the Community.  It also manufactures and  distributes recorded music, with a market share below 5% in the EEC.  9. Firstly, therefore, with regard to the relevant consumer "software" entertainment markets there is a linkage of  the financial resources of MEI with MCA's activities where adequate finance is an important precondition of  competitiveness.  The principal competitors of MCA, however, have financially strong shareholders or parent  companies as well, like Paramount (Gulf and Western), Warner (Time-Warner), Columbia  Pictures (Sony) and  Twentieth Century Fox (News Corporation).  This linkage does, therefore, not raise serious doubts as to its  compatibility with the common market.  10. Secondly, with regard to the consumer electronic hardware markets on which MEI is a major player, the  linkage of MEI's "hardware" products with MCA's "software" seems likely to provide a significant competitive  advantage to MEI.  This linkage merits more consideration.  <ind> 2.<ind> Possible impact of the hardware-software linkage on the relevant markets.  11. In view of the information currently available to the Commission, there is a sufficient supply of motion  picture films and recorded music for every major technical standard or format used for broadcasting, home audio  and video systems and cinemas. Even if MCA should apply a market strategy for its software products that  favours MEI's hardware after the takeover, it is unlikely that this could lead to the creation or strengthening of a  dominant position on the side of MEI. The same applies for MEI favouring MCA's software products.  12. In the short term, therefore, the proposed concentration will not significantly impede competition on relevant  hard- and software markets within the Community as presently constituted. The appraisal of the proposed  concentration has, however, to include future developments, especially the transformation of markets through  technical progress.   <ind> <ind> Video equipment markets  13. The structure of competition on the video equipment markets will in a few years be affected by the  introduction of HDTV (High Definition Television) and related products. The commercial success of new or  improved electronic products may at least partly depend on the availability of software which is attractive to  consumers. This is especially true, when the introduction of advanced hardware goes along with the creation of a  new technical standard or format. Consumers will then be willing to buy new products only if an adequate  quantity of new software is available.  14. It is therefore necessary to consider whether MEI will, after the takeover of MCA, be in such an  advantageous position that the creation of a dominant position on future video equipment markets (as  increasingly affected by HDTV technology) is likely.  15. A hardware-software link could be particularly important for the success of HDTV hardware products in the  event of there being different standards or formats for HDTV broadcasts, HDTV home video systems and HDTV  cinema.  In those circumstances a hardware manufacturer with a link to a software producer could facilitate the  timely launch of a complete package on to a market thus attracting consumers in the crucial early days, and  thereby gaining a competitive advantage over its competitors.  There are two competing HDTV standards under  development, the Japanese HiVision/Muse standard and the European MAC standard.  16. On the assumption that there will be competing HDTV-standards, it seems very likely that MCA as a  subsidiary of MEI will be one of the first software companies to offer motion pictures under the technical  standard or format of MEI's video equipment.  This may, prima facie, be  a competitive advantage for MEI on  future hardware markets, but this would depend on a variety of factors. One such factor will presumably be the  way in which HDTV is introduced into the Community markets.    17. Another such factor is the availability of filmed entertainment from producers other than MCA. Currently,  there is only one other major video equipment manufacturer who is linked with a competitor of MCA (Sony and  Columbia Pictures).  MCA and Columbia together take a share of 16% of consumer video entertainment  products in the Community.  This is less than one third of the combined share of all seven major US film  producing companies. No other significant software company is linked with an important consumer electronics  company. These software companies will have complete freedom as to whether and under which format they will  offer motion pictures.  Competition on software markets may even force MCA to offer its software under several  HDTV-standards.  18. Thus, there would remain a sufficient number of software companies which could offer their motion pictures  under the competing HDTV-standard.  On the basis of information currently available on future developments in  these markets, it does not appear likely that the privileged access to software that MEI will have after the  proposed concentration will lead to a dominant position which significantly impedes competition.  <ind> Audio Equipment Markets  19. The above analysis of video equipment markets applies in principle as well for future audio equipment  markets. Thus, it is not likely that the improved access to recorded music that MEI will have after the takeover of  MCA will lead to a dominant position which significantly impedes competition on future audio equipment  markets.  <ind> 4.<ind> Conclusion  20. The proposed concentration does therefore not raise serious doubts as to its compatibility with the common  market  For the above reasons, the Commission has decided not to oppose the notified operation and to declare it  compatible with the common market. This decision is adopted in application of Article 6 (1)(b) of Council  Regulation No. 4064/89.  For the Commission,